RESOLVING TAX DISPUTES THROUGH ALTERNATIVE

DISPUTE RESOLUTION (ADR) PROCESSES IN TANZANIA:

LAW AND PRACTICE

Albert Gasper Msando

Master of Laws Degree (LL.M) Graduate Essay

University of Dar es Salaam
September, 2019
 UNIVERSITY OF DAR ES SALAAM

SCHOOL OF LAW

MASTER OF LAWS IN PROCEDURAL LAW AND

INTERNATIONAL LEGAL PRACTICE

TOPIC: RESOLVING TAX DISPUTES THROUGH ALTERNATIVE

DISPUTE RESOLUTION (ADR) PROCESSES IN TANZANIA:
LAW AND PRACTICE

NAME: ALBERT GASPER MSANDO

REG. NO: 2018 – 06 – 01263

SUPERVISOR: DR LAUREAN MUSSA

A Graduate Essay Submitted to the University of Dar es Salaam, School of Law

in Partial Fulfillment of the Requirements for the Degree of Master of Laws
(LL.M) in Procedural Law and International Legal Practice

September, 2019
 i

CERTIFICATION

The undersigned certifies that he has read and hereby recommends for acceptance by
the University of Dar-es-Salaam, School of Law, a Graduate Essay titled:
“Resolving Tax Disputes Through Alternative Dispute Resolution (ADR)
Processes in Tanzania: Law and Practice” in partial fulfillment of the requirements
for the Degree of Master of Laws (LL.M) in Procedural Law and International Legal
Practice of the University of Dar-es-Salaam.

………………………………………..
Dr Laurean Mussa
(Supervisor)

Date: ……………………………...
 ii

DECLARATION

I, Albert Gasper Msando, declare and state that this Graduate Essay is my original
work. I have not submitted it to any other University or Institution for similar or any
other award. Reference and limited reproduction of other people's works have been
done and sufficiently acknowledged. I further declare that the work is a direct result
of my intellectual efforts. I have not infringed copyrights of any other persons.

Declared at Dar Es Salaam this…..... day of……………….2019

Signature:…………………………
 iii

COPYRIGHT

This Graduate Essay is a copyright material protected under the Copyright and
Neighboring Rights Act, 1999 [R.E. 2002] and any other international enactments
on Intellectual Property. It may not be reproduced by any means, in full or in part,
without written permission of the author and the University of Dar-es-Salaam,
School of Law, except for short extracts in fair dealings, for research or private
study, critical scholarly review or discourse with acknowledgment.
 iv

DEDICATION

To

His Excellency, Hon Dr John Pombe Joseph Magufuli

The President of the United Republic of Tanzania

If it were not for his discernment and guidance, I would not have felt the need and
the importance to undertake my LL.M studies. His humbleness, firmness,
consideration and unyielding encouragement silently and quietly kept me going with
the belief and hope of making an intellectual contribution that may be helpful to my
country. His love and commitment to serve our country is unparalleled. Fighting
against corruption, embezzlement, imparting a sense of responsibility and
accountability in civil service are not easy tasks. In fulfilling my role as a citizen, I
have chosen to support his [and the Government's] efforts to increase efficiency and
effectiveness in revenue collection through this academic work. I will always be
indebted to him, the loving father and a great mentor.
 v

ACKNOWLEDGEMENT

I must, at the very start, acknowledge the moral support of my wife Jacqueline
Malai-Msando, my children David-Lennix, Davina-Lina and Davies-Lemmy for
their collective sacrifice throughout the time of my studies.

I am thankful to my supervisor, Dr Laurean Mussa, for going through the drafts of

this work and offering guidance and corrections thereon. Equally, I am grateful to Dr
Bashiru Ally, Prof Kitila Mkumbo, Dr Nandera E. Mhando, Hon. Judge Francis S.
Mutungi Advocate Lemmy Kimariyo, and Advocate Hudson Nyange for making
sure that I remained intellectually excited throughout my studies.

Then, my parents Gasper and Theresia, my brothers George and Gilbert with their
wives Rozina and Ivone, my sisters Acquilina and Asella with my smiley niece,
Lexi. Also, Claudio, Alex, Georgina, Rochelle, and Arianna. To them all, my
message is; this is for you, each one of you. Thank you for the prayers.

I am very grateful to all my lecturers at the University of Dar-es-Salaam, School of

Law, fellow students and all the supporting staff for being part of my journey until
completion. Specifically, Jebra Kambole, Amos Manyanda, and Rachel Pallangyo
have been a source of many smiles and memorable moments.

I am very thankful to my driver, Albert Gombanila and my house helpers, Othman

and Jane, for making sure I did not miss my lectures and I remained healthy. Equally,
I am grateful to the Board of Directors under the Chairmanship of Engineer
Assegelile Mwamafupa and all the staff of The Dons Group (T) Limited and Albert
Msando Private Office. They remained focused and committed to ensure the
prosperity of the businesses during my absence.
 vi

And lastly, my friends, Advocate Beatus Malima, Advocate Joseph Nuwamanya,

Advocate Moses Mahuna, John Cassian Shayo and Ally Binamu Bananga have
throughout provided me with the necessary moral support and encouragement.
 vii

ABSTRACT

ADR processes, if properly employed, will result in quicker and less expensive tax
disputes resolution, increased tax compliance and enhanced relationships between
taxpayers and the Tax Revenue Authority. There has been a trend by revenue
authorities internationally towards employing different initiatives, such as alternative
dispute resolution (ADR) processes, to resolve tax disputes without litigation to
reduce conflict escalation and improve relationships with taxpayers.1

The study examines the applicability [and viability] of the ADR processes in tax
disputes in Tanzania and establishes that ADR is enshrined in the Constitution, 1977
and tax legislation. However, ADR is not effectively used. Formal rules of procedure
to regulate the conduct of ADR in tax disputes have not been enacted. The Tax
Ombudsman Service, the Tax Revenue Appeals Board and the Tax Revenue Appeals
Tribunal have not specified rules of procedure or practice to resolve complaints or
appeals through mediation, conciliation or arbitration. Absence of rules of
procedure has led to ineffective use of the ADR processes and hence continued
delays in resolution of tax disputes in Tanzania.

This study, first, highlights the inefficiency of the existing tax appeals system and
discusses how the use of negotiation, mediation and conciliation in resolving tax
disputes can effectively reduce case backlogs at the appeals machinery. Second, it
concludes that absence of specific rules of procedure stipulating how the Tax
Ombudsman Service, the Board and the Tribunal may exercise their powers to
resolve tax disputes by mediation, conciliation or arbitration hinder the effective
inclusion and application of ADR processes in tax disputes resolution. And, third, it
recommends that law reform and administrative actions should be undertaken by the
Government for ADR processes to be effective in expediting tax dispute resolution.

1
Ernst & Young, (2010), Tax Dispute Resolution: A New Chapter Emerges – Tax
Administration Without Borders, available at https://www.scribd.com/document/47397554/Tax-
dispute (accessed on 12/08/2019).
 viii

LIST OF ABBREVIATIONS AND ACRONYMS

ADR - Alternative Dispute Resolution

Art. - Article
BC - Before Christ
CAG - Controller and Auditor General
Cap. - Chapter
CJ - Chief Justice
CAT - Court of Appeal of Tanzania
CIR - Commissioner for Inland Revenue
Ed.(Eds.) - Editor (Editors)
Et al. - Et alia (and others)
Etc. - Et cetera (and so on)
G.N. - Government Notice
HC - High Court
Hon. - Honorable
HRMC - Her Majesty’s Revenue and Customs
Ibid. - Ibidem (in the same source)
ILRC - Ireland Law Reform Commission
i.e. - Id est (that is to say)
J. - Judge
KRA - Kenya Revenue Authority
Kshs. - Kenyan Shillings
LRCT - Law Reform Commission of Tanzania
n.(nn.) - Note (notes)
No. - Numero (number)
NZLR - New Zealand Law Report
NZTC - New Zealand Tax Cases
OECD - Organization for Economic Co-operation and Development
op. cit - Opera Citato (in the work mentioned)
Or. - Order
Ors. - Others
 ix

p.(pp.) - Page (pages)

r. (rr.) - Rule (rules)
R.E. - Revised Edition
s.(ss.) - Section (sections)
SARS - South African Revenue Service
TAA - Tax Administration Act
TOS - Tax Ombudsman Service
TRA - Tanzania Revenue Authority
TRAA - Tax Revenue Appeals Act
TRAB - Tanzania Revenue Appeals Board
TRAT - Tanzania Revenue Appeals Tribunal
TTLR - Tanzania Tax Law Report
TZS - Tanzanian Shillings
UN - United Nations
UK - United Kingdom
USA - United States of America
USD - United States Dollars
v. - Versus
Vol. - Volume
 x

LIST OF PRINCIPAL AND SUBSIDIARY LEGISLATION

The Constitution of the United Republic of Tanzania, Cap. 2 [R.E. 2002]

The Appellate Jurisdiction Act, Cap. 141 [R.E. 2002]
The Arbitration Act, Cap. 15 [R.E. 2002]
The Arbitration Rules, G.N. No. 427 of 1957
The Civil Procedure Code, Cap 33 [R.E. 2018]
The Civil Procedure Code (Amendment of the First Schedule) Rules, G.N. No. 381
of 2019
The Court of Appeal Rules, G.N. No. 368 of 2009
The Tax Administration Act, No. 10 of 2015
The Tax Administration (Remission of Interest and Penalties) Order, 2018
The Tax Administration (Transfer Pricing) Regulations, G.N. No. 166 of 2018
The Tanzania Revenue Authorities Act, Cap. 399 [R.E. 2002]
The Income Tax Act, Cap. 332 [R.E. 2002]
The Tax Revenue Appeals Act, Cap. 408 [R.E. 2010]
The Tax Revenue Appeals Board Rules, G.N. No. 217 of 2018
The Tax Revenue Appeals Tribunal Rules, G.N. No. 222 of 2018
 xi

LIST OF CASES

Africa Mashariki Gold Mines Limited v. Commissioner General [2003] 1 TTLR 3

Auckland Gas Co. Ltd v. CIR [1999] 2 NZLR409; [1999] 19 NZTC 15,027

Brierley Investments Ltd v. Bouzaid [1993] 3 NZLR 655; [1993] 18 TRNZ 1(CA)

Commissioner General v. JSC Automredtzoloto, Tax Appeal No. 7 of 2012, in the

Tax Revenue Appeals Tribunal at Dar Es Salaam, Casebook on the
Tax Law of Tanzania, Volume 1

Karata Dennis and Others v. Attorney General, Civil Appeal No. 73 of 2014, Court
of Appeal of Tanzania at Dar Es Salaam (unreported)

Pan African Energy Tanzania Limited v. Commissioner General, Civil Appeal 121 of
2018, Court of Appeal of Tanzania at Dar Es Salaam (unreported)

Rosham Meghjee & Co. Ltd v. Commissioner General, TRA, Civil Appeal No. 49 of
2008, Court of Appeal of Tanzania at Dar Es Salaam, Casebook on the
Tax Law of Tanzania, Volume 1

Shell Nigeria Exploration and Production Co. Ltd & 3 Ors v. Federal Inland Revenue
Service & Another CA/A/208/2012

Tanzania Revenue Authority v. Kotra Company Limited, Civil Appeal No. 12 of

2009, Court of Appeal of Tanzania at Mwanza, Casebook on the Tax
Law of Tanzania, Volume 1

Tullow Tanzania BV v. The Commissioner General, Civil Appeal No. 24/2018,

Court of Appeal of Tanzania at Dodoma (unreported)
 xii

TABLE OF CONTENTS

Certification...................................................................................................................i
Declaration....................................................................................................................ii
Copyright.....................................................................................................................iii
Dedication....................................................................................................................iv
Acknowledgement........................................................................................................v
Abstract........................................................................................................................vi
List of Abbreviations and Acronyms..........................................................................vii
List of Principal and Subsidiary Legislation...............................................................ix
List of Cases..................................................................................................................x
Table of Contents.........................................................................................................xi
CHAPTER ONE: INTRODUCTION.......................................................................1
1.1 Background to the Problem..............................................................................1
1.2 Statement of the Problem..................................................................................3
1.3 Objectives of the Study.....................................................................................5
1.3.1 General Objective.............................................................................................5
1.3.2 Specific Objectives...........................................................................................5
1.4 Significance of the Study..................................................................................6
1.5 Literature Review.............................................................................................6
1.6 Limitation of the Study...................................................................................11
1.7 Hypotheses......................................................................................................12
1.8 Data Collection and Analysis Methodology...................................................12
CHAPTER TWO: ALTERNATIVE DISPUTE RESOLUTION IN TAX
DISPUTES.....................................................................................................14
2.1 Introduction.....................................................................................................14
2.2 Definition of ADR..........................................................................................15
2.2.1 Mediation........................................................................................................16
2.2.2 Conciliation.....................................................................................................16
2.2.3 Arbitration.......................................................................................................17
2.2.4 Negotiation......................................................................................................18
2.3 Objections to the Use of ADR in Tax Dispute Resolution.............................19
2.3.1 The Principle of Statutory Exclusivity............................................................20
 xiii

