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URA’s access to NWSC clientele data faces legal hurdles

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URA officials attend to clients at their offices in Nakawa. The authority seeks access customer data from the National Water and Sewerage Corporation to ensure tax compliance. PHOTO | FILE

The Uganda Revenue Authority (URA)’s decision to access clientele data from the National Water and Sewerage Corporation (NSWC) has elicited flak from data privacy lawyers, who fear that its enforcement could contravene Article 27 of the Constitution and the Data Protection and Privacy Act of 2019.

The November 5 letter addressed to the Managing Director of NWSC, reads: “In a bid to improve overall tax compliance, we aim to ensure the completeness of the taxpayer register by identifying and registering all persons liable to pay tax in Uganda. We, therefore, seek your support to ensure that all your customers are registered with URA for purposes of complying with their responsibilities imposed under a tax law.”

It reads further: “The purpose of this letter is to request a data set from July 2021 to date to aid in the identification and registration of persons who have not complied with Section 3(1) of the tax procedure Code Act 343, which requires all persons liable to pay tax to apply for registration with URA.”

According to the letter, URA wants the NWSC to provide the full names of the customers, customer numbers, and meter numbers, including the single owner with multiple water connections, National Identification Number, contact details including telephone numbers and email, monthly consumption data in units and amounts paid since July 2021 to date and the detailed location of the metered connection, including street name, building name, trading centre, village, parish, county, and district.

However, there are fears that this may result in a breach of privacy rights and the enforcement could be outside the purview of Article 27 of the Constitution and the Data Protection and Privacy Act of 2019 and the Data Protection and Privacy Regulations of 2021.

Article 27 (2) of the Constitution provides that no person shall be subjected to interference with the privacy of that person’s home, correspondence, communication, or other property. Mr Allan Sempala, the head of the legal department at Unwanted Witness, a privacy and data protection watchdog, told Daily Monitor newspaper yesterday that there are obligations URA must fulfill before accessing personal data.

“You have to seek consent from the owner of that personal data. If I am to collect your personal data from you or any other person, I have to ask the two parties or that person you gave that information...the law also gives an exception for the collection of that data without seeking the consent of the owner of the personal data. And one of those exceptions is where they are collecting personal data to perform a public duty by a public body.”

Sempala argued further: “Where we find a problem is that URA is seeking to only enforce or evoke a certain section, which is Section 7 or Section 2, 7.2 of the Data Protection and Privacy Act alone. The regulations as well give whoever is collecting such data an obligation before they actually go for that information. It should include a systematic description of processing and the purpose of processing. It should have an assessment of risks that they’re researching, the risks to personal data, and the measures to address the risks. This report ought to be made public.”

Mr Sempala says there is a need to define public duty.

“Before you go ahead to collect personal data from a fellow government agency, you ought to have done an impact assessment, having assessed all the risks that might befall the personal data you were trying to collect, and made it public,” he said. 

However, Wilfred Niwagaba, who is the shadow Attorney General, argues that “The Data Protection Act Sections 7,9(3) and 13(3) d and Tax Procedures Code Act sections 42(4) all read together, give URA as a tax collector of public funds this right and to that extent privacy laws don’t apply.”

It is not the first time the tax body has attempted to access clientele information to enforce tax collection, which previously ran into legal headwinds.

Commercial banks

In 2017, the tax body’s then commissioner for domestic taxes, Henry Saka, demanded that commercial banks in the country be compelled to provide clientele data, including the National Identification Number (NIN), home address, telephone number, email, cash withdrawals and balances on individual accounts to the tax collector.

The banks petitioned the Constitutional Court, which in 2018 ruled that: “The Notice impairs the right to privacy of all bank account holders of Uganda enshrined in Article 27(2) of the Constitution in a manner that far exceeds what is necessary to accomplish the objective of tax collection and is accordingly beyond what is acceptable and demonstrably justifiable in a free and democratic society.”

The court also ruled that URA could not unilaterally invoke the Tax Procedure Act to access data, saying this could only be done in exceptional circumstances where there is a probable cause of breach of tax laws. NWSC confirmed they had received the letter and are processing the information.

Mr Samuel Apadel, the NWSC spokesperson, said: “It is a lawful request, so we are providing this information to URA to be used for the purposes for which they have requested it. We will provide the information because they have quoted relevant laws.

“We review the letter and we are going to provide the information. This information is also audited by the Auditor General and presented to Parliament, and this is government to government. You know what happens, for example, when the government is investigating something, if they make a lawful request it will be provided.”

Experts, who spoke to this publication, say the change in strategy by the tax collector may be aimed at unearthing concealed property to improve collections of rental tax.

“I think they want to use that information for assessment of rental income,” said a source, who spoke anonymously.

Rental income is the total amount of rent derived by a person for the year of income from the lease of immovable property (land and or buildings) in Uganda with the deduction of any expenditure incurred in respect of the property.

Section (5) of the Income Tax Act states that a tax shall be charged for each year of income and is imposed on every individual  who has rental income for the year of income. This letter coincides with the World Bank’s report on the country’s low property tax collections, which stand between 10 and 20 percent.

URA’s move also comes a few weeks after the Tax Appeal Tribunal ruled that high-rise apartments should pay Value-added Tax (VAT). URA’s decision also comes on the heels of the decision by the Tax Appeal Tribunal, which ruled that high-rise apartments should pay Value-added Tax (VAT).

The tax body, which has a low tax to GDP ratio of 13 percent in Africa, has consistently missed its set tax collection targets that experts as a result of poor administration and evasion.

Targets

This financial year URA has a target to collect Shs31.9 trillion to fund the Shs72.1 trillion budget. On December 13, this publication reported that the URA Commissioner General, Mr John Musinguzi, had pledged to “completely close all revenue leakages. Please don’t be part of the racket that has been trying to cut corners and doge their tax responsibility. As we automate our data and analyse it, it is bringing out several facts,” “Over the last four years, our tax base has grown from 1.7 million taxpayers to 4.4 million taxpayers. Our target is to have at least 10 million taxpayers,” Musinguzi told NTV on December 11.

Survey findings by Afrobarometer, a research network working in 39 African countries, titled: “Value for money. Perceived misuse of tax revenue, corruption, and unfairness erode support for broadening the tax base in Uganda,” found that 54 percent of Ugandans don’t see value for their taxes. According to the findings, while most Ugandans said the government has the right to collect taxes, half said the taxes are not used for the wellbeing of citizens. Mr Albert Baine, a tax consultant, expressed reservations about URA’s strategy.

“That may not be the most effective way to widen the tax base because how much of the information are they going to get and the biggest percentage of that information will be useless, especially for domestic users. They are going to sieve all that information and get the rental owners. Let us say, how does KCCA effectively manage the collection of trading licences from every single small business, and URA has failed to identify who owns what property for purposes of rental income?” Mr Baine asked.