Patrick Nyabiryo and 1117 of his former colleagues worked for the defunct Uganda Electricity Board (UEB) before they were retrenched between 1998 and 2001. Their terminal packages of UGX 987,266, 321 were subjected to Pay As You Earn (PAYE) tax, a sum of which was remitted to the Uganda Revenue Authority (URA) by UEB.
Dissatisfied with the tax decision, the former workers successfully challenged it in the High Court. The Court ruled that taxing terminal benefits is illegal and not supported by the Income Tax Act. The High Court then ordered URA to refund UGX 987,266,321 to the plaintiffs. On top of the refund, URA was also ordered to pay each plaintiff general damages of UGX. 1,200,000.
URA proceeded to appeal to the Court of Appeal against the judgement of the High Court. In a judgment read on 20December, 2021, the Court of Appeal agreed with URA, and overturned the High Court Decision. Two Justices of the Court of Appeal, Hon. Lady Justice Monica K. Mugenyi and Hon. Justice Remmy Kasule agreed with URA’s arguments, but Hon. Justice Geoffrey Kiryabwire dissented.
The two Justices of the Court of Appeal noted that the issue of taxation of terminal benefits was already well decided on by the Supreme Court of Uganda in the renowned case of URA Vs. Siraje Hassan Kajura of 2015. Therefore, they maintained that the Court of Appeal was bound to follow the decision of the Higher Court under the doctrine of precedent, which binds the Courts below it.
The case puts to rest the long drawn legal battle between URA and former employees of UEB and many other Parastatals who were affected by the Government Structural Adjustment Program, popularly known as retrenchment.
The Court of Appeal noted that the case was of public interest, and therefore did not award costs against the former employees of UEB.
URA was represented by Counsel George Okello, the Assistant Commissioner Litigation. Mr. Okello welcomed the decision of the Court, saying it settles the issues squarely and fairly and offers clarity on the taxability of retrenchment packages.
According to Mr. Okello, the case also upholds the sanctity of Article 132 (4) of the 1995 Constitution of Uganda, in which the Supreme Court decision on matters of law binds all Courts in Uganda.
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