Court outlaws payment of Shs100,000 in Stamp Duty

The judges held that the inclusion of Section 2 (h) in the Stamps (Amendment) Act, 2020, to facilitate the collection of stamp duty as a tax from the petitioners on obtaining a license to practice or certificate to practice was inconsistent with and in contravention of Article 92 of the Constitution.

“To the extent that it does not fall within the ambit of the exceptions provided for by Article  21(4)(a) and (b) of the Constitution, Section 2 (h) of the Stamp Duty (Amendment) Act, 2020, is discriminatory against professionals in private practice and is, therefore, inconsistent with and/or in contravention of Articles 21 (1) and (3) and 152 ( 1) of the Constitution and, therefore, to that extent, void,” Justice Irene Mulyagonja held in the lead judgment.

She said Parliament was clearly misled into amending a law to facilitate the collection of Stamp Duty on instruments that are executed by government officials and so exempted from payment of such duty by the parent Act.

Other judges on the panel were Egonda Ntende, Catherine Bamugemereire, Monica Mugenyi and Eva Luswata.

The judges argued that the inclusion of Section 2 (h) in the Stamps (Amendment) Act, 2020, to facilitate the collection of stamp duty of Shs100,000 as a tax from the professionals on obtaining a license or certificate to practice is inconsistent with and/or in contravention of Article 92 of the Constitution, and, therefore, void.

Justice Mulyagonja reasoned that the enactment of the Stamp Duty was for an unjustifiable purpose that it continued to impose a tax on practicing certificates and licences where other dues for them had been imposed by specific legislation in respect of each of the professions that are petitioners before the court.

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The court observed that Parliament also passed the amendment in the face of several elaborate decisions of the courts that ruled that further taxes should not be imposed on obtaining practicing certificates and licences by professionals.

‘Imbalance in taxation’

Justice Mulyagonja held that the argument that professionals in private practice are taxed as business people and, therefore, their licences ought to be subjected to an additional tax called Stamp Duty is not sufficient justification for the additional charge. She ruled that the amendment to impose Stamp Duty on professionals who have to renew licences and certificates, therefore, does not fall within the ambit of Article 21(4) (a) of the Constitution. Hence the Attorney General has not shown that the amendment was necessary for implementing policies and programmes aimed at redressing social, economic, educational or other imbalance in society.

“I say so because the petitioner’s complaint is not against all the people in Uganda, but against professionals in the same professions, save that the complainants are in the private sector,” she said, adding, “There appears to me to be no imbalance in the taxation regime for lawyers or doctors, engineers and other professionals in the private sector and those in the public sector, as is evident in the Income Tax Act, because each of the two categories is taxed according to what Parliament considered to be fair and reasonable in each of the two circumstances.”

Backstory

The court decision arises from a complaint regarding the decisions of the High Court in the various applications wherein the imposition of a new license upon professionals in private practice had been achieved by amending the Trade (Licensing) Act. The background to that dispute was that Section 3 of the Trade (Licencing) Act, Cap 101, provides for the designation of business areas and trading centres by the minister responsible for local administrations and urban authorities. Section 8 thereof prohibits carrying out certain business in the designated areas without a trading license.

Thirteen professional bodies led by the Uganda Law Society petitioned the court, challenging the enactment of the Stamp Duty (Amendment) Act, 2020, which commenced on July 1, 2020. In doing so, it introduced a new item in the Second Schedule to the Stamp Duty Act, 2024, (the parent Act), levying stamp duty on every professional license or certificate in the amount of Shs100,000 per annum.

They are Uganda Law Society, Uganda Medical Association, Uganda Institution of Professional Engineers, Institution of Surveyors of Uganda, Institution of Certified Public Accountants of Uganda, Pharmaceutical Society of Uganda, Uganda Veterinary Association, Uganda Society of Archives, Association of Graduate Nurses and Midwives of Uganda, Insurance Training College, Medical Clinical Officers Professionals Uganda Association, Uganda Dental Association, and Uganda Veterinary Professionals Association of Uganda.

Aggrieved

The court heard that the professional bodies were aggrieved by the additional levy that was introduced by the challenged amendment to the Stamp Duty Act.

This is because the members of each of the professions represented in the case were required to renew their licences or certificates to practice annually for which they pay and they are issued by the various professional bodies under specific laws governing their professions.

According to the complaint, the petitioners argued that the impugned amendment had the effect of discriminating against private practitioners compared to professionals in the same fields that are employed by the government. Workers of other public bodies who are also exempted from annual renewal of practicing certificates and licences, were cited.

Through their lawyers, the professional bodies said the amendment to bring the new tax on board was to circumvent various decisions of the High Court that were previously handed down in favour of some of the petitioners. This, in effect, reintroduced a tax or charge that was struck out by the courts. That as a result, it was in breach of the principle of separation of powers.