2.3.2 The Legality Principle....................................................................................22

2.3.3 The Equality Principle....................................................................................23
2.3.4 The Model of Tax Procedure..........................................................................23
2.4 Conclusion......................................................................................................24
CHAPTER THREE: DISPUTE RESOLUTION REGARDING TAX
DECISIONS..................................................................................................25
3.1 Introduction.....................................................................................................25
3.2 Tax Dispute Resolution Mechanisms in Tanzania.........................................29
3.2.1 Objection to Tax Assessment.........................................................................29
3.2.2 Appeal against Tax Decision..........................................................................30
3.3 Conclusion......................................................................................................32
CHAPTER FOUR: FINDINGS AND DATA ANALYSIS...................................34
4.1 Introduction.....................................................................................................34
4.2 Specific Findings............................................................................................34
4.2.1 Applicability of ADR Processes.....................................................................34
4.2.2 Absence of General Rules of Procedure.........................................................35
4.2.3 Ineffectiveness of the Objection Procedure....................................................36
4.2.4 Absence of Specified Rules of Procedure by TRAB and TRAT....................37
4.3 Other Findings................................................................................................38
4.3.1 Lack of ‘Judicial Innovation’ by TRAB and TRAT.......................................38
4.3.2 Impracticality of Using Arbitration................................................................39
4.3.3 Adjournment of Appeals.................................................................................40
4.3.4 Composition of TRAT....................................................................................41
4.3.5 Lack of Funds.................................................................................................42
4.3.6 Lack of Skilled Personnel and Practitioners...................................................42
4.3.7 Slow Implementation of Recommendations by CAG....................................43
CHAPTER FIVE: GENERAL CONCLUSIONS AND RECOMMENDATIONS
........................................................................................................................45
5.1 Introduction.....................................................................................................45
5.2 General Conclusions.......................................................................................45
5.3 Recommendations...........................................................................................47
BIBLIOGRAPHY.....................................................................................................50
 1

CHAPTER ONE

INTRODUCTION

1.1 Background to the Problem

Almost 33 years ago, precisely in the year 1986, the Law Reform Commission of
Tanzania (LRCT) made a key observation that, “it is a matter of consensus that the
interest of all involved in the administration of justice is that justice should be
speedy, cheap and fair. Delayed justice causes numerous social and economic
disruptions, and therefore, the measure of a good legal system is the length of time it
takes to conclude litigation”.2 (Emphasis added).

Resonating the observation by LRCT, in a Tax Appeal between Commissioner-

General versus JSC Automredtzoloto, the Tax Revenue Appeals Tribunal (TRAT)
held that in determining tax disputes, it is guided by two principles. The said
principles are, (a) the desire to ensure that tax cases are disposed of expeditiously
and that, (b) as an avenue that has much bearing on the system of tax collection, it is
important that tax cases are not subjected to undue delays.3 (Emphasis added).

However, the Controller and Auditor General’s (CAG) Annual Report for the
financial year 2017/2018 showed that long outstanding cases before the tax appeals
machinery accounted for TZS 382.6 Trillion of disputed taxes.4 For the financial
year 2016/2017, the Report showed that the Tanzania Revenue Authority (TRA) had
long outstanding cases at various tax appeals machinery in which the amount in
dispute was about TZS 4.4 Trillion.5

2
The United Republic of Tanzania, Law Reform Commission, Report No. 1 of 1986 on
Delays in the Disposal of Civil Suits, May 1986, Government Printer.
3
Tax Appeal No. 7 of 2012, in the Tax Revenue Appeals Tribunal at Dar Es Salaam, reported
in Fauz Twaib, (2018), A Casebook on the Tax Law of Tanzania, Vol. 1, Law Africa Publishing
(K) Ltd, Nairobi, Kenya.
4
The United Republic of Tanzania, National Audit Office, CAG Annual Report, 2017/2018, at
p. 114. Four cases that have been filed during this period accounted for TZS 374.7 Trillion, ‘the
Acacia Mining cases’. The Government is still in negotiations with the taxpayer therefore the cases
are periodically adjourned by TRAB.
5
The United Republic of Tanzania, National Audit Office, CAG Annual Report, 2016/2017, at
p. 100.
 2

This upward trend of the tax amount in dispute is reflected in the financial reports for
the 2015/2016, 2014/2015 and 2013/2014 financial years, respectively. 6 The CAG
Report for the financial year 2017/2018 showed that taxpayers filed 144 tax
objections against assessment decisions by the Commissioner-General. The amount
in dispute in those objections was TZS 77,857,964,376.7 In the financial year,
2016/2017 taxpayers filed 289 objections against assessments raised by the
Commissioner-General. The amount in dispute was TZS 2,566,348,814,547.35.8 In
the said year the CAG Report revealed that out of 289 objections filed, TRA
managed to attend and settle 55 objections (19%) only. The tax amount involved in
the settled objections was TZS 1,558,116,225,302.76. In the financial year,
2015/2016, the Commissioner-General managed to settle only 0.16% of the tax
objections. The amount due to the TRA out of the settled objections was TZS
1,378,200,249 while the total amount objected totaled TZS 858,236,909,894.9

The CAG Reports point to the fact that there are still long outstanding cases and
objections before appeals machinery. Tax dispute resolution mechanism in Tanzania
is through litigation and ADR processes, to wit, mediation, conciliation and
arbitration. Litigation is the ‘traditional’ mode of settlement when a tax dispute
arises. From 2000 to 2016, it has been reported that 1,968 cases were filed before
Tax Revenue Appeals Board (TRAB) with an amount in dispute totaling 7.0
Trillion.10 Out of all the cases filed during that period only 138 (7%) cases were
resolved by mutual agreement between TRA and the taxpayers. 11 The tax dispute
resolution mechanism consists of the Commissioner-General at the objection level,
the TRAB, TRAT and Court of Appeal of Tanzania (CAT) at appeals level.

6
In the financial year 2015/2016, the amount in dispute was about TZS 7.23 Trillion. In the
financial year 2014/2015, the amount in dispute was about TZS 6,850 Billion, and in the financial
year 2013/2014, the tax amount tied up in outstanding cases was TZS 1,716 Billion.
7
Op. cit., (n.4)
8
Ibid.
9
Ibid.
10
It has been reported that, a “TRAB Report on Trend of Tax Appeals and Application Disposal,
2017”, showed cases that have been settled by mutual agreement between TRA and Taxpayers
from 2000 to 2017 (17 years) were 138 out of 1,968 filed cases (7%). See an online Article by
Shab Maurus, Managing Tax Risks: Tax Cases Disposal Trend From 2001 to 2017, posted on
Thursday, May 11, 2017, available at https://www.thecitizen.co.tz (accessed on 25/07/2019).
11
Ibid.
 3

The Tax Ombudsman Service (TOS) has been recently established and is empowered
to independently review and address any complaint by a taxpayer regarding service,
procedural or administrative matter arising in the course of administering tax laws by
tax authority.12

1.2 Statement of the Problem

Tax disputes are inevitable in any legal system.13 Therefore, it is of critical
importance that mechanisms be available to resolve disputes in an efficient and
timely manner as possible.14 The appeals machinery, that is, the Commissioner-
General, TRAB and TRAT has been accused of ineffectiveness and inefficiency in
resolving tax disputes.15 Some of the factors contributing to the situation are
inadequate number and composition of board members limiting the bodies to run
parallel sessions, lack of experienced personnel and lack of funding.16

As a consequence, tax disputes before appeals machinery are prolonged. It is not

uncommon for a tax dispute in Tanzania to take more than five years. 17 Tax officials
are considered by the taxpayers to be overly aggressive18 and more than often inflate
tax claims which results to increased number of objections and disputes.19

12
See ss. 28A, 50 and 53 TAA, 2015 and also s. 11(1) of TRAA, 2001 and r. 25(1) of TRAT
Rules, 2018.
13
An observation made by the Subcommittee on Dispute Avoidance and Resolution of the
Committee of Experts on International Cooperation in Tax Matters, Eighteenth Session, New York
23-26 April 2019, Preliminary Draft of the Chapter on Domestic Dispute Resolution Mechanisms
to be included in the proposed UN Handbook on Dispute Avoidance and Resolution scheduled to
be approved on April 2021, available at http://www.un.org (accessed on 06/08/2019).
14
Martha Minow, (1983), Some Thoughts on Dispute Resolution and Civil Procedure, Journal
of Legal Education, Vol. 34, No. 2 (June 1984), pp. 284-297, Association of American Law
Schools, available at https://www.jstor.org/stable/42892687 (accessed on 12/02/2019), quoted
Warren Burger, (now retired CJ.) a supported of ADR who said, “to fulfill our traditional
obligation means that we should provide mechanisms that can produce an acceptable result in the
shortest time, with the least possible expense and with a minimum stress on the participants. That
is what justice is all about”, p. 288.
15
CAG Annual Report 2015/2016, p. 98 and CAG Annual Report 2016/2017, pp. 76-79.
16
Ibid.
17
For example, the case involving a withholding tax dispute between Tullow Tanzania BV and
Commissioner General, Civil Appeal No. 24/2018, Court of Appeal of Tanzania at Dodoma,
(unreported), started in 2011, and the Court of Appeal decision was rendered on May 2018, which
was almost seven years since the dispute arose.
18
Kibuta Ongwamuhana, et al., (2015), Tax Dispute Resolution: A Manual for the Tax
Practitioner, Mkuki na Nyota Publishers Ltd, Dar Es Salaam, p. 18.
19
Ibid., p. 25.
 4

On the other hand, Tax officials view taxpayers as always out-and-about to evade or
avoid payment of the right amount of taxes. 20 This ‘apprehensive’ relationship is a
fertile ground for disagreements on the right amount of taxes to be paid or
interpretation of law and facts, which may escalate into tax disputes. The Alternative
Dispute Resolution (ADR) processes provide a mechanism to resolve tax disputes.

The increased use of the ADR processes in several jurisdictions around the globe is
inspired mainly by the inefficiency of the current tax disputes resolution
mechanisms,21 insights from economic psychology, such as the importance of
procedural justice22 and the realization of savings in money, time, resources as well
as other benefits.23 While it is acknowledged that there are circumstances that
warrant litigation, there is also an acknowledgement that many cases that are initially
on track for litigation are resolved in another venue, and efficiencies can be derived
if the appropriate tools, practices, and procedures are in place and used.24 (Emphasis
supplied).

TRAB, TRAT and TOS may resolve tax disputes or complaints by ADR processes,
to wit, mediation, conciliation or arbitration. However, the appropriate tools,
practices and procedures are not in place or being used. No formal rules of procedure
to regulate the conduct or use of the ADR processes have been promulgated. Rule
16(11) of TRAB Rules, 2018 excludes applicability of the rules of procedure made
under the Civil Procedure Code, Cap. 33 and the Arbitration Act, Cap. 15 in tax
dispute resolution.
20
Odd-Helge Fjeldstad, et al., (2012), in People’s Views of Taxation in Africa: A Review of
Research on Determinants of Tax Compliance, CHR. Michelsen Institute, WP 2012:7, wrote tax
evasion had been a universal and persistent problem throughout history with manifold economic
consequences. Two thousand five hundred years ago, Plato was writing about tax evasion, and the
Ducal Palace of Venice has a stone with a hole in it, through which people once informed the
Republic about tax evaders. This thinking, also known as the rational model theory, informs the
general perception of tax official when dealing with taxpayers, available at
https://www.cmi.no/publications/file/4577 (accessed on 16/08/2019).
21
Hanna Filipczyk, (2016), Alternative Methods for Resolving Tax Disputes in Poland – The
Odds of Success, SSRN Electronic Journal, 10.2139/ssrn.2759842, paper presented at the 4th
Annual TARC Workshop, available at https://www.reserachgate.net (accessed on 25/06/2019).
22
Ibid.
23
Chris Jaglowitz, (1999), Mediation in Federal Income Tax Disputes, available at
https://www.cfcj-fcjc.org/sites/default/files/docs/hosted/17454-mediation_taxpdf (accessed on
25/06/ 2019).
24
Op. cit., (n.1), p. 4.
 5

In the absence of prescribed rules of practice and procedure, TRAB and TRAT are
vested with powers to specify their own rules of procedure and practice to resolve tax
disputes but so far they have not done so.25

And lastly, there are no rules of procedure or guidelines on how the out-of-court
‘negotiated settlements’ between taxpayers and the Commissioner-General are
conducted and settlements reached before they are recorded as consent judgments
either by TRAB or TRAT. The law does not stipulate procedure on how the
Commissioner-General and the taxpayers should conduct or engage in the settlement
or negotiation process out-of-court.

1.3 Objectives of the Study

1.3.1 General Objective
To critically examine the law and practice in respect of the use of the ADR processes
in tax dispute resolution and recommend that procedural rules to regulate the conduct
of negotiation, mediation, and conciliation to resolve tax disputes and related matters
thereto should be enacted.

1.3.2 Specific Objectives

i) To analyze the relationship between delays in tax dispute resolution and the
ineffective use of the ADR processes.

ii) To consider and examine the necessity of enacting specific rules of procedure
on the use of ADR processes, to wit, mediation, conciliation and negotiation
processes in tax disputes resolution in Tanzania.

iii) To propose specific legal reforms to be undertaken by the Government to

allow the use of the ADR processes from the initial stages of tax disputes
(pre-filing stage) to the appeal machinery (post-filing stage).

