KAMPALA — The Constitutional Court has ruled in a landmark case, describing as unconstitutional, a requirement by taxpayers disputing Uganda Revenue Authority assessment to first deposit 30 percent of amount in dispute before appealing to Tax Appeals Tribunal.
Until now, the long-established position under section 15 of the Tax Appeals Tribunal Act was that a company or any taxpayer who disputes a tax bill to deposit 30 percent of the money in dispute to URA before launching a challenge.
In a major blow to the tax body, the Constitutional Court judges led by Acting Chief Justice Alfonse Owiny-Dollo ruled that the requirement was unconstitutional and went against a constitutional provision that guarantees everyone a fair hearing.
In a majority ruling on Friday July 24, Justices Alfonse Owiny Dollo, Kenneth Kakuru, Egonda Ntende and Ezekiel Muhanguzi said that the requirement for payment of 30 percent before challenging URA assessments contravenes Article 44 (c) of the Constitution.
In the result, “this Court makes the following orders;- by decision, section 15 of the Tax of the Appeals Tribunal Act – in so far as if compels an objector to a tax assessment whose challenge is not with regard to the amount of tax assessed— is inconsistent with article 44 of the constitution, hence unconstitutional,’ the judges ruled”.
By majority decision, Fuelex Uganda Limited was also awarded half of the costs of the reference.
Significance of the decision
Commentators say, the ruling is a huge win to businesses who have for long argued that their money is unnecessarily held up at URA as cases drag on for years at the Tax Appeals Tribunal.
The circumstance in which URA was floored stemmed from a longstanding dispute with fuel company, Fuelex Uganda Limited, who the URA accused of refusing to pay a tax bill of UGX160.5m between June 2005 and September 2006.
Fuelex Uganda Limited, in 2009 objected to the tax bill, but it had to deposit 30 percent of the disputed amount before challenging it at the Tax Appeals Tribunal.
In the Constitutional Court, Fuelex argued that the provision clearly offends the rule of law provisions in the Constitution which guarantee equal access to justice for everyone and negates all forms of equity known to the law.
On its side, URA argued that Fuelex had not paid the requisite 30 percent of the tax it had objected to prior to lodging the objection hence the application was incompetent.
The majority court ruling rejected URA’s reasoning, saying it blocks justice.
OnlyJustice Hellen Obura dissented the majority ruling arguing that there was no need to make reference to the constitutionality of the payment of 30 percent of the tax in dispute because the Supreme Court had upheld it.
She awarded costs to the Uganda Revenue Authority.
The declaration of payment of 30 percent tax in dispute before challenge comes at heals another ruling last month where the Tax Appeals Tribunal itself said companies can pay the money in installments.