Tax legislation being streamlined in Africa
THE past two years have seen significant changes to tax administration legislation and practices on the African continent. In Angola, the establishment of a General Tax Administration was approved on September 18 2014, merging the National Customs Agency and the National Tax Administration to ensure greater efficiency in the collection of taxes by streamlining available resources.
As part of a process of extensive tax reforms in the country, a new Tax Enforcement Code (Law no 20/14) also became effective on January 1 2015 which provides for the execution process over tax debts and replaces the 2011 Simplified Tax Enforcements Regime.
The Tanzanian Tax Administration Act 2015 came into force on 1 July 2015. The act consolidates administrative provisions in a single act, repealing the relevant tax administration provisions previously included in existing tax legislation.
The new act addresses the interpretation of tax laws, the relationship between the Tanzania Revenue Authority, taxpayers and tax consultants, communication and documentation, tax returns, access to information and assets, assessments and objections, payment, recovery, remission and refund of tax, interest, penalties, offences and tax proceedings.
In terms of the Tax Administration Act the ruling provisions (previously included in section 131 of the Income Tax Act, 2004), are extended to include not only private rulings, but also class rulings. Records and accounts are to be kept in accordance with generally accepted accounting principles for at least five years, but exceptions apply to documents relevant to tax disputes not yet determined and where the Tanzania Revenue Authority has served a notice requiring longer retention. In terms of section 36 of the act, the use of an electronic fiscal device is now mandatory for any person who is trading, but the authority has the power to publish a list of taxpayers exempt from this requirement.
The revenue authority is required to consider and make a refund decision (or make a request for further information) within 90 days from the date of receipt of a written refund application, supported by relevant evidence.
Where further information is requested, the authority must serve the notice within 30 days of receipt of the information requested and pay the tax refund within 14 days of the refund decision, subject to the right of the authority to offset the refund against any tax due from the taxpayer under any tax law. The authority is required to maintain a separate bank account for refunds and ensure that the account is adequately funded.
The Kenyan Tax Procedures Act became effective on January 19 and covers procedures for income tax, value-added tax and excise duty, with the objective to provide uniform procedures for consistency and efficiency in tax administration.
The act reduces the time required to maintain records for tax purposes to five years (previously 10 years for income tax and seven years for excise duty). But the Kenyan Tax Procedures Act does not appear to delete the provision in the Income Tax Act that requires preservation of books for 10 years, resulting in conflicting provisions.
A penalty of 100,000 Kenyan shillings has been introduced for failing to comply with the electronic tax system, incentivising taxpayers to file returns and make payments electronically. It also stipulates that where a taxpayer pays less than the total amount of tax, penalty and interest due, the amount paid shall be applied to settle the tax liability first, then the penalty and finally the interest. If the taxpayer faces more than one tax liability at the time payment is made, the payment shall be applied in the order in which the tax liabilities arose. Previously no provisions governed the order of application of payments by the Kenya Revenue Authority.
The Kenyan Tax Procedures Act scraps the provision under the previous law in terms of which a party seeking to appeal an assessment by the Kenya Revenue Authority was required to pay the tax not in dispute as well as 30% of the tax in dispute. Public and private rulings have been introduced in respect of all taxes (previously only the VAT Act provided for such rulings) and the authority is now required to respond to an objection to a tax assessment within 60 days.
Even countries that have not implemented specific tax administration legislation (yet) are addressing practical tax administration issues in their Tax Amendment Acts or through practical guidelines issued by the revenue authority.
The Botswana Income Tax (Amendment) Act, 2015 empowers the commissioner-general to refund tax overpaid and set-off any refund due against any tax, duty, levy, interest or penalty payable under any of the relevant laws that he is responsible for. In terms of the Democratic Republic of the Congo Finance Law 2016, effective from January 1, senior tax officers are allowed to propose an amicable arrangement with respect to tax penalties. In this respect, penalties ranging from 500-million Congolese francs to 2.5-billion Congolese francs are under the tax administration’s jurisdiction. For penalties exceeding 2.5-billion Congolese francs, only the finance minister has the power to propose an arrangement with the taxpayer.
The Mauritius Revenue Authority introduced new tax objection guidelines effective from July 1 last year, including guidance on instances where an amount equal to 10% of the tax assessment is to be paid in order for the objection to be valid, possible methods of payment of the 10% and the conditions under which a bank guarantee may be provided should the taxpayer be unable to pay 10% of the tax assessment because of cash flow issues.
A number of countries are updating laws and are moving to greater efficiency in the collection of taxes
Celia Becker is an Africa Regulatory and Business Intelligence executive at ENSafrica.