Q&A – 8 May 2017

Repossession of sensitive equipment

We have provided some equipment to an authority in Tanzania that is using it for some important purposes. Unfortunately we have not been paid and want to repossess our equipment. We are told that we cannot do so as it will amount to an offence under the National Security Act. Please guide.
YU, Dar

The National Security Act provides in section 3 that any person who, for any purpose prejudicial to the safety or interests of the United Republic- (a) approaches, inspects, passes over, is in the vicinity of or enters any protected place; (b) makes any sketch, plan, model or note or in any manner whatsoever makes a record of or relating to any thing which might be or is intended to be directly or indirectly useful to a foreign power or disaffected person; (c) obtains, collects, records, publishes or communicates to any person any code, password, sketch, plan, model, note or other document, article or information which might be or is intended to be directly or indirectly useful to a foreign power or disaffected person; (d) without lawful excuse, damages, hinders or interferes with, or does any act which is likely to damage, hinder or interfere with, any necessary service or the carrying on thereof, commits an offence and shall be liable on conviction to imprisonment for life. This act defines necessary service which includes– (a) any service relating to the generation, supply or distribution of electricity; (b) any fire brigade or fire service; (c) any sewerage, rubbish disposal or other sanitation service; (d) any health, hospital or ambulance service; (e) any service relating to the supply or distribution of water; (f) any service relating to the production, supply, delivery or distribution of food or fuel; (g) mining; (h) any communications service; (i) any transport service; (j) any road, railway, bridge, ferry, pontoon, pipeline for the supply of water or fuel, airfield, harbour or dock; (k) any other service or facility, whether or not of a kind similar to the foregoing, declared by the President, by notice published in the Gazette, to be a necessary service for the purposes of this Act.

We are not sure whether the entity you are dealing with falls under a necessary service but even if it does, and depending on the wording of the contract, if you have a lawful excuse of repossessing then this will likely not fall under the ambit of section 3 of the act. However, this is a sensitive matter and you should consult your lawyer for more formal advice.

7 days notice by TRA

Does TRA have powers to come and search taxpayers premises? Can this be a fishing expedition for them? If the answer is yes, is this provision not unconstitutional and can it be amended? Can TRA give me only 7 days to pay up after they issue assessments or demand notices? What are my rights? TRA has written to me demanding taxes in Kiswahili which I do not understand- do I still need to comply?
YU, Dar

Under the Tax Administration Act and other tax laws, including the East Africa Community Customs Management Act, the Tanzania Revenue Authority has wide powers to search premises of taxpayers. This is similar to other jurisdictions where tax revenue collection must be protected. We do not see anything unconstitutional about this provision. Of course, the search needs to be for tax related matters and not a general fishing expedition; however the taxpayer cannot stop a tax official from doing his/her job.

This provision can only be amended by parliament and we see no reason why parliament would wish to amend this especially in Tanzania where the tax base is very narrow and tax compliance very weak. We sometimes find TRA being blamed for powers that they actually do possess, with taxpayers calling it harassment and TRA calling it tax evasion! As for the 7 days notices, we have indeed seen such deadlines being given and opine that the taxpayer has 30 days to object to any decision by the commissioner, or if an objection has been determined by the TRA to go to the Tax Revenue Appeals Board (Board) as an appeal. Hence the 7 days are, in our opinion, not justified as they fall within the objections or appeals period that is clearly provided by our tax laws.

If you are issued with such a deadline, it is prudent that you inform TRA about your rights existing for 30 days and TRA cannot enforce collection measures when the time frame for you to object or appeal have not expired. Notwithstanding the above, if all objection and appeals periods have lapsed, and you have neither objected nor appealed, then TRA may proceed with recovery measures as there are no proceedings pending before them or the Board. Kiswahili is our national language and the Tax Administration Act provides for Kiswahili as one of the languages of communication. Infact in some jurisdictions the tax authority only writes to you in the national language. Fortunately or unfortunately, in Tanzania TRA writes mostly in English.

You seem to know the contents of the Kiswahili TRA letter although you claim not to understand Kiswahili, perhaps because there are taxes to be paid. We see absolutely no grounds why you should use the language of the letter to avoid paying taxes. This would constitute bad faith on your part and you could face serious consequences including further penalties, fines, and/or prosecution.

Arbitration too expensive

I entered into an agreement that has an arbitration clause. Going to arbitration is very expensive- can I sue direct in Court? Please help me.
HH, Dar

There is very little we can do to ‘help’. You agreed to arbitration and unless the other party agrees that they are ready to litigate in Court, your Court application will unlikely survive. Reasons like you thought arbitration was cheaper than going to Court will not hold in a Court of law, which will direct you to arbitration.