Tax Appeals Tribunal: Is it an enabler or barrier to business?

Many businesses that have tax disputes have been closed thus leaving them incapacitated to operate after resolving the dispute. FILE PHOTOS

What you need to know:

  • The Tax Appeals Tribunal is a court in itself that seeks to reduce case backlog resulting from tax disputes.
  • The Tribunal gives a timeframe of 30 days within which an application can be filed. However, an extension can be granted if the complainant fully explains why they may need an extension.

A couple of Tax Appeals Tribunal requirements are fiercely being contested by taxpayers, particularly the business people, who argue some provisions of the tribunal are a barrier to trade.
This, they say, defeats one of the basic objective of the Tribunal, which is to enhance not just revenue collection but to facilitate trade.
Under contestation is the issue of upfront payment of a percentage of tax under dispute before the matter is entertained by the Tribunal.
Before hearing any tax dispute between Uganda Revenue Authority and a taxpayer, it is mandatory for a business or individual involved to deposit 30 per cent of the total amount under dispute.

As a result, there has been attempts by some businesses and individuals to by-pass the Tribunal, preferring to have their tax matters and related issues handled in courts.
The main argument, traders say, the mandatory deposit ties down a substantial amount of operation capital or worsens and renders a considerable amount of money idle.
For a period the matter is being heard, they say, the money could be generating much more than the interest it would incur should the matter end up in their favour.

Storm in a tea cup
In an email exchange last week, Patience Tumusiime Rubagumya, the URA commissioner for legal services and board affairs, said the issue of contesting the 30 per cent payment is not new.
“This issue was contested some time back. A taxpayer filed a case at the Constitutional Court and court agreed with the position of URA that the requirement was not unconstitutional,” she said.
According to Rubagumya, the payment of taxes is a national duty and therefore if an assessment has been raised and the taxpayer feels uncomfortable, it is the duty to first pay a percentage of the assessed tax in dispute and then the case is heard.

This, she says, ensures that government receives some assurances pending disposal of the matter.
“And in the event that the case is lost, URA refunds the money with interest,” she said.
The requirement also ensures that taxpayers do not use the avenue to delay payment of taxes by filing frivolous suits.
“This was the practice that was cropping up,” she says.

Here to stay
Tax Appeals Tribunal, according to URA is an important facet of taxation because it is where issues concerning taxation can best be interpreted.
Membership of the Tribunal highly considers knowledge in accounting, law and taxation.
Additionally, cases are expeditiously handled and disposed thus realising tied up revenues.
“You all know that the Judiciary has a problem of case back log, thus having these cases in the Commercial Court is not in the interests of URA or the taxpayers because the cases will stay longer thus holding up revenue for longer periods,” Rubagumya says.

Having a Tax Appeals Tribunal, she says, is best practice in all parts of the developed world and Uganda has been receiving a number of revenue authorities from countries such as Malawi, Namibia and Lesotho to understand how a Tax Appeal Tribunal works.
Keith Muhakanizi, the Ministry of finance permanent secretary, says the 30 per cent upfront payment is part of the law and none including his ministry or URA can remove it.

“I think it is a good law. There are cases where people hide behind some laws and other things not to pay taxes,” he says.


However, the rigidity of the law, notwithstanding, according to Matia Kasaija, the Minister of Finance, believes there is room for engagement through different channels.
“They [those challenging the Tribunal] should write formally. We can discuss this matter with a view of harmonising positions,” he says.
According to Olivia Matovu, a dispute resolution practitioner and associate partner at Ligomarc Advocates, the Tribunal was established to resolve tax disputes, which often demand specialised experience and expertise.

She believes it is doing its intended functions because time spent on tax-related disputes is now much shorter than it was.
In an interview last week, the deputy registrar in charge of mediation, Vincent Mugabo, said the establishment of the Tribunal has allowed the Commercial Court to focus on other cases.
“We still have quite a number of cases from URA on tax disputes. But we refer them to the Tribunal because it is the first point of call on cases about taxes.”
However, he adds, that if a complainant is not satisfied with the judgment of the Tribunal, they can appeal in the Commercial Court.
However, cases requiring injunctions either for or against URA, are still within the Commercial Court’s jurisdiction.

HOW THE TAX TRIBUNAL WORKS

The Tribunal was set up by an Act of Parliament as a specialised court to provide taxpayer with easily accessible, efficient and independent arbitration in tax disputes with URA.
It is a quasi-judicial institution which operates as an independent body with its independence guaranteed by law.
Any taxpayer aggrieved by a taxation decision may apply to the Tribunal for review of the decision.
For instance, an appeal can be made to the commissioner general against a decision made by URA and if the decision of the commissioner general is not satisfactory then the complainant can petition the Tribunal.

The Tribunal gives a timeframe of 30 days within which an application can be filed. However, an extension can be granted if the complainant fully explains why they may need an extension.
After an application has been filed, URA or the commissioner general are allowed up to 30 days within which they are expected to file a response.
Just like court both parties are given a chance to be listened to after which a judgment is passed.
And the final decision is appealable to the High Court by upto the Court of Appeal.

Commercial disputes
The commercial court previously had jurisdiction in all disputes arising out of commercial transactions or anything connected to business, whether contractual or otherwise.
The Tax Appeals Tribunal is a court in itself that seeks to reduce case backlog resulting from tax disputes.

While Uganda subjects its tax payers to a refundable 30 per cent cash deposit of the tax assessed, Kenya in its Tax Appeals Tribunal Act 2013 requires taxpayers to pay a non-refundable fee of Shs700,000 (KShs 20,000) before a dispute is heard. Rwanda has only recently (2015) subscribed to an Independent Tax Appeals Tribunal. Prior to that, all appeals related to taxation were handled by Rwanda Revenue Authority, in an appeals committee. It was argued that the committee was most likely to act with bias since they themselves assess the tax in dispute.