25
The procedure is provided under r. 17(1) and (3) of TRAB Rules, 2018 and r. 16(1) and (3) of
TRAT Rules, 2018.
 6

1.4 Significance of the Study

The study is significant for the following reasons:

1.4.1 It will add to the dearth of knowledge on the general ADR literature in
Tanzania. There is no study covering the use of the ADR processes in tax
dispute resolution. The literary works available are on the use of ADR in
other civil suits or proceedings.

1.4.2 It will highlight the shortcomings of the current legal and policy framework
on the use of the ADR processes in tax dispute resolution.

1.4.3 It will also help the adjudicators, TRAB, TRAT and CAT, to conduct self-
assessment exercise and see whether they can adopt short-term measures
within the existing legal framework to deal with the delays in determining tax
disputes.

1.5 Literature Review

There is dearth of literature on ADR.26 The available literature has not covered
applicability or the inclusion of the ADR processes in tax dispute resolution
mechanisms in Tanzania. This is so even though mediation, conciliation, and
arbitration, as alternative means to resolve tax disputes by TRAB and TRAT, were
included in the Tax Revenue Appeals Act (TRAA) since 2001.

Equally, there is limited literature on the tax dispute resolution mechanisms that
touches on the inclusion of ADR processes in Tanzania. The available works are
premised on litigation only. The fact that the use of ADR in tax dispute resolution
has not been covered in any of the available works seem to suggest that ADR and tax
dispute resolution have all along been treated as separate subjects or fields of study.

26
Clement J. Mashamba, (2014), Alternative Dispute Resolution in Tanzania: Law and
Practice, Mkuki na Nyota Publishers Ltd, Dar Es Salaam.
 7

Kibuta in his book, Tax Compliance in Tanzania: Analysis of Law and Policy
Affecting Voluntary Tax Payer Compliance, briefly discusses the issue of court
delays in the determination of tax disputes, which result to tied-up tax revenue. He
states that appeals at TRAB and TRAT are determined with relative speed (within
three to six months), but a serious concern is on the time frame for an appeal from
TRAT to be determined by the Court of Appeal, which may take up to three to four
years.27 However, this contention is contradicted by the findings of the CAG that one
of the challenges requiring Government’s attention is the ‘piling-up’ of tax disputes
and long outstanding tax cases at TRAB and TRAT.28 The CAG further avers that
dishonest businessmen use the appeal machinery as an avenue for ‘packing’ tax
liabilities.29

Furthermore, the author does not discuss the effectiveness of the ADR processes in
enhancing voluntary tax compliance and relationships between the TRA and
taxpayers, or as a means of reducing court delays in the disposition of tax disputes.
The work is confined on litigation as the means of tax dispute resolution in Tanzania
while leaving out ADR in the discussion. This study focuses on the use of ADR
processes to enhance relationships between TRA and taxpayers and as the means to
reduce delays is disposition of tax disputes.

Kibuta et al., in Tax Dispute Resolution: A Manual for the Tax Practitioner,
provide a comprehensive step-by-step account of tax dispute resolution in Tanzania.
The authors consider the value of the objection procedure as the first tier of tax
dispute resolution. It is contended by the authors that this procedure is undermined
by the tendency of the TRA to reject objections peremptorily and the perception of
the taxpayers and tax practitioners that it is only a step towards appeal to TRAB.30

27
Kibuta Ongwamuhana, (2011), Tax Compliance in Tanzania, Analysis of Law and Policy
Affecting Voluntary Tax Payer Compliance, Mkuki na Nyota Publishers Ltd, Dar Es Salaam, pp.
202-203.
28
CAG Annual Report, 2016/2017, p. 76.
29
Ibid.
30
Kibuta Ongwamuhana, et al., Tax Dispute Resolution.
 8

The authors argue that the procedure is not effective and efficient even though in
some instances, the procedure helped resolve tax disputes, which would otherwise
end up on appeal.31 Commenting on how to determine the dispute resolution strategy,
it is observed that, “tax practitioners ought to recognize that, for the taxpayer, the
relationship with the tax office is a permanent one. It is therefore imperative a
cordial but professional relationship is maintained”.32

The work by Kibuta, et al., is confined to the objection and appeal procedures
without any consideration of the ADR processes, which is the subject of this study,
as mechanisms of tax dispute resolution under the TRAA, capable of facilitating and
ensuring that the permanent relationship between the taxpayer and the tax authority
is cordially but professionally maintained.

Mashamba, in Alternative Dispute Resolution in Tanzania, Law and Practice, 33

has written in a detailed manner about the ADR processes in Tanzania, giving a
historical backdrop of its origin and applicability in the civil justice system. His work
is partly confined to the introduction and inclusion of the ADR processes in the Civil
Procedure Code, Cap. 33 and the Arbitration Act, Cap. 15. However, throughout his
work, there is no reference to the use of the ADR processes in tax disputes. This
study is intended to fill the vivid knowledge gap on the use of the ADR processes in
tax disputes resolution in Tanzania.

An essential work reviewed that provides insights on forms of alternative disputes

settlement available in other jurisdictions is the Tax Disputes and Litigation
Review, by Whitehead (Ed.).34 The book provides an overview of each jurisdiction’s
anti-avoidance rules and any alternative mechanisms for resolving tax disputes, such
as mediation, arbitration or restitution claims.35

31
Ibid., p. 39.
32
Ibid.
33
Clement J. Mashamba, Alternative Dispute Resolution in Tanzania.
34
Simon Whitehead, (Ed.), (2014), The Tax Disputes and Litigation Review, 2nd Ed., Law
Business Research Ltd, available at https://www/c.ymscdn.com (accessed on 03/03/2019).
35
Ibid., p. vii.
 9

This book provides valuable case studies from 26 countries that it has covered. It
shows some countries that use the ADR processes and those that do not use the ADR
processes. From Africa, the book only covered South Africa and Nigeria. Tanzania
and other East African countries are not included. This book is a good source of
information that is relevant to the Tanzanian situation or environment.

Gashaw in his article, The Room for Alternative Dispute Resolution (ADR)
Processes in Tax Disputes: A Message for the Ethiopian Tax Administrations,36
makes an essential contribution to this study area. He examines whether and why tax
disputes are amenable to the ADR processes as a rival or complementary tax dispute
resolution mechanism in Ethiopia.37

The challenges and possible solutions he highlights and advances in his article have
some bearing on the Tanzanian situation. The author correctly associates himself
with the general assertion by the Organization for Economic Co-operation and
Development (OECD) that the introduction of the ADR processes into tax disputes
usually involves challenges and precautions that must be taken to make better use of
ADR. Absence of rules procedure and guidelines on how the ADR processes may be
conducted in tax dispute resolution in Tanzania highlights the potential challenges
and need to promulgate the said rules of procedure to avert those challenges.

Thuronyi and Espejo in their Tax Law Note, How Can an Excessive Tax Volume of
Tax Disputes Be Dealt With,38 discuss a range of approaches to reduce the number
of tax cases that go to court. They place more emphasis on avoiding disputes at the
earliest possible stage and resolving as many disputes as possible at the
administrative level.
They assert that the general trend is towards more widespread adoption of the ADR
processes to deal with caseloads of appeals as it involves flexible procedures, which
36
Misganaw Gashaw, The Room for Alternative Dispute Resolution (ADR) Processes in Tax
Disputes: A Message for the Ethiopian Tax Administrations, Ethiopian Business Law Series, Vol.
V, 2012, available at https://www.academia.edu (accessed on 20/03/2019).
37
Ibid., p. 4.
38
Victor Thuronyi and Isabel Espejo, (2013), How Can an Excessive Tax Volume of Tax
Disputes Be Dealt With, available at
https://www.imf.org/external/np/leg/tlaw/2013/eng/tdisputes.pdf (accessed on 19/03/2019).
 10

do not cause financial strain on the taxpayer and are cost-effective for the tax
administration. Use of mediation, conciliation and arbitration at the administrative
level has not been expressly provided for in any of the tax laws in Tanzania. This is
an area where Victor and Isabel have convincingly made a case that tax authorities
must improve on to avoid tax disputes going to court.

Greggi and Kovacevic, in their paper, Lights and Shadows on the Implementation
of the Alternative Dispute Resolution (ADR) System in the Italian Trial,39
discussing the ADR system in tax matters as set forth in the Italian and Croatian
doctrine and legislature, argue that, literally the tax administration has no power to
negotiate with the taxpayer the amount of the tax to be paid if some discrepancies
have emerged between the amount reported by the latter and the amount due, upon a
preliminary investigation by the office.

The authors support this view by citing the work of De Mita E. (2006), which argued
that academic doctrine argues that there is a complete lack of discretionality by the
tax administration in the enforcement of taxes. The academic doctrines (principles)
used as the basis for the objection to the use of ADR processes have been discussed
in this study to show that such use does not conflict with those principles.

The authors point out that the Italian system has adopted a ‘quasi-ADR mechanism’
of mediation even though in Italy the term ADR is not used in taxation. 40 This
position is different in Tanzania and some other jurisdictions. Tax authorities are
allowed to enter into negotiations and settlements with taxpayers in certain cases to
avoid costs and prolonged disputes.

Umar and Nyende, in Challenges of Tax Administration in Developing Countries,41

argue that the complex challenges of tax administration in developing countries
39
Marco Greggi and Natasa Zunic Kovacevic, (1991), Lights and Shadows on the
Implementation of the Alternative Dispute Resolution (ADR) System in the Italian Trial, v.38, br. I,
377-396 (2017), available at https://www.academia.edu, (accessed on 16/03/2019).
40
Ibid.
41
Mohammed A. Umar and Nyende F. Tusubira, Challenges of Tax Administration in
Developing Countries, Journal of Tax Administration, Vol. 3:2, 2017, available at
https://www.jota.website (accessed on 19/03/2019).
 11

involve deep-rooted systemic problems, some of which are linked to acts of omission
or commission by the political leadership. The authors argue that such acts account
for low levels of tax collection despite the tax administration reforms that have been
undertaken.

The article provides the basis for the argument that failure to use the ADR processes
to reduce caseloads in appeals machinery is also attributed to the acts of omission by
the political leadership. Slow implementation of recommendations given by the
CAGin his Annual Reports has been observed as the cause of continued inefficiency
of the appeals machinery in resolving tax disputes.

1.6 Limitation of the Study

In conducting the study, some limitations were faced. Access to information on tax
disputes that are still ongoing was not easy because undecided tax matters are mainly
confidential. This hindered access to some information relevant to the study, such the
causes of the tax disputes or the basis of settlement where negotiations were
successfully.

Furthermore, some officials could not readily give certain specific information that
they may have felt had adverse effects on the performance image of an authority.
Also some of the respondents requested their identity to remain confidential for the
fear of possible reprisal or victimization.

The study was self-funded, and therefore, the researcher could not visit equally
essential tax regions like Mwanza and Mbeya, where there are many taxpayers. The
respondents interviewed were those who are based in Arusha and Dar-es-Salaam tax
regions.
The Tax Ombudsman Service was established after the study had begun and at the
time the writing of this work had commenced. The Minister for Finance has not
made regulations on the conduct of the Tax Ombudsman or recruitment of
 12

employees. This may be an area for further future study to establish how the TOS has
performed or achieved to reduce case backlogs or taxpayer’s complaints.

1.7 Hypotheses
This work was carried out on the assumptions that,

1.7.1 Delays in the disposition of tax disputes and determination of tax objections
by the Commissioner-General are caused by an inefficient tax appeals
machinery and shortage of competent and experienced personnel.

1.7.2 Effective use of the ADR processes in tax dispute resolution will reduce case
backlogs at the appeals machinery and will also speed-up the determination
of tax objections.

1.7.3 Lack of specific rules of procedure, guidelines or a framework on how to

conduct ADR processes fetters the use of the ADR processes in tax dispute
resolution and may lead to integrity issues.

1.8 Data Collection and Analysis Methodology

The study was mainly conducted through secondary sources found in the library,
personal books collection and by reviewing various literary works from online
sources. Domestic and foreign judicial decisions, journals, articles, papers, and
reports written by renowned scholars, Law Reform Commissions, and other bodies
or institutions were reviewed to provide further insight into the study. A review of
the relevant laws related to the use of the ADR processes in disputes resolution in
other fields was also done.

Data was collected by direct observation and content analysis when attending two
hearing sessions at TRAB and TRAT in Dar Es Salaam. Reported proceedings of the
two appeal bodies were reviewed.
 13

Data was also collected through interviews, whereas 12 key persons who are
knowledgeable and experienced in tax matters were interviewed. These were
practising advocates (4), tax expert (1), registered tax consultants in Arusha (2) and
Dar Es Salaam (2). Respondents who are administrators and officers of statutory
bodies, officials of TRA – Legal Section (1), Secretary to the Board – TRAB (1),
Registrar - TRAT (1). Taxpayers (3) were also interviewed to solicit information and
their knowledge on the use of ADR processes in tax disputes. Unstructured interview
questions were administered, physical visits and telephone calls were made and
emails were sent to the selected respondents.

Simple random sampling was used. This method was chosen because of the nature of
the study, the time and money available; and the degree of accuracy of the
information that was required.

Data collected was qualitatively analyzed. The content was analyzed and grounded
theory was applied to explain why the ADR processes are not effectively used and
the causes of delay in hearing of tax disputes.
 14

CHAPTER TWO
ALTERNATIVE DISPUTE RESOLUTION IN TAX DISPUTES
"Dialogue is the most effective way of resolving conflict."
Tenzin Gyatso, the 14th Dalai Lama.
2.1 Introduction
ADR includes various processes of resolving disputes. However, for this study, only
four processes are considered. Three of the processes have been expressly
incorporated in tax dispute resolution mechanisms in Tanzania; these are mediation,
conciliation, and arbitration.42 The fourth one, negotiation, is discussed for two
reasons, one, it has functional characteristics similar to the two processes that are
included, i.e. mediation and conciliation,43 and two, it is being used by the taxpayers
and the Commissioner-General as an ad hoc process when a taxpayer requests for an
out-of-court settlement.44

Other ADR categories in taxation such as advanced pricing agreements; pre-filing

and post-filing processes; class and private rulings did not form part of this study
because the rules of procedure for their applicability are in place. 45 They are
categorized as ADR mechanisms because they prevent the tax authorities and
taxpayers from escalated disputes. These methods allow the tax administration and
the taxpayers to enter into agreements that stipulate binding decisions on the part of
the tax authority.

42
See s. 17(1)(b) of TRAA, 2001 on powers of the TRAB and the TRAT and s. 28C of TAA, 2015
on powers of Tax Ombudsman to resolve a complaint amicably using mediation or conciliation.
43
John A. Faris, (1995), An Analysis of the Theory and Principles of Alternative Dispute Resolution,
A Doctoral Thesis Submitted to the University of South Africa, South Africa, available at
https://core.ac.uk/download/pdf/43175988.pdf, p.13 (accessed on 15/03/2019).
44
The researcher was informed by Advocate Harold S. Gugami on the 07/08/2019 and the
same date by the Secretary to the Board – TRAB, that the TRAB normally issues a letter to a
taxpayer who informs it that he wishes to resolve the matter ‘out-of-court’. Copy of the letter is
sent to the Commissioner-General. This is done before the issuing of summonses for hearing.
However, the TRAB has no control whatsoever on the outcome or procedures to be followed. It
will only adjourn the matter to give room to the parties to settle or record a consent judgment.
45
See ss. 11, 12 and 13 of TAA, 2015. Also, the Minister for Finance has issued the Tax
Administration (Transfer Pricing) Regulations, 2018. TRA has issued the Transfer Pricing
Guidelines, 2014.
 15

These other ADR categories assure taxpayers that, as long as the agreement is
complied with, and that there are no changes in critical assumptions, there will be no
further dispute with the tax authority.46 As concepts, they are pegged on the idea that
tax authorities and taxpayers may engage in constructive dialogue about tax issues in
respect of particular transactions or business practices of an industry. The underlying
assumption, therefore, is that once the issues have been resolved between the parties,
the tax authority will not challenge them unless it vacates that position.

2.2 Definition of ADR

ADR has been mostly defined based on its benefits over litigation rather than a
system of procedural pluralism, which consists of multiple systems of a process that
47
share a single theoretical system of processual principles. Faris argues that each
process is distinct in its form and specialized in its function, but they all share
common consensual principles in a central structure of processual theory.48 The most
salient of these principles being: disputant consensus, disputant autonomy and
participation, processual flexibility and decision making through problem solving.49

In this study, the definition adopted in the Kenyan ADR Framework, 2015 is found to
be more accurate and relevant in tax dispute resolution mechanisms. ADR is defined
therein as “a voluntary, participatory and facilitated discussion over a tax dispute
between a taxpayer and the Commissioner. It is in the form of facilitated mediation
and not arbitration as envisaged in the Arbitration Act (Chapter 49 of Laws of
Kenya), as the facilitator has no power to impose any decision regarding the outcome
of the tax dispute. Instead, the parties are facilitated to find a solution to the disput”. 50
The key element is the involvement of a facilitator to mediate the disputing parties,
the taxpayer and the Commissioner.

46
See n. 1 (p.9).
47
John A. Faris, An Analysis of the Theory and Principles of Alternative Dispute Resolution, p.13.
48
Ibid.
49
Ibid.
50
The Preamble of the Kenya ADR Framework launched in 2015 and revised on June 2019 at
p. 7.
 16

2.2.1 Mediation
Sustac observed that the term mediation had been defined from the perspective of the
negotiation concept, of its creative side, of its substance, of its expansion range and
third-party intervention.51 He further stated that mediation is defined by reference to
the legal frame as being a ‘voluntary process where a neutral mediator tries to help
the parties in conflict to reach an agreement which must be acceptable for both
parties and which must put an end to a conflict before going to the court’.

Therefore, mediation is an assisted negotiation and an informal process in which

parties are aided by a mediator possessing specialized skills, requisite training, and
sufficient experience necessary to assist the parties to reach a negotiated settlement.
The mediator plays a facilitating role only without the power to impose a settlement
and does not rule who is right or wrong. Parties are offered a forum before or after
the dispute is in court for principled negotiations whereby they abandon their rights
position and adopt an interest position to reach a solution.

2.2.2 Conciliation
Conciliation is a recommendation-based ADR process where settlement is made out
of court. Within the conciliation procedure, the achievement of the parties’
agreement is pursued with regard to conflict extinguishment, but unlike the mediator,
the conciliator does not analyze the conflict, but only tries to clarify to the parties the
position of each of them in view of establishing trust between the parties, correcting
their deficient perceptions and helping them reach a reasonable understanding of the
reasons generating the conflict.52 Like in the mediation process, there is no
involvement of the Court in the proceedings.53

51
Zeno D. Sustac, A Philosophical Approach to Alternative Dispute Resolution Systems
quoting Diana-Ionela Anches, Mediera in viata social-politica, Ed. Universitara Bucuresti, 2011,
pp. 68-72, available at https://www.mediate.com (accessed on 14/08/2019).
52
Ibid.
53
Sheetal Sharma of KIIT Law School, Arbitration, Mediation and Conciliation in India, How
Effective Are They?, available at http://www.juudgeblog.wordpress.com/2018/02/08 (accessed on
18/07/2019).
 17

It is a voluntary process as it is upon the discretion of the parties to choose it as a

method to resolve their dispute. The proposal to be given by the conciliator is not
binding upon the parties. It presides over litigation because the parties do not have to
go through the technical procedures and formalities of litigation; instead, it allows
parties to reach an amicable resolution in a friendly manner.

However, it should be noted that conciliation and mediation are sometimes used
interchangeably hence create some confusion. The processes are inherently different
due to the roles played by the mediator and the conciliator and the analysis of rights-
based and interests-based approaches adopted in resolving disputes.54

2.2.3 Arbitration
Mashamba reproduced an older version of the definition of arbitration by Ramilly,
M. R., in Collins v. Collins [1858] 26 Beav. 306, 312 to the effect that arbitration is a
reference to the decision of one or more persons, either with or without an umpire, of
some matter or matters in difference between the parties. 55 It is his contention, and
correctly so that the definition could fit any ADR process because the role of the
arbitrator is not included.

The critical feature of arbitration (that sets it apart from the other ADR processes) is
that apart from the fact that parties' consent is fundamental once given, the arbitrator
has the power to adjudicate the dispute between the parties and make an award that is
binding to them. The arbitrator, therefore, imposes a decision on the parties. The
process is more formalistic and procedural than mediation or conciliation. In most
cases the arbitrators follow certain rules of procedure, which the parties have
consented to or have been agreed upon before the commencement of the
proceedings.

54
ILRC, (2010), Report on Alternative Dispute Resolution: Mediation and Conciliation, Dublin,
available at https://www.lawreform.ie/fileupload/reports/r98adr.pdf (accessed on 25/07/2019).
55
Clement J. Mashamba, Alternative Dispute Resolution in Tanzania.
 18

2.2.4 Negotiation
This ADR process is defined as the way by which persons manage disputes and
search, employing dialogue, solutions that express a mutual agreement. Negotiation
is found in all other alternative methods of resolving disputes, being either a
technique used for reaching an understanding mutually acceptable for the parties or a
process stage of these alternative methods of litigation settlement.56 It is the dominant
process of ADR compared to the other processes. 57 The vital element of negotiation
is continuity until terminated by agreement or failure to settle.58

All the ADR processes included in the tax dispute resolution mechanisms in
Tanzania have one inherent common feature, that is, the involvement of a Third-
Party. Persons other than the parties to the dispute who play different roles
depending on the process adopted facilitate the processes.

However, a cursory interpretation of section 17 of the TRAA, 2001 is that TRAB and
TRAT are mandated to ‘mediate, conciliate or arbitrate’. And in the TAA, 2015
(after amendment in June 2019) the Tax Ombudsman is mandated to mediate and
conciliate. Both pieces of legislation are mute on how the mediator, conciliator or
arbitrator may be appointed. And there is no rule of practice to show how the ADR
processes have been used as it will be shown later in this study.

In Kenya and South Africa the situation different. The ADR frameworks provide
how the facilitator will be appointed. Again, this procedural position of the law in tax
dispute resolution in Tanzania is different from the procedure in other civil suits
brought under the Civil Procedure Code, Cap. 33. Under the said law, the position
has now changed after the enactment of the Civil Procedure Code (Amendment of
the First Schedule) Rules, 2019. The rules allow parties or the Court to appoint a
Third-Party to mediate.

56
Op. cit., (n.52).
57
John A. Faris, An Analysis of the Theory and Principles of Alternative Dispute Resolution, pp. 53-
54.
58
Ibid.
 19

2.3 Objections to the Use of ADR in Tax Dispute Resolution

In considering the applicability of the ADR processes in tax disputes resolution, it is
essential to review and discuss albeit briefly some academic doctrines (principles) to
appreciate its aptness and viability. The reason is not far fetched. Taxation is an
obligation imposed by statute in most countries and Tanzania in particular; it is a
constitutional and statutory obligation. 59 The TRA is established under the Tanzania
Revenue Authority Act, Cap. 379. One of its primary functions as spelt out in section
5(1)(a) of the Act is to administer and enforce the laws or the specified provisions of
the laws set out in the First Schedule to the Act.

Therefore, the TRA performs its statutory functions guided by the principle that its
primary duty is to assess, collect and account for all the revenue to which those laws
apply.60 This statutory duty cannot be dispensed with without the express provisions
of the law. It follows therefore that, the Commissioner-General cannot legally enter
into an agreement, settlement or compromise with a taxpayer for non-payment or
less-payment of taxes unless the law allows. A statutory person can only perform
acts, which he is empowered to perform.61

This duty is well captured in a decision by the Court of Appeal of New Zealand
where it was observed that "the Commissioner [of New Zealand] cannot contract out
of those obligations…[The] Commissioner does not have a general dispensing
power. He (or she) cannot opt-out of the obligation to make the statutory judgment
of the liability of every taxpayer under the Income Act"62

59
Art. 138(1) of the Constitution, 1997 provides that no tax shall be imposed except in accordance
with an Act of parliament.
60
Tanzania Revenue Authority versus Kotra Company Limited, Civil Appeal No. 12 of 2009,
Court of Appeal of Tanzania at Mwanza, reported in Fauz Twaib, (2018), A Casebook on the Tax
Law of Tanzania, Vol. 1, Law Africa Publishing (K) Ltd, Nairobi, Kenya, p. 29.
61
Rosham Meghjee & Co. Ltd versus Commissioner General, TRA, Civil Appeal No. 49 0f
2008, Court of Appeal of Tanzania at Dar Es Salaam, reported in Fauz Twaib, (2018), A Casebook
on the Tax Law of Tanzania, Vol. 1, Law Africa Publishing (K) Ltd, Nairobi, Kenya, p. 12.
62
Mark Keating and Kirsty McLaren, (2009), The Settlement of Tax Disputes: The Commissioner is
Able But Not Willing, 15:4 New Zealand Journal of Taxation Law and Policy, 323, p. 3. The
observation was made in Brierley Investments Ltd v. Bouzaid [1993] 18 TRNZ 1 (CA).
 20

However, the position has been relaxed as the same Court of Appeal of New Zealand
in another matter ruled, “the taxpayer and the Commissioner are entitled to make
sensible litigation, including settlement, decisions”.63 While in another case, William
Young P., advised, “major tax litigation is expensive and places a heavy strain on
the human resources available to the Commissioner. The commissioner must be
permitted to make rational decisions as to how those resources can best be deployed.
Further, sensible litigation, including settlement, decisions must necessarily allow
litigation risk”64 (Emphasis added)

Filipczyk has discussed the normative obstacles to the use of ADR processes in tax
disputes that are based on legislative impediments or restrictions on derogation from
the statutory duty to collect taxes by the tax administration. 65 The work is in response
to the objections to the suitability of the ADR processes in tax dispute resolution in
Poland. It is an important piece of work to consider because, since 2001, the law
allows the use of mediation, conciliation and arbitration in Tanzania.

