A tax dispute arises where there is a difference of opinion between the URA and a taxpayer. This may relate to one or more entries on a tax return. Tax disputes majorly arise out of assessment or enforcement of tax laws.
There has been an increase in the number of tax disputes and this is attributed to the increased awareness by the taxpayers of their rights and obligations, and also URA’s focuses on tax practices of taxpayers, bringing many eligible tax payers who have not been on the tax register, and as well closing the gaps which taxpayers have used to avoid taxes.
Uganda follows a self-assessment tax system, where by taxpayers, guided by the existing tax laws, determine the taxes due to the URA, proceed to file the relevant returns and make payments if any. URA occasionally carries-out compliance audits to make sure tax returns or claims are correct, they also check that payments made were for the right amount and were made on time.
Usually, the prime cause of disputes arise where the URA, through the commissioner, issues a taxpayer with an additional assessment. The are events that lead to an assessment from the URA that may have come out of an audit which may have been comprehensive or a desk audit. It is advisable that a taxpayer as a first step in dispute resolution is to avoid the dispute before an assessment is raised by way of what is known as voluntary disclosure.
If in agreement, it is advisable to pay the tax on time to avoid the accumulation of interest. The URA as well gives an opportunity to negotiate payment plans for tax assessed. It is important to note that on the payment plan strategy, interest on the unpaid amount continues to accrue.
However, there are times when taxpayers will disagree with the URA in principle or otherwise. This will make the taxpayer to be aggrieved by an assessment or not satisfied with the commissioner general’s decision. The tax law stipulates a well objection and appeals procedure for dealing with URA disputes after an assessment has been raised.
Some of the most common issues subject to tax litigation consist of a combination of both criminal and civil law matters. