“Instead URA has cynically doubled down, sending incessant reminders to taxpayers to file their returns and pay their taxes before the 30th June deadline “to avoid inconveniences”. It remains unclear exactly how many of the country’s 1.6 million taxpayers were expected to access their records…”
By Alenyo Blaise Okwero
Following the President’s announcement of a second full countrywide lockdown on 18th June 2021, any rational taxpayer would have expected URA to announce relief measures including an extension of filing and payment deadlines for those whose returns and taxes were due on 30th June 2021.
Instead URA has cynically doubled down, sending incessant reminders to taxpayers to file their returns and pay their taxes before the 30th June deadline “to avoid inconveniences”. It remains unclear exactly how many of the country’s 1.6 million taxpayers were expected to access their records in their places of business in order to file these returns and make payment when public and private means of transport have been banned!
But for our esteemed revenue authority, acting irrationally and indeed, illegally, is par to the course. The purpose of this article is to highlight some administrative faults in tax collection by URA over the last several years.
In July 2016, the Tax Procedures Code Act came in force and repealed section 103 of the Income Tax Act which provided that the due date of payment was the due date for furnishing of the income tax return of income. The Tax Procedures Code Act also repealed Section 34 of the Value Added Tax Act which similarly provided that the due date of payment was the date the VAT return was due. The effect of these repeals was to remove any specific legal obligation to pay tax by the particular due date. While the obligation to file a return and pay tax remained, the legal requirement to do so by a specific date disappeared. This simply means that all interest charged and collected by URA while there was no payment due date in the statute books is illegal.
This no mere clerical error. Article 152 of the Constitution categorically states that no tax shall be imposed except under the authority of Taxation an Act of Parliament. Therefore where the statute does not provide for the tax, it does not exist. At best, this is an ambiguity of the tax law which must be resolved in favour of the taxpayer. Either way, the interest remains illegal.
This, of course, is not news to URA and efforts have been made to remedy the situation. A new payment due date was incorporated in the Value Added Tax Act by the Value Added Tax (Amendment) Act 2018 under Section 34A which came in force in July 2018. Inexplicably, no new payment due date for income tax was introduced until the Income Tax (Amendment) Act, 2021 which comes in force on July 1st 2021.
The effect is that any interest charged on unpaid income tax from 1st July 2016 to 30th June 2021 was illegal and any interest charged on unpaid VAT from 1st July 2016 to 30th June 2018 was illegal. When pursuing revenue from a taxpayer, URA officers blithely cite the provisions of the law creating the taxpayer’s liability.
In this instance, we the taxpayers, should cite the absence of the law back to URA and demand a refund or a tax credit where this interest was illegally collected.
There can be no tax collected except as the people of Uganda through Parliament decree and interest on VAT from 1st July 2016 to 30th June 2018 and income tax from 1st July 2016 to 30th June 2021 was not decreed by Parliament. It was therefore collected illegally.
But this is not URA’s only sin. The Income Tax Amendment Act 2020 significantly reduced the Presumptive Tax Rates applicable to businesses with a gross turnover of less than 150 million shillings. This law took effect on 1st July 2020.
Despite this, URA did not change the rates in its system. The result is that businesses have been paying presumptive tax for the financial year 2020/2021 using the old rates which have been repealed and which are invariably higher.
Again, considering that tax must be collected in accordance with Parliament’s statutes, this is not a violation that can be overlooked.in consideration of the COVID 19 pandemic there is a need for a nationwide tax pardon for small businesses especially considering the economic disruptions from the continued lockdown measures both international and local.
In addition to the above there is a further and final issue and one that has far reaching impacts on how an aggrieved tax payer interacts with URA to receive redress, the 2021 amendment of the Tax Procedure Code Act introduces a new and narrow definition of a tax decision.
It’s important to note that the tax decision is the basis for a taxpayer going to court or securing a remedy against URA. By developing a narrow definitions a lot of transactions (decisions) between URA and a taxpayer are strategically cut out from the decisions considered under the new definition, thus limiting access to justice. This kind of legislative reform shows a more reactive policy making as opposed to the development of a holistic and taxpayer considerate taxation system.
To remedy these irrational and illegal acts by URA, the revenue authority ought to refund taxes illegally collected where possible or make the taxes already paid creditable to the taxpayer. Further, going forward the URA must desist from illegal and irrational actions.
In conclusion, URA and Ministry of Finance should engage civil society more in matters of tax policy formulation processes. We are all ready to pay taxes but they must be charged in accordance with the law.
The author Alenyo Blaise Okwero is tax lawyer With FOROS tax consultants and the Open Form Initiative (TOFI)