It should be noted that in some jurisdictions such as Colombia, Dominican Republic,

Brazil, Denmark and Nigeria, ADR processes are not allowed in settlement of tax
disputes, which are considered as public matters. 66 For example, the Nigerian Court
of Appeal has held that “tax disputes are not arbitrable as they relate to the revenue
of the federation and thus fall under the exclusive jurisdiction of Federal High
Court”.67

2.3.1 The Principle of Statutory Exclusivity

In Poland, the inclusion of the ADR processes or its limited applicability has been a
subject of debate due to the principle of statutory regulation of taxation, also known
as the principle of statutory exclusivity.68

63
See Auckland Gas Co. Ltd v. CIR [1999] 2 NZLR409; [1999] 19 NZTC 15,027, (n.94).
64
op. cit., (n.62).
65
Hanna Filipczyk, Alternative Methods for Resolving Tax Disputes, (n.21).
66
Simon Whitehead, (Ed.), Tax Disputes and Litigation Review.
67
The said decision was made in Snepco & 3 Others v. FIRS & Another, CA/A/208/2012
(n.34).
68
Ibid., p. 9.
 21

The principle implies that all tax matters shall be by means of statute. The
interpretation of the principle suggests that the ADR processes leading to settlement
mean the amount payable out of such settlement is differing from what the law
stipulates.69 The premise or rationale of the principle is sound and correct in the
Tanzanian context.70 For example, if the law has provided that VAT shall be charged
at 18% and for some reason, the taxpayer fails to pay timely or to provide required
documents, indeed, the taxpayer and the tax authority cannot ‘agree’ to pay less than
the statutory rate.71

However, an agreement to settle between the taxpayer and the tax administration
should not be viewed narrowly as ‘the possibility to negotiate taxes’ 72 or derogation
from the statutory duty to assess the amount of tax payable on the facts as he finds
them in accordance with the law as he understands it.73 Instead, the ADR processes
are used as tools to find the truth of the facts and apply the law to those facts.

The Tax Administration (Remission of Interest and Penalties) Order, 2018 74 was
passed to allow the Commissioner-General to remit the whole of interest or penalty
in respect of eligible tax payable by an eligible person. Persons who had filed
objections or appeals were eligible persons if they voluntarily agreed to conclude
their tax liability without further grievances or disputes.75 The said order was, in fact,
the legitimate way to ‘circumnavigate’ this core principle. The measure was intended
to settle tax disputes amicably without further prolonged litigation.

69
Ibid.
70
Op. cit., (n.60).
71
This position is different in New Zealand where the Commissioner for Tax is allowed to
‘compromise’ proceedings. In Fairbrother v. CIR [2000] 2 NZLR 211; (2000) 19 NZTC 15,548
(HC), William Young, J., observed that "there is now no scope for an argument based on an
absolute obligation to collect the right amount of tax. I have reached the view that the
Commissioner is entitled to compromise proceedings in relation to a taxation liability outside the
four corners of the statutory provisions as to relief and remission” referred by Mark Keating and
Kirsty McLaren, (n.62).
72
Ibid.
73
Binh Tran-Nam and Michael Walpole, Independent Tax Dispute Resolution and Social
Justice in Australia, UNSW Law Journal, Vol. 35(2), available at
https://www.austlii.edu.au/au/journals/UNSWLawJl/2012/21.pdf (accessed on 07/08/2019).
74
G.N. No. 282A of 2018.
75
Ibid., Ors. 4 and 5.
 22

2.3.2 The Legality Principle

This principle is similar but not identical to the statutory exclusivity principle.76 It
implies that the public organs shall function based on and within the limits of the
law.77 The objection based on this principle is premised on the assumption that
negotiated settlements are ‘tax bargains’.78 The concern here is on the balancing of
the principle of legality and the need to apply the procedural justice principle through
the use of the ADR processes, which are considered to be outside the purview of the
public law framework.79

In the UK, ADR and more specifically facilitation or mediation is a flexible dispute
resolution tool available to Her Majesty's Revenue and Customs (HMRC) which, in
appropriate cases, can help HMRC and its customers resolve disputes (or reach key
decision points) cost-effectively and efficiently.80

It is important to note that the concept of resolving disputes ‘cost-effectively'

imbedded in ADR processes does not mean making compromises on what is the right
tax liability consistent with the law.81 It means establishing the correct tax liability,
fairly and even-handedly across all taxpayers in a way, which minimizes unnecessary
cost.82 Curtly stated, consensus does not mean compromise. 83 In the ADR processes,
mediation and conciliation, parties should be facilitated or in their initiative try to
reach consensus on the issues in dispute. Conditional or concessions should not be
permitted in settlement of tax disputes. Settlements must be reached in accordance
with the law.

76
Op. cit., (n.65).
77
Reference is made to Art. 7 of the Polish Constitution of 1997.
78
Op. cit., (n.65) p. 12.
79
Victor Thuronyi and Isabel Espejo, How Can Excessive Volume of Tax Dispute Be Dealt
With? p. 39.
80
Her Majesty’s Revenue & Customs, (2017), Code of Governance on Resolving Tax Disputes:
Commentary on the Litigation and Settlement Strategy (LSS), p. 35, available at
https://www.assets.publishingservice.gov.uk (accessed on 29/01/2019).
81
Ibid., p. 9.
82
Ibid.
83
Op. cit., (n.78).
 23

2.3.3 The Equality Principle

Because taxpayers must be equally treated, that is, each case of similar facts and
circumstances should be treated the same, the use of the ADR processes poses the
risk of different treatment to taxpayers. This is because it may be felt that parties
possess different negotiating skills and techniques and therefore, different
agreements many be reached while facts and circumstances are the same. How this
concern may be addressed depends on the way the tax authorities use in practice the
authority (competence and capacity) vested in them and authorizing them to settle a
case.84

Procedural rules or a legal framework will address this concern by clearly stating
when and how settlements may be entered into. This will provide a level of certainty
and predictability. In Kenya, for example, the ADR Framework provides for the
‘suitability test’ of disputes appropriate for ADR and how the processes should be
conducted.

2.3.4 The Model of Tax Procedure

The objection in this aspect is pegged on the model of tax procedure. Usually, the tax
procedure is inquisitorial, and the process involved, such as audits or investigations
are not adversarial. The tax authority's role is to determine what the taxpayer is
legally required to pay as taxes and therefore, such a model does not permit entering
into the settlement agreement.85

However, the argument downplays the fact that one, the tax authority is playing a
double role, the authority conducting proceedings and the creditor. 86 Two, the
determination competence of the authority does not exclude dialogue or
negotiations.87ADR will bring balanced power equilibrium between the parties to
reach a just determination of what amount of taxes should be paid.

84
Hanna Filipczyk, Alternative Methods for Resolving Tax Disputes.
85
Ibid., p. 13.
86
Ibid.
87
Ibid.
 24

2.4 Conclusion
ADR processes are being used in tax disputes resolution, whereas mediation,
conciliation and negotiation are the most preferred processes. Arbitration is not being
used even though the law in Tanzania provides for it. The academic doctrines, which
form the basis of theoretical objections to the use of ADR in tax disputes, stem from
legal formalism and are not theoretically valid.88 Any decision between the parties to
reach a consensus on how the truth about facts can be established using ADR
processes and how the law can be applied to those established facts does not mean
derogation from the statutory obligations and standards. ADR processes are just tools
to be applied to establish the correct factual and legal position of each party without
unnecessary costs and delays.

Thuronyi and Espejo correctly concluded that, “the vagueness in practice of the
procedures included within the concept of ADR leads to a concern about possible
misuse”.89 They proceed to propose that, "to minimize this problem a certain level of
formalization is needed, together with a clear definition of cases where ADR is
possible and a clear strategy and tight governance around concluding whether or not
to negotiate or litigate".90 Therefore, it is essential to consider the tax dispute
resolution mechanisms in Tanzania and show how ADR processes can be effectively
used to resolve tax disputes expeditiously.

88
Ibid., p. 9.
89
See (n.38) p. 39.
90
Ibid.
 25

CHAPTER THREE
DISPUTE RESOLUTION REGARDING TAX DECISIONS
“A world of tax without disputes is an illusion. It is just as much an illusion as a
world without tax. Tax and disputes come together inseparably.” Hans Mooij.91

3.1 Introduction
Disputes are a common feature of any human society, regardless of time, space,
social traditions or level of development. 92 Disputes are by no means confined to
humans alone.93 In modern society, they can arise in many areas of life and involve
all stakeholders of the community, including individuals, businesses, organizations
and government departments.94 They are contextual social phenomena determined by
the clash between interests, the concepts and the needs of particular persons or
groups when they enter into contact and have different or apparent objectives.95

It is not different in the field of taxation. The Court of Appeal of Tanzania in one
decision describing a tax dispute stated,"[this] denial of liability to pay the assessed
taxes, and the assertion that the liability exists is a tax dispute between the two
parties, pure and simple".96 The description by the Court of Appeal narrowed the
definition of a tax dispute to denial and assertion of liability. However, tax disputes
are said to take place when the taxpayer takes a contrary view to that of the tax
administration (or vice versa) and decides to take some action regarding this
disagreement.97 If no action permitted by law is taken to object or challenge a tax
decision, but the taxpayer holds a different view, a tax dispute cannot be said to exist.

91
available at https://www.kluwertaxblog.com accessed on 27/08/2019.
92
Binh Tran-Nam & Michael Walpole, Independent Tax Dispute Resolution and Social
Justice.
93
Ibid.
94
Ibid.
95
Zeno D. Sustac, A Philosophical Approach to Alternative Dispute Resolution Systems.
96
Tanzania Revenue Authority versus Kotra Company Limited, Civil Appeal No. 12 of 2009,
Court of Appeal at Mwanza, reported in Fauz Twaib, (2018), A Casebook on the Tax Law of
Tanzania, Vol. 1, Law Africa Publishing (K) Ltd, Nairobi, Kenya.
97
Op. cit., (n.92).
 26

The dispute between the taxpayer and the Commissioner-General may involve an
objection to assessment made, a calculation of the amount due for refund, drawback
or repayment of any tax, duty, levy or charge, a refusal to make any refund or
payment or decision to register, refusal to register any trader for the purpose of Value
Added Tax by the Commissioner-General.98

A complaint by a taxpayer on service, procedural or administrative matter may be

made to the office of TOS for a resolution through mediation or conciliation. The
complaint can be dubbed as a tax dispute even though it may not necessarily involve
a question of denial or assertion of tax liability per se.99 However, the researcher
observes that a complaint must be of such gravity that warrants resolution by TOS
and not just mere grievances that should be dealt with administratively by the TRA.

This study on tax disputes resolution through the ADR processes has been partly
inspired by the question posed by Thuronyi 100 together with Espejo101 that, how can
the excessive volume of tax disputes be dealt with? The question is very valid for the
government, the tax administration and all the other stakeholders, to wit the
taxpayers, adjudicating organs and the development partners.

The question is not new. In 400 BC, Athens instituted the position of a public
arbitrator to relieve the overburdened courts and provide more rapid relief for those
cases the disputing parties believed could be solved outside the formal path of
justice.102 As has been shown already, Tanzania is grappling with a similar problem,
and its revenue collection measures are adversely affected.103

98
See ss. 12(1), 14(1)(a),(b) and (c) of the Tax Revenue Appeals Act, Cap. 408 [R.E. 2010].
99
See s. 28A of the Tax Administration Act, 2015 as amended by the Finance Act, No. 8 of
2019.
100
Victor Thuronyi is a graduate of Cambridge University and Harvard Law School. He has
practiced tax law, served in the U.S. Treasury Department, and taught tax law, before joining the
International Monetary Fund in 1991. He has worked on tax reform in numerous countries. He is
the author of Comparative Tax Law (2003) and other writings on tax law and policy. He retired
from the IMF in 2014 as lead counsel (taxation).
101
Isabel Espejo is a Consultant at the World Bank Group’s Latin America and the Caribbean
(LACTAX).
102
Investment Climate Advisory Services of the World Bank Group, (2011), Alternative
Dispute Resolution Guidelines, 1818 H Street, N. W., Washington D.C., 20433, p. 4, available at
htpps://www.worldbank.org (accessed on 25/06/2019).
103
Op. cit. (n. 4).
 27

Traditionally, tax disputes were adjudicated through litigation in courts of law or

quasi-judicial bodies explicitly established to deal with tax matters. This method can
be defined as one, which extinguishes a conflict, characterized by a certain authority
imposing a solution to the parties involved in a conflict. 104 In recent times, other
means of resolution, including ADR, have been employed such as negotiation,
mediation, conciliation, arbitration, and the use of ombudsman and expert opinion as
this study intends to show.105 ADR has evolved as a response to the inefficiency of
the traditional methods of conflict resolution and includes the procedures and
techniques of conflicts amicable resolution.

In Australia for example, ADR is well developed because the government adopted
policy decisions to promote it in a bid to relieve the courts from case workloads
while at the same time offering the taxpayers a forum of choice for dispute
resolution.106 The underlying aim was to foster a more conciliatory approach to
dispute resolution built on a foundation of constructive engagement between
parties.107

The background to the introduction of the ADR in Tanzanian judicial system is

articulated in a Circular issued by Chief Justice Circular (No. 1 of 2002 dated 29 th
April 2002 – Operation of the Alternative Dispute Resolution System). 108 Generally,
ADR was introduced into the administration of justice in Tanzania vide Civil
Procedure Code (Amendment of Schedules) Rules, G.N. No. 422 of 1994.109 In
tax disputes resolution mechanism, the ADR processes, mediation, conciliation and
arbitration, were introduced with the enactment of the TRAA, which came into force
on the 1st June 2001.

