Accessing clients’ bank details: Alternatives for URA

Tuesday April 17 2018

Accessing clients’ bank details: Alternatives for URA

In trying to expand the tax base, URA asked banks to furnish it with details of clients’ bank accounts, a request that later backfired. FILE PHOTOS 


Uganda Revenue Authority (URA) has found itself in the middle of a storm and as things look the tax collector has been “cooked”.
If you go by the events of the last three weeks, URA must be in a spot of bother and it will be difficult to come out unscathed.
First, it was the President castigating the tax collector for being “lazy” and failing to identify taxable ventures.
However, before this could settle, another storm formed as Uganda Bankers Association (UBA) wrote to URA informing the tax agency that it had declined its request to access details of clients’ accounts.

It all started with a March 16 letter where Henry Saka, the URA commissioner for domestic taxes, asked banks to furnish the tax body with details of account holders dating back to January 1, 2016 up to December 31, 2017.
The request could have rattled UBA as, in its response, it reminded URA that this was illegal and outside the mandate of the tax body.
UBA also warned the tax collector that it would proceed to court to challenge the demands.
A storm had been kicked up, particularly among the elite, who, together with President Museveni, reportedly blamed URA for engaging in an illegality.

According to reports, the President, during a Cabinet meeting, angrily directed URA to back off in whatever it was trying to do, which among them included a request to banks to them access to clients’ bank records such as account name, Tax Identification Number, National Identification Number, address, telephone numbers and emails addresses as well as standing balances.
In doing so, the tax collector, had quoted Section 42 of the Tax Procedure Code Act, which partly allows it to access details on an account of a person it suspects of defaulting or evading taxes.
However, this can only be done after the tax collector has secured a court order.

Therefore, URA was accused of bypassing relevant laws and institutions such as the Central Bank, which to date has conveniently stayed away from the matter.
This, according to UBA was a dangerous precedent that would expose clients and scare away people from a sector that continues to face a number of challenges such as low penetration.
Fabian Kasi, the chairperson of UBA, particularly pointed out that members were concerned of the impact of URA’s action on a sector whose primary existence is solely dependant of client confidentiality.
Therefore, how else would URA have packaged its demands without raising a rubble.

First, according to Muhammed Ssempijja, a tax expert, we need to understand; “the spirit behind the letter”, before examining where URA erred.
“The only problem is the implication and the dangers of [URA’s action that] may have on the economy. However, the dangers notwithstanding, the spirit of the letter is okay,” he says.

Ssempijja who is also a partner at Ernst & Young, says that equitable taxation is urgently needed in Uganda.
However, accessing people’s private bank accounts might send a wrong signals and could have negative impact on an already weak sector.
Therefore, he says, URA should do a tactical withdrawal and get back to the drawing board and think of other ways through which it can equitably tax every Ugandans, especially the rich that conceal riches.
Albert Beine, a tax compliance advisor, plainly says it was a mistake for URA to write the now impugned letter.
Ms Doris Akol, the URA commissioner general at

Ms Doris Akol, the URA commissioner general at a previous function. A number of people have argued that its was wrong for URA to ask banks to furnish them with clients’ account details.

“It raises several issues and [can] discourage even those who are not targets. Secondly, how do you guarantee security of all that data after it has been accessed by third parties?” he wonders.
Clients, he says, have a covenant with banks to keep their information from any externalities including government and URA.
Just like Ssempijja, Julius Mukunda, the Civil Society Budget Advocacy Group executive director, believes that URA erred in its approach to tackle a subject that they need to address.

“The problem was the operation (sic) and not the spirit of the tax collector whose intention is to expand the tax base,” he says.
Through its research that was launched recently, URA found out that there is a category of people, who are extremely rich but are not paying taxes.
Therefore, this could be one of the ways through which the tax body is seeking to chat a way forward in order to tax these people who are classified under the High Net Worth Individuals category.
This category, according to the research, is composed of high profile people who are rich but are not sufficiently taxed because they conceal their incomes.

Julius Kapwepwe Mishambi, a development advocate and the director of Uganda Debt Network supports URA and argues that “their intention [to tax people who conceal their incomes] shouldn’t be frustrated”.
For Uganda to free itself from the shackles of the current debt slavery, he says, it should be able to mobilise enough revenue and “any cause towards that should be supported rather than frowned upon as it now appears”.
Sophie Nampewo Njuba, a budget policy specialist, believes URA deserved to be appreciated for its efforts to widen the tax base.
However, she says, they must not open up battles that they are not going to win.

“This [opening up battles] might only throw them in the ditch and worsen the problems that they are grappling with currently,” she says.
And as things look, URA could have already lost on this front because, according to Keith Muhakanizi, the secretary to the Treasury: “Cabinet has said no to that [accessing bank details and] it shouldn’t happen.”
However, he acknowledges that the law allows URA to access such details (bank details, but: “It should be implemented properly,” emphasising that it should only apply to those suspected of defaulting or evading taxes.

Taxation challenges

In the 2018/19 financial year, the domestic revenue projection stands at slightly over Shs15.5trillion of which Shs15tillion is tax revenue (collected domestically) and Shs418b is non-tax revenue. This amounts to about 53 per cent of the total resource envelope which has been estimated at shs.29.2 trillion.
However, given past trends there has been a variance between the revenue projected and actual collection.

In 2016/17 financial year, revenue collections amounted to Shs12. 7 trillion, registering a shortfall of Shs457.5b.
Therefore, in order to cover up the shortfalls, the government has had to greatly rely on external and domestic debt thereby increasing its indebtedness which currently stands at 27 per cent of GDP.
It is therefore crucial that the country generates as much revenue as it can domestically in order to reduce the debt burden and be able to finance its own development.


Importantly perhaps, already the law is on URA side. It allows the tax body to access information about a tax payer whenever it deems it fit.
However, this, according to tax and legal experts can only be done if the tax body follows procedures and laid down laws.
But even then, the experts argue, URA should work within a certain threshold as it will be difficult to use the law to seek details of clients whose number is not given.
Therefore, they say, URA should be specific in its demands and clearly state reasons why it seek to access clients’ accounts.