One certainty in this modern age is the pervasiveness of technology and automation in revolutionising the day to day obligations in the workplace. Some institutions are the pioneers in processing and analysing data using minimal workforce through the adoption of technology. Undeniably, Government Revenue Authorities are among the institutions who have access to a large volume of data on a day to day basis. For most developing countries, there has been a recent shift to the tax electronic filing system as part of the digital economy initiative adopted in these jurisdictions to handle “big data”.
The Tanzania Revenue Authority (TRA) has now rolled out an electronic filing system which allows taxpayers to submit tax returns by a single click of a button. The biggest advantage that the system will bring is convenience which should increase compliance. Tax returns will now be processed in real time and taxpayers will have the confirmation that the return has been received and accepted by the authority immediately whilst taking away the need to keep a stamped copy. This will significantly reduce the amount of time spent both by the taxpayer and TRA; in addition, it will reduce the risk of input errors of the old system which would require data from the manual returns to be keyed into the TRA system.
Among other things, with the new system, taxpayers are expected to register at the onset and appoint the company’s declarants and a certified tax consultant who is registered with NBAA as a Certified Public Accountant in Public Practice (CPA PP). Returns which are currently eligible for filing under the new e-filing platform are corporate income tax returns (including statement of estimated tax payable (“SETP”)) and semi-annual payroll returns (Pay As You Earn (“PAYE”) and Skills and Development Levy). The system automatically keeps track of the number of returns and the due dates of submission of the respective return allowing the taxpayer to plan accordingly.
To ease the burden of compliance, the system has incorporated a feature which allows the taxpayer to request for an extension of time to submit a tax return in case they anticipate delays. This is refreshing as currently there have been instances where late filing penalty has been levied for one month despite the taxpayer having sought an extension. However, similar to the manual system, late payment interest will still apply if the tax has not been paid on time.
As with any first-time adoption of a new system, there are likely to be some implementation challenges that can be surmounted as taxpayers are phased into the system. Taxpayers should make efforts to ensure that they have completed the registration process before the statutory deadlines for filing the returns.
PAYE and SDL returns, although both payroll related, currently have differing tax return filing deadlines – six monthly for PAYE and monthly for SDL. The system however assumes monthly filing for both, and it is understood that a legislative change will be made to amend the PAYE requirement to a monthly basis.
Companies also need to update their record of directors with the TRA database (so as to allow an integration with the online filing system), as well as appoint the company declarant and appointing certified auditor in the system (As outlined above this is the auditor who will certify the Income Tax Return. The TRA should also continue to inform taxpayers to promote the adoption of the digital filing approach.
Although there will be challenges, the benefits from an online filing system will far outweigh the initial difficulties. Having adopted the system at a later stage, Tanzania can learn from jurisdictions which adopted e-filing earlier. For instance, Kenya’s online tax filing system, widely known as iTax, is a centralised filing and payment portal. This means that a taxpayer is only required to login into a single platform to complete all compliance obligations. This significantly reduces the number of hours spent by taxpayers on compliance and allows them to concentrate on the business. In contrast, the VAT and corporate tax return filing system in Tanzania are currently accessed in different portals; however, we understand that in the near future the VAT return filing will also be moved to the new platform and taxpayers will also be able to file some other returns like excise duty returns.
Also, it is proposed that the new system will be updated to enable taxpayers to file correspondence in relation to a dispute resolution with the TRA. Normally, this type of correspondence is very detailed and supported by a lot of documentation as evidence. To save time and administration costs, it is hoped that in due course the system will also incorporate such filings to be made electronically.
One thing is sure: with this modernisation of the filing process, we will see a general improvement in the level of compliance among taxpayers.