104
Op. cit., (n.95).
105
Ibid.
106
Hon Philip Ruddock MP (Attorney-General), ‘Towards a less litigious Australia: The Australian
Government’s Alternative Dispute Resolution Initiatives’ (2004), 23(1) The Arbitrator & Mediator
1, available at https://www.iama.org.au/journal/jnprevix.htm (accessed on 14/08/2019).
107
Ibid.
108
The United Republic of Tanzania, LRCT, (2013), Report of the Comprehensive Review of the
Civil Justice System in Tanzania, presented to the Minister for Justice and Constitutional Affairs,
Dar Es Salaam, p. 27.
109
Ibid.
 28

It should be noted that, in 2013, the Civil Justice Review Project did not include or
cover the tax administration system and the dispute resolution mechanism
established by the TRAA.110 Even though it is hailed as capable of speeding up the
administration of justice and can have a dramatic impact on the courts' ability to
manage cases, the reality in practice shows mixed results. 111 The use of ADR in civil
matters under the Civil Procedure Code, Cap. 33 had been a subject to criticisms.
The reasons for the criticisms are lack of training to mediators and arbitrators, lack of
willingness of the parties and the systemic problems related to administrative issues
within the judiciary.112 This, as it will later be shown, is a result of the fact that ADR
was received wholly as a concept ‘transplanted’ from the United States of America
following the recommendations made by the Mroso Committee.113

As stated before, a party who has a complaint against or is aggrieved by a tax

decision of the Commissioner-General or an officer of the TRA has legal recourse
either by way of a tax objection, an appeal to TRAB and TRAT or make a complaint
to TOS. In hearing the appeal or complaint, TRAB, TRAT and TOS may use
mediation, conciliation or arbitration to resolve the dispute. However, in practice,
ADR has not recorded significant success in tax disputes resolution.114

The law on the use of ADR processes, that is, mediation, conciliation and arbitration,
in tax disputes knitted it together with litigation. Parties may opt to resolve a dispute
using the ADR processes when they are already litigating before TRAB or TRAT. It
is not mandatory for parties to use ADR in tax disputes, as is the case in civil suits
brought under the Civil Procedure Code, Cap. 33.

110
The United Republic of Tanzania, LRCT, (2013), Report of the Comprehensive Review of the
Civil Justice System in Tanzania.
111
Ibid., p. 27.
112
LRCT, Newsletter, p. 4, available at https://www.lrct.go.tz (accessed on 27/06/2019).
113
The late Chief Justice of Tanzania, His Lordship Francis Nyalali, appointed a Committee under
the Chairmanship of Hon. Justice J. A. Mroso (now retired) to establish whether ADR could be
adopted in the Civil Justice System in Tanzania. The committee recommended that ADR processes
be adopted in the Civil Justice System. The proposed processes were mediation, conciliation and
arbitration.
114
Op. cit., (n.10).
 29

3.2 Tax Dispute Resolution Mechanisms in Tanzania

3.2.1 Objection to Tax Assessment
If a tax dispute between a taxpayer and the TRA arises as a result of the taxpayer's
protests as to the factual or legal correctness of an assessment the remedy is to lodge
a tax objection to the Commissioner-General.115 The taxpayer must first issue a
Notice of Objection to the Commissioner-General in writing stating the grounds of
objection. For the Commissioner-General to admit and entertain the objection, the
taxpayer must either pay the amount not in dispute or one-third of the assessed tax,
whichever is greater.116 The Commissioner-General may waive payment of the
deposit or order a lesser amount to be paid upon being satisfied that good reasons
exist warranting such a waiver or reduction of amount.117

CAT has recently delivered a judgment that has the effect that the Commissioner-
General's decision on a request for waiver is non-appealable to TRAB. 118 The Court
has held that an appeal to TRAB is presently narrowed down to ‘an objection
decision’ of the Commissioner-General made under the TAA. A decision refusing to
grant a waiver is not an objection decision. 119 This means that the decision by the
Commissioner-General on the question of waiver is final unless the aggrieved party
seeks judicial review or makes a complaint to the Tax Ombudsman stating that it is a
procedural and administrative decision. The effect of the judgment is that, for a
taxpayer who is disputing an assessment by the Commissioner-General but cannot
deposit one-third of assessed tax and the Commissioner-General has refused to grant
waiver or payment of less amount, cannot have his objection heard on merit. 120 The
effects of the judgment are astronomical even though on the other hand cases
pending at TRAB will be intermittently reduced.

115
See s. 51(1) of the TAA, 2015.
116
Ibid., s. 14.
117
See s.12(4) of the TRAA, 2001.
118
Pan African Energy Tanzania Ltd v. Commissioner-General (TRA), Civil Appeal No. 121 of
2018, Court of Appeal of Tanzania, at Dar Es Salaam, (unreported). The Judgment was delivered
on 12th June 2019.
119
Ibid., p. 13.
120
The taxpayer cannot appeal to TRAB because it is a prerequisite that there must be an objection
decision of the Commissioner-General. See s. 7A of the Tax Revenue Appeals Act, Cap. 408 [R.E.
2010] as amended by the Finance Act No. 16 of 2007.
 30

3.2.2 Appeal against Tax Decision

(i) The Tax Revenue Appeals Board
An appeal may lie to TRAB against the final decision on the tax objection or any
other tax decision of the Commissioner-General upon satisfaction of the
requirements of section 12(3) of the TRAA. The authority to adjudicate tax disputes,
that is, all proceedings of a civil nature arising from revenue laws administered by
the Tanzania Revenue Authority is vested in TRAB. The ordinary Courts of law have
no jurisdiction to hear tax disputes.121

In hearing appeals, TRAB may determine the matter through mediation, conciliation
or arbitration processes.122 However, the rules of procedure under the Civil Procedure
Code, Cap. 33 and the Arbitration Act, Cap. 15 with regard to the conduct of
mediation and arbitration shall not apply.123 The law further provides, TRAB shall
regulate its procedures subject to the provisions of the TRAA and the TRAB Rules.

In the event the TRAA and the Rules are silent about any particular practice or
procedure, the proceedings of TRAB shall be conducted in accordance with such
rules of practice and procedure as TRAB may specify.124

(ii) The Tax Revenue Appeals Tribunal

A party who is aggrieved by the decision of TRAB may appeal to TRAT on points of
fact and law.125 However, a decision entered with the consent of parties at TRAB
shall not be a subject of an Appeal. 126 A consent judgment entered between a
taxpayer and the TRA as a result of an ADR process is therefore not appealable.

TRAT has appellate jurisdiction in all appeals arising from the decision of TRAB
while exercising its original jurisdiction and supervisory powers over TRAB. TRAT
may call for and inspect the records of any proceedings before TRAB and may revise
121
See ss. 7 and 53(1), TRAA, 2001.
122
Ibid., s. 17(1)(b).
123
See r. 16(11), TRAB Rules, 2018.
124
Ibid., r. 17(1) and (3).
125
See s. 11(1), TRAA, 2001.
126
See r. 16(12), TRAB Rules, 2018.
 31

any decision made thereof.127 It may resolve any complaint or an appeal through
mediation, conciliation or arbitration.128 The rules of procedure under the Civil
Procedure Code, Cap. 33 and the Arbitration Act, Cap. 15 with regard to the conduct
of mediation and arbitration shall not apply.129

Subject to the provisions of the TRAA and the Rules, TRAT has discretion on the
procedure of the proceedings before it.130 Moreover, where the TRAA and the TRAT
Rules are silent about any particular practice or procedure, the proceedings of TRAT
shall be conducted in accordance with such rules of practice and procedure as TRAT
may specify.131

(iii) The Court of Appeal of Tanzania

CAT has jurisdiction to determine appeals from TRAT only on points of law. 132 At
this stage, the applicable Rules are the Court of Appeal Rules, 2009. From the nature
of the jurisdiction of the Court of Appeal in tax disputes and its Rules of procedure
ADR processes cannot be used to resolve an appeal involving a question of law.

(iv) The Tax Ombudsman Service

The law has been amended to establish an office known as Tax Ombudsman Service
(TOS) responsible for reviewing and addressing any complaint by a taxpayer
regarding service, procedural or administrative matters arising in the course of
administering tax laws by the TRA, the Commissioner-General or staff of the
Authority.133
The Tax Ombudsman is a specialized version of the more general concept of
Ombudsman, which historically has been referred to as an institution that defends the
people.134 The Ombudsman, an originally Scandinavian institution, as a concept was
introduced in Tanzania in the early 1970s as one of the solutions chosen by the

127
Ibid., s. 11(2), TRAA, 2001.
128
Ibid., s. 17(1)(b).
129
See r. 15(8), TRAT Rules, 2018.
130
Ibid., r. 16(1).
131
Ibid., r. 16(3).
132
See s. 25(1) and (2), TRAA, 2001.
133
See s. 28A of the TAA, 2015 as amended by the Finance Act, Act No. 8 of 2019.
134
Committee of Experts on International Cooperation in Tax Matters, at p. 21.
 32

Tanzanian leadership to deal wit maladministration conducts of its public officials

and leaders.135 An ombudsman is usually appointed by the government or by
parliament, but with a significant degree of independence, is charged with
representing the interests of the public by investigating and addressing complaints of
maladministration or a violation of rights.136

In Tanzania, the Tax Ombudsman is appointed by the Minister and must possess
competent knowledge in tax administration. He shall be in charge of and carry out
the functions of the TOS independently and impartially without interference from
any institution, agency or department of the Government or any other person.
However, he shall not review legislation or tax policy, authority's policy or practice
save that which relates to a service, administrative or procedural matter with respect
to the administration of tax laws and a matter subject to a tax objection or Appeal
save for an administrative matter relating to such tax objection or appeal.137

3.3 Conclusion
The inclusion of the ADR processes in the tax administration regime in Tanzania was
meant to allow TRAB and TRAT to resolve tax disputes expeditiously. They are
vested with the powers to specify and determine the practice and procedure of
proceedings before them. However, the abysmal state of affairs is reflected in CAG
Reports in respect of inefficiency and ineffectiveness of the appeals machinery.
Issues of cases backlogs and prolonged hearing or determination of objection
proceedings have been identified as causes for tied-up revenue in tax disputes.
The introduction of ADR was because the appeal procedure was, as Gashaw puts it,
‘needlessly tortuous, slow, costly, intrinsically and overly adversarial and
discouraged direct and open communication or exchange of information between the
tax officer and taxpayer’.138
135
Patrick M. Norton, (1973), The Tanzanian Ombudsman, The International and Comparative Law
Quarterly 22, No. 4: 603-31, available at http://www.jstor.org/stable/757658 (accessed on
07/08/2019).
136
Definition sourced online from Wikipedia, available at
https://www.jstor.org/topic/ombudsmen (accessed on 07/08/2019).
137
Ibid., ss. 28B and 28D of the TAA, 2015.
138
Ron Jorgensen Ftia and Harwood Andrews, “Objections and Written Tax Advocacy”,
Taxation in Australia, Vol. 45, (2011) in Misganaw Gashaw, A Room for Alternative Dispute
 33

Dispute resolution process, being an important aspect of the tax legislation, needs to
be adequate and effective in achieving its objectives.139 Effective use of the ADR
processes requires a sound legal framework with clear and specific procedures and
the willingness of the Tanzania Administration to apply them. Therefore, it was
imperative to conduct a study on how the ADR processes, to wit, mediation,
conciliation, arbitration and negotiation have been effectively applied to
expeditiously resolve tax disputes in Tanzania since the year 2001 when they were
included as shown in the next chapter.

CHAPTER FOUR
FINDINGS AND DATA ANALYSIS

4.1 Introduction
This Chapter is dedicated to the analysis of the study findings of the existing
procedural legal framework and practice in tax disputes resolution mechanisms in
Tanzania. That is the TRA internal appeal mechanism (objection procedure) and the
appeal against tax decisions to TRAB and TRAT. It covers an analysis of the
findings of the study about the inclusion of ADR in tax disputes resolution, the main

Resolution (ADR) Processes, p. 20, (n.36).

139
Leshego Mphahlele and Henriette Erasmus, (2017), A Comparative Analysis of the Respective Tax
Dispute Resolution Platform Available in South Africa and Australia to Conclude on the Adequacy
of the South African Tax Dispute Resolution Platform, Southern African Accounting Association,
p. 770, available at https://www.saaa.org.za (accessed on 09/08/2019).
 34

focus being on the absence of formal rules of procedures to regulate the conduct of
mediation, conciliation or arbitration and the practice of TRA, TRAB, and TRAT ad
praesens tempus in relation to tax disputes negotiations and settlements.

