Will alternative dispute resolution channels be cheaper and easier?

Author: Edward Balaba

Tax disputes by their nature tend to overwhelm even seasoned taxpayers, with a sense of helplessness. This is because they set a taxpayer against the government which considers outstanding taxes as debts owed to government. 

Under the Tax Procedures Code (Amendment) Bill 2021, the government has proposed to introduce Alternative Dispute Resolution (ADR) mechanisms for resolving tax disputes before the Uganda Revenue Authority (URA).  Simply put, ADR refers to the use of mechanisms other than the conventional methods like courts to resolve disputes. Some of the existing ADR mechanisms include negotiation, mediation, arbitration, conciliation, among others. 

If the proposal is passed into law, a taxpayer who is dissatisfied with a URA decision may apply to the commissioner to use ADR to resolve the tax dispute. The responsible minister (through detailed regulations) will specify the ADR mechanisms that will be available and the modalities of their usage by taxpayers. 

Though mediation (as an ADR method) is already being applied within external forums for tax dispute resolution like the tax appeals tribunal (tax tribunal) and courts, the new proposal is unique because it will introduce ADR within the internal dispute – resolution system at URA.  The mediation before the tax tribunal (effective July 1 2018) allows parties to first explore ‘informally’ settling the dispute (under the guidance of a mediator) prior to formal resolution by the tribunal.  
The proposal to have ADR within URA is a welcome initiative because, on the whole, ADR ensures timely resolution of disputes, is less costly and often times achieves a ‘win – win’ outcome for the ‘warring parties’. 

However, there are concerns that will need to be clarified, both legally and administratively, if the ADR is to be successful. For example, whether exercising the ADR option before URA will disentitle the tax payer from using the existing route of formal review before the tax tribunal or ADR will serve as an additional stage to be explored in the tax dispute resolution cycle.
 If it is an additional stage, the proposal falls short of enlarging the timelines for a tax payer who has first opted for ADR but was unsuccessful. Presently, an aggrieved tax payer should apply for review of a URA decision to the tax tribunal within 30 days. 

The enlargement of timelines beyond the 30 days will ensure that a tax payer who is unsuccessful with the ADR at URA is still within time to apply for review before the tribunal. Relatedly, will a tax payer that has participated in ADR at URA, without success, be entitled to further consider ADR (mediation) at the tribunal stage?  There has also been a long – standing legal debate on whether outstanding tax or attendant tax disputes can be negotiated or settled through agreement. 

The Courts have highlighted that taxes are ‘not contractual but statutory’ and should be determined by tax laws and not agreements between tax payers and the government (or URA). But there have also been instances like the capital gains tax disputes where the government negotiated and agreed amounts of tax payable by the International Oil Companies (IOCs). 

On the whole, the proposed law needs to address how ADR before URA will be structured, managed and implemented in a clear, fair and transparent manner that ensures both justice and equality for the tax payer. If ADR methods like arbitration are introduced, will we see the emergence of a new decision maker (the arbitrator) in tax matters - in addition to URA, the tax tribunal and the courts?   These are some of the issues that the proposed law and the regulations should address. 

Mr Edward Balaba is a tax lawyer working with PKF taxation services limited.

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