4.2 Specific Findings

4.2.1 Applicability of ADR Processes
The use of ADR processes to resolve disputes in Tanzania has the legal backing of
the Constitution, 1977.140 The TAA, the TRAA and the Rules expressly provide for
the powers of TRAB, TRAT and TOS to resolve tax disputes through ADR
processes, to wit, mediation, conciliation and arbitration.141 Therefore, the law allows
the use of ADR processes in tax dispute resolution. However, the study has revealed
that ADR is not effectively applied in tax disputes. From the year 2000 to 2016 only
138 (which is 7%) of filed tax disputes were resolved by mutual agreement between
taxpayers and TRA.142

Globally it is recommended that at least 80% of tax disputes should be resolved

through ADR.143 South Africa is said to resolve 66% of the tax disputes through
ADR while Kenya had resolved 181 tax disputes through ADR from July 2015 to
April 2018 raising approximately Kshs. 8.3 Billion. 144 Comparatively, Tanzania is

140
Article 107A(d) of the Constitution, 1977.
141
The powers of the TRAB and TRAT are provided under Section 17(1)(b) of the Tax Revenue
Appeals Act, 2010, Rule 16(11) of Tax Revenue Appeals Board Rules, 2018 and Rule 15(8) of
Tax Revenue Appeals Tribunal Rules, 2018.
142
Shab Maurus, Managing Tax Risks (n.10). Only one respondent, Adv. Harold Gugami, had
resolved two disputes through ADR. Other respondents, Senior Adv. Nicholaus Duhia (who is also
an Auditor), Adv. Lemmy Kimariyo (Registered Tax Consultant), Senior Adv. Hudson Nyange,
Senior Adv. Joseph Nuwamanya and Senior Adv. Wilbert Kapinga are tax practitioners but have
not resolved any dispute through ADR despite acknowledging its usefulness. Senior Adv. Hudson
Nyange, when interviewed, replied that he tried two times to request TRAB to mediate the
disputes, but the prayer was not granted.
143
Carlos Kirchheiner, a manager at Delloite Consulting in an Article, Alternative Tax Dispute
Resolution Can Revolutionize the Tanzania Tax Regime, published online by the Citizen on
29/05/2019, available at https://www.thecitizen.co.tz (accessed on 12/08/2019).
144
Ibid. The researcher contacted Carlos Kirchheiner to request for his confirmation of the views
contained in the said Article on 13/08/2019. (cakirchheiner@delloite.co.tz). Carlos' view relevant
to this study is that the vagueness of the procedures included within the concept of ADR may lead
to concerns about possible misuse, that is, transparency and confidentiality issues. Accordingly, he
proposes that a certain level of formalization is needed.
 35

lagging far behind. Reasons for this state of affairs may also be attributed to the other
findings of this study as discussed below.

4.2.2 Absence of General Rules of Procedure

Despite the provision of the law on the use of ADR processes, there are no formal
rules or procedure prescribing how the processes should be conducted by TRAB,
TRAT or TOS promulgated by the Minister for Finance. However, in practice
taxpayers and tax officials, without the active participation of the said appeal bodies,
conduct negotiations leading to tax disputes settlements.145

Countries such as the United Kingdom, Kenya and South Africa have specific rules
of procedure or framework to regulate the ADR processes. 146 The rules generally
provide the framework on the powers of the tax authority, timelines and the
procedure to be followed by the parties, among other things. Absence of specific
rules of procedure leads to delays in the determination of tax disputes 147 and
complaints that tax officials ‘coerce’ taxpayers into accepting ‘compromises’
because collection targets must be met by the former.148
4.2.3 Ineffectiveness of the Objection Procedure
It is noted that the objection procedure is not an ADR process. The Commissioner-
General reviews an objection once lodged and admitted. It is considered based on
facts and available evidence. The procedure is adversarial as TRA retains an upper
hand at this stage.149

145
Information provided during an interview by Advocate Alan Kileo on 06/08/2019 and confirmed
by the Secretary to the Board on 07/08/2019.
146
UK has the HMRC’s Litigation and Settlement Strategy (LSS) Framework, Kenya has the
Alternative Dispute Resolution Framework, 2015 and South Africa has Procedures for Alternative
Dispute Resolution under Part C of its GN. 550 made under the Tax Administration Act, 2011.
147
Adv. Harold S. Gugami in response to an interview question stated that there are no timelines. The
Secretary to the Board – TRAB said that the matter would be adjourned until when parties revert to
it with an update on the negotiations. It does not set any time limit for parties to settle.
148
Op. cit., (n. 145).
149
One practitioner who requested to remain anonymous when interviewed on 09/08/2019 while
attending TRAB proceedings replied that at the objection stage, TRA is a ‘secured creditor and a
powerful partner'. It has all the powers to decide on the objection. The taxpayer is put in a
disadvantaged position because during this time (and even at appeal stage) it cannot get a tax
clearance certificate. The cost of the dispute is sometimes higher than the amount in dispute
because the taxpayer may not be able to get work or residence permits for its expatriate employees
or business licence without a tax clearance. It may then be forced to settle to mitigate its losses.
 36

The procedure is intended to provide the taxpayer with an opportunity to give further
evidence, oral or documentary, and make submissions in writing to the
Commissioner-General who in turn will either make a decision by determining the
objection or call for any further evidence or other information as may appear
necessary.150 However, this procedure has been a cause of delays in tax disputes
settlement and a source of criticism by taxpayers and practitioners.151

The criticisms are two-pronged, one, that the objection procedure may be used by
taxpayers to delay payment of tax, which is appropriately due 152 and two, on the
impediment surrounding the right to an objection which is based on the fact that the
same office and in most cases the same officer who issued the assessment sits as the
reviewer of the objection.153
The requirement to deposit one-third of the assessed tax or the undisputed amount
whichever is higher compounds the impediment. 154 The Commissioner-General
remains the party with authority to re-examine and determine the grievances by the
taxpayer leading to the objection application. In a similar factual situation, Jaglowitz
argues that while [Revenue Canada] proclaims that the review of objections
conducted by appeals officers is impartial and objective and that some practitioners
and perhaps many taxpayers may argue that the contrary is more accurate and hence
the notion of receiving an impartial and objective review [at Revenue Canada] is
slightly tarnished.155

This is against the notion of ‘principled settlements'.

150
See ss. 51(4) and 52 of the TAA, 2015.
151
On 07/08/2019 during an Interview, the Secretary to the Board - TRAB said that the number of
waiver applications pending at the Tax Revenue Appeals Board as of July 31, 2019, was slightly
above 200 out of 918 pending applications at the Board. The exact number could not be given due
to the filing system used, which does not differentiate filed appeals and applications. What this
means is that more than 30% of the applications at the Board were a result of refused waiver
requests during objection proceedings instead of appeals on the merits of the tax disputes.
152
The CAG in his Annual Report of 2016/2017, observed that, “as a consequence the appeal system
has been an avenue for packing tax liabilities lawfully by dishonest businessmen something that
ties up significant government taxes.” p.76.
153
Kibuta Ongwamuhana, Tax Compliance in Tanzania, p. 78.
154
Ibid.
155
Chris Jaglowitz (1999), Mediation in Federal Income Tax Disputes.
 37

Kibuta argues that during the objection stage when the Commissioner General is
reviewing the objection and the subsequent response to the TRA proposal, there is an
opportunity to engage TRA in a dialogue to examine the issues contested. 156 If used
effectively, these two opportunities will lead to resolving the dispute or significantly
narrowing the difference.157

This can be effectively achieved if the procedure is conducted; differently, that is,
with the assistance of a third person as a mediator. Procedural rules on how the third
person is appointed, timelines to resolve the disputes, conduct of parties, matters
capable of resolution etc. will remove the uncertainties and formalize the procedural
aspect of the alternative dispute resolution mechanism in tax disputes.158

4.2.4 Absence of Specified Rules of Procedure by TRAB and TRAT

In the absence of formal rules of procedure, TRAB and TRAT have powers under the
existing Rules to specify rules of procedure for the conduct of the ADR processes. 159
This study has revealed that no such specification of rules has been done. TRAB
does not conduct mediation, conciliation or arbitration.
As stated above, TRAB facilitates parties to engage in out of court negotiations by
adjourning the hearing of the appeal before it while waiting for parties to reach a
settlement or otherwise.160 If a taxpayer wishes to engage the Commissioner, upon
request TRAB will issue a letter to that effect. 161 Apart from that, it does not play any
active role than recording an agreement in the event parties settle.162

156
Op. cit., p. 49, (n.148).
157
Ibid. p. 50.
158
General comments made by Advocate Wilbert Kapinga, Advocate Alan Kileo and Advocate
Nicholaus Duhia in response to interview questions sent by email.
159
See Rule 17(1) & (3) of TRAB Rules, 2018 and Rule 16(1) & (3) of TRAT Rules, 2018.
160
Information provided by the Secretary to the Board – TRAB during an interview on 07/08/2019,
Advocate Alan Kileo in reply to interview questions 06/07/2019 and advocate Harold S. Gugami
in response to interview questions on 07/08/2019.
161
Ibid.
162
Ibid.
 38

4.3 Other Findings

Apart from the absence of formal rules of procedure, other findings indirectly linked
with the effective inclusion of ADR processes in tax disputes mechanisms in
Tanzania were observed. These are as follows hereunder;

4.3.1 Lack of ‘Judicial Innovation’ by TRAB and TRAT

The law allows TRAB and TRAT to promulgate their own rules of procedure in
adjudicating an appeal before them.163 For the last three years, only two members out
of eight could attend a session with the TRAB Chairman to make a quorum. 164 The
Chairman always rotates the members.165 The Vice-Chairpersons were not appointed
in the same period.166 The situation was not different at TRAT as for the last three
years, only the Chairman and two members were appointed to fill the vacancies.167

TRAB and TRAT have powers to specify their own rules of procedure. The Rules
exclude the applicability of the Civil Procedure Code, 1966 and the Arbitration Act,
Cap 15 in proceedings before TRAB and TRAT.168 Therefore, TRAB or TRAT could
specify rules allowing the members to mediate or conciliate matters which had not
been scheduled for hearing but capable of being mediated or conciliated.
The appointment of the members as mediators or conciliators would not create
problems because the rules would provide that if mediation or conciliation fails the
member who was appointed to mediate or conciliate would not be part of a panel to
adjudicate the matter. This could have assisted in sifting matters that from the outset
should not have reached the appeal stage.169

For example, it was observed that a single-member could mediate a dispute on

refusal to grant waiver by reviewing the reasons advanced by the Commissioner-
General based on available facts and the provisions of the law instead of such matter

163
See (n.127).
164
Information provided the Secretary to the Board during an interview on the 07/08/2019.
165
Ibid.
166
CAG Annual Report 2017/2018, pp. 53 – 56. The Swahili version of the Report, p.110.
167
Information provided the Registrar of TRAT during an interview on 09/08/2019.
168
Op. cit., (n.123).
169
Information provided Advocate Lemmy Kimariyo during an interview on 21/08/2019.
 39

to remain pending for an extended period. In 2019 alone it was stated that more than
200 appeals out of (926 appeals) pending before TRAB were on Commissioner-
General's refusal to grant a waiver.170

4.3.2 Impracticality of Using Arbitration

The drafters of the TRAA and the Rules included arbitration as an ADR process.
Arbitration is determinative, also known as an adjudication-based process, which is
different from advisory and facilitative, also known as recommendation-based
processes such as mediation and conciliation.171 The nature of the proceedings other
than ADR processes (litigation) before TRAB and TRAT are not different from
arbitration proceedings.172

The procedures before TRAB or TRAT are inherently adversarial and formal, but the
law provides that both TRAB and TRAT shall not be tied with rules of evidence and
procedural technicalities.173 Therefore, it is the researcher’s observation that
arbitration is a duplication of processes. If a matter can be arbitrated, it is as well
possible to determine it through trial.
The Commissioner-General is likely to favour litigation over arbitration because the
judgment is binding not only for that particular matter but other cases that involve
the same facts or legal issues.174

4.3.3 Adjournment of Appeals

While TRAB is blamed for not exercising its powers to mediate, conciliate or
arbitrate on the other hand some practitioners commended it having encouraged
parties to negotiate a settlement outside court even though it did not oversee the

170
Information provided by the Secretary to the Board during an interview on 07/08/2019.
171
Op. cit., (n.92).
172
The researcher’s observation when visiting TRAB and TRAT offices on the 07/08/2019 and
09/08/2019 and while attending TRAB and TRAT sessions.
173
See r. 17(2) of TRAB Rules, 2018 and r. 16(2) of TRAT Rules, 2018.
174
A reply to the interview question by an Attorney of TRA – Legal section on the 07/08/2019.
 40

process. The cases of Akasa Resources Limited v. Commissioner-General175 and

Exim Bank Limited v. Commissioner-General176 have been cited as examples.177

The downside of this ‘approach’ is that TRAB has no control over the timing and the
manner of the proceedings.178 Parties may take longer if there is a lack of genuine
intention to settle.179 TRAB will keep removing the matter from the cause list while
waiting for the parties to revert and report the status of the settlement negotiations. 180
The net effect is that the intention that the dispute is expeditiously determined is
sometimes defeated when parties are not interested in settling.

It has been observed that the law does not provide for the use of ADR in matters not
before appeals machinery, that is, TRAB and TRAT. So the negotiations between
taxpayers and the Commissioner-General referred here have no back up of the law or
legal framework within which to conduct them even though TRAB has facilitated the
parties to engage in discussions.Commissioner-General may use his general powers
to issue a reassessment as part of the negotiation. 181 Usually the assessments are
inflated and reassessments are ‘compromises’ by the taxpayer.182

It was further been observed that when a settlement is reached TRAB or TRAT will
record it and will be binding upon the parties. TRAB or TRAT will not question the
legality of the agreed terms. This raises the question that TRAB or TRAT may
endorse a settlement that is contrary to the law and give it the force of law as a
judgment. Such an agreement is not subject to an appeal. In Karata Ernest and Others
versus the Attorney General,183 the Court observed that,

175
Income Tax Appeal No. 80 of 2017 Tax Appeals Revenue Board at Dar Es Salaam (unreported).
176
Appeal No. 51 of 2017 Tax Appeals Revenue Board at Dar Es Salaam (unreported).
177
Information provided by Advocate Harold S. Gugema in response to interview questions by email
on 07/08/2019.
178
Ibid.
179
Ibid.
180
Ibid.
181
Information provided by Advocate Lemmy Kimariyo during an interview on 21/08/2019.
182
Information provided by a taxpayer who requested anonymity during an interview on
10/08/2019.
183
Civil Appeal No. 73 of 2014, Court of Appeal of Tanzania at Dar Es Salaam, (unreported).
 41

‘The [above] judgment is not a conventional type of judgment based on facts

and evidence received by the court. It is not a reasoned judgment but merely
a judgment recorded by the court. The basis of the judgment is the Deed of
Settlement. The basis of the Settlement is privy to the parties and unknown to
this court. It was the applicants and the respondent and their representatives
who negotiated and agreed on the terms/ drafts and signed the Settlement
Deed.

Therefore TRAB (or TRAT) will not review the terms of the settlement agreement to
satisfy itself that the same is in accordance with the tax laws. It is thus essential to
have rules of procedure in place that will give powers to TRAB and TRAT to review
the settlement agreement and to satisfy themselves that it has been made within the
parameters of tax laws.

4.3.4 Composition of TRAT

The law provides that TRAT shall consist of a Chairperson, two Vice-Chairpersons
and four members.184 At the time of the study, TRAT was composed of a
Chairperson and two members. The two Vice-Chairmen and two other members had
not been appointed. This means that TRAT could not conduct mediation or
conciliation because once it does, and then the mediation or conciliation fails, there
will be no panel to adjudicate the matter.
Therefore, the result would be further delay for a substantial period until when a new
panel can be formed. In the absence of appointed members a new panel would be
impossible to form. The intended expeditious trial of the case would be defeated.185

4.3.5 Lack of Funds

TRAB and TRAT are facing a lack of funding and workforce. This made it
impossible for both TRAB and TRAT to hold parallel sessions in other tax regions.
In 2016/2017 TRAT managed to have only 48% sittings due to lack of funding and
workforce.186 It was observed that lack of funds affected the number of cases it could
184
S. 8(2)(a), (b) and (c) of TRAA.
185
The Registrar of TRAT gave information during an interview on 09/08/2019.
186
CAG Annual Report, 2016/2017, p. 79.
 42

handle in the said year. With such limitations, the use of ADR processes is also
affected because the members cannot constitute themselves into a panel of mediators
or conciliators while they are working on a tight budget.

4.3.6 Lack of Skilled Personnel and Practitioners

The CAG Report has shown that inadequate capacity in handling objection cases by
the TRA management has led to delay in settlement. 187 The CAG's review further
revealed that the delays were attributed to an inadequate number of skilled and
experienced personnel in Tax Audit and Technical Units.188 In 2014/2015 the
Commissioner-General managed to settle only 26% of all objections lodged.

It was observed that lack of skilled personnel leads to wrong interpretation of the law
or facts between the tax practitioners (tax consultants, auditors and advocates) and
tax officials.189 This difference in interpretation of law or facts may escalate to a tax
dispute. Having a neutral Third Party may be helpful to assist the parties to arrive to
a common understanding of the law and thus ADR provides the opportunity to
resolve such a dispute expeditiously and in a less adversarial manner.

4.3.7 Slow Implementation of Recommendations by CAG

The CAG, in some of his reports, has made recommendations for the improvement of
the tax appeal machinery on areas of efficiency in handling tax objections and delays
in disposing of appeals.190 It was observed that the recommendations by the CAG had
been repeatedly made and it has taken quite some time to implement them. For
example, the TOS office was established in June 2019 while CAG made the
recommendation in his 2014/2015 Report. The CAG proposed it as a long-lasting
solution to the inefficiency of the tax appeals machinery.

He wrote in the said report, “… (a) hearings of tax appeals should be expedited by
the Board, Tribunal and Court of Appeal; (b) for a long-lasting solution, I propose
187
CAG Annual Report, 2015/2016, p. 101.
188
Ibid.
189
Ibid.
190
See (n.4).
 43

the Government to set up an Independent Complaints Commission to expedite the

handling of appeals.” (Emphasis added).191

However, it was observed that the limitations on the powers of the Tax Ombudsman
are already indicative of how its independence is questionable. 192 The findings of the
Tax Ombudsman shall directly be submitted to the Minister for Finance. 193 The law
is silent on whether the decisions of Tax Ombudsman are binding to the
Commissioner-General. Furthermore, the Tax Ombudsman shall not review a matter
subject to a tax objection or Appeal save for an administrative matter relating to such
tax objection of Appeal.194 With the decision of CAT in the Pan African's case, it is
unclear whether a refusal to grant a waiver or less-payment of a deposit by the
Commissioner-General is an administrative matter not subject to appeal and
therefore can be reviewed by the Tax Ombudsman. The rules of procedure should
clarify this or an amendment of TAA, 2015 may be required.

Until the conclusion of the study regulations prescribing the procedure of conducting
and handling of complaints by the Tax Ombudsman are yet to be made by the
Minister.195 This is an area, which may require future study or research so as to
establish how effective is the office of TOS.

191
CAG Annual Report, 2014/2015 at p. 59.
192
Comment made by Advocate Lemmy Kimariyo during an interview on 21/08/2019.
193
See s. 28B(3) of TAA, 2015.
194
Ibid., s. 28D(c).
195
See s. 28G, TAA, 2015. The law provides for the powers of the Minister for Finance to make
regulations for the conduct and handling of complaints by the Tax Ombudsman.
 44

CHAPTER FIVE

GENERAL CONCLUSIONS AND RECOMMENDATIONS

Where there is no public trust in tax administration citizens are wary of co-operating
with the government to resource the state. Florens Luoga (Prof)

5.1 Introduction
A sound legal system is measured by how effective and efficient it is in adjudicating
disputes and delivery of justice. Having considered the findings on the use of ADR
processes in tax dispute resolution mechanisms, various conclusions on the
hypotheses developed at the initial stage of this study have been reached. These
conclusions are based on the overall aims of ADR as represented through its
historical development and the underlying institutional issues prevalent in Tanzania.
 45

5.2 General Conclusions

This work was carried out on assumptions that,

Delays in the disposition of tax disputes and determination of tax objections by

the Commissioner-General are caused by an inefficient tax appeals machinery
and shortage of competent and experienced personnel.

The study concludes that the delays in the resolution of tax disputes are mostly a
result of failure to use ADR processes to resolve some tax disputes that are capable
of being settled through mediation or conciliation. Most disputes are caused by
differences in opinion related to available facts, different application and
interpretation of legal principles among taxpayers, auditors and tax officials during
audits or when conducting assessments. Such matters may be resolved through ADR
and principled settlements can be reached in accordance with the law.

The study further concludes that lack of trained tax officials, members of TRAB and
TRAT in ADR processes causes its limited or restrictive use. The fact that Vice-
chairpersons’ seats at TRAB have remained vacant cannot be blamed as the cause for
delay or failure to use ADR processes. It is observed that rules of procedure could
have been adopted or specified by TRAB or TRAT to provide that a single Mediator
or Conciliator could conduct ADR on eligible cases. This innovation would have
made it possible for rotating members of TRAB or TRAT to be used as Mediators
and Conciliators when they were not seating in adjudicating panels or sessions.

The effective use of the ADR processes in tax dispute resolution will reduce case
backlogs at the appeals machinery and will also speed-up the determination of
tax objections.
 46

The study concludes that this hypothesis is affirmed. Factors contributing to the
inefficiency and ineffectiveness of the appeals machinery can be mitigated by the
Commissioner-General, TRAB and TRAT effectively using the ADR processes at
the earliest stage of a tax dispute or even at a late stage, that is, when the dispute has
escalated to an appeal and is before TRAB or TRAT to reduce case backlogs. 196 This
conclusion is supported by the fact that before the decision in the Pan African case 197
appeals against the decision of the Commissioner-General accounted for the
increased applications at TRAB and the ensuing appeals. Rules of procedure would
have provided for mechanisms to mediate or conciliate the Commissioner-General
and the taxpayer at the objection stage.

Reasons to be adduced by a taxpayer to satisfy the Commissioner-General and the

reasons of the latter to refuse to grant waiver or order payment of less amount are
questions of fact, fairness and just consideration of the request for waiver. The law
has granted the discretion to the Commissioner-General, which discretion must be
exercised judiciously. Rules of procedure should cater for this issue because
‘sensible litigation’ entails resolving a dispute cost-effectively and expeditiously.
Lack of specific rules of procedure, guidelines or a framework on how to
conduct ADR processes fetters the use of the ADR processes in tax dispute
resolution and may lead to integrity issues.

This hypothesis is affirmed. The objections or reluctance to use ADR processes

stems from the apparent fear that the tax officials may misuse the processes.
Negotiations between tax officials and taxpayers are not regulated by any rules of
procedure, as is the case of Kenya, South Africa and the UK. In 2015, Tanzania
ranked 117th (out of 168 countries) in the Corruption Perception Index (CPI),
reported by Transparency International (TI), an international non-governmental
organization acting against corruption. The report indicated that the most affected
sectors included taxation and customs.198 Against such poor performance indicator in

196
Advocate Wilbert Kapinga in response to interview questions 19/08/2019.
197
Op. cit., (n.118).
198
The report is available at https://www.tanzaniainvest.com/corruption (accessed on 10/08/2019).
 47

corruption, it is apparent that ADR processes will be suspect of dishonesty and

integrity questions.

This concern can be addressed if rules of procedure are promulgated to provide for
how tax disputes will be handled. Transparency, the conduct of mediators and
conciliators and the commitments towards procedural justice as engraved in the
TRA's Clients Charter, which has no legal binding force, are among issues to be
included in the rules regulating the conduct of ADR processes.

5.3 Recommendations
It is recommended that the Minister should promulgate the Tax Administration
(Alternative Dispute Resolution) Rules. Under section 28G the Minister may make
regulations to prescribe for the procedure of conducting and handling of complaints
by the Tax Ombudsman. This is a window of opportunity to enact the rules.

The Review of the Civil Justice System should cover tax statutes and the tax
administration system. The LRCT in exercising its statutory mandate should extend
its review mandate to include tax disputes resolution mechanisms.
The establishment of the TOS is a welcome move, but the inclusion of ADR
processes in the Civil Justice System must be reviewed to solve the challenges that
have persisted since its reception in 1994. The LRCT Report on Review of the Civil
Justice System did not cover tax administration as part of the Civil Justice System.
LRCT did not review tax statues providing for the procedure in tax dispute resolution
mechanism. The whole tax dispute resolution system should be redesigned. A
specific study should be carried to establish the particular needs and solutions that
may apply to Tanzania. The current approach adopted by some countries to
undertake dispute systems design evaluation (DSDE) provides an opportunity for
tailor-made solutions that may yield better results. Such an approach has been taken
by the United States, Australia, New Zealand and the United Kingdom.199

199
Melinda Jone, (2018), Evaluation of Tax Dispute Resolution System in the United States and
Possible Recommendations from Australia, eJournal of Tax Research Vol. 16, No. 1, pp. 56-86,
available at https//www.austaxpolicy.com (accessed on 25/06/2019).
 48

Arbitration is a duplication of processes and therefore should not be used as an ADR

process; instead, mediation, conciliation and other non-adjudicative processes should
be encouraged.200 The current system, which has designated TRAB and TRAT as the
adjudicators should be retained. The system resembles the arbitration process and
therefore, including the latter is superfluous.

The new rules to be promulgated should remove Arbitration as an ADR process from
appeal proceedings before TRAB and TRAT. Learning from the challenges
highlighted by the LRCT on how ADR has performed in respect of court-annexed
mediation, it is recommended that mediation and conciliation should not be annexed
to TRAB or TRAT appeal procedure. TRAB and TRAT should only encourage
parties to use ADR. TOS should be the office mandated to conduct ADR so that
disputes may be expedited. Also, consistency and efficiency may be achieved if TOS
is used to mediate or conciliate tax disputes that meet the suitability test.

It is also recommended that other forms of ADR, such as facilitation, case evaluation
and neutral (expert) opinion, should also be included in tax dispute resolution
mechanisms in matters that are still non-contentious. ADR processes should be used
at the earliest possible opportunity to resolve issues between the TRA and taxpayers
by either exchange of documents or full disclosure of information.

Continuous training should be provided to tax officials and the staff to be recruited
by the Tax Ombudsman Service. Those responsible should be skilled and highly
trained in ADR processes above the requirement to have legal and tax knowledge,
which should remain a professional requirement. Knowledgeable officials will
reduce cases of different interpretation of the law and facts among practitioners and
the said officials.

200
Out of 12 Respondents who were interviewed, 9 proposed mediation as the best ADR process to
be adopted in resolving tax disputes.
 49

Without risking oversimplification of the mechanisms of resolving disputes or

ignoring the complexities involved in tax disputes due to their technical nature;
natural and life long tendencies by the humankind to maximize profit geared by the
opportunistic behaviors and the selfishness [and greed] of the mind, ADR will only
be meaningful and useful if the tax dispute resolution mechanism in Tanzania is
stripped-off the inherent adversarial features of litigation and in their place advisory-
based, facilitation-based and recommendation based processes should be adopted.
The procedural law should prescribe or regulate how the ADR processes will be
conducted.

Thus, if achieved, ADR will be actively used not only as post facto mechanism with
the capacity of incentivizing the taxpayer to voluntarily pay taxes or avoid litigation
but also a pre ante mechanism to prevent differences in interpretation of facts and
law escalating into disputes. That way, the administration of justice in tax disputes
will be speedy, cheap and fair. The social and economic disruptions caused by
delayed justice will be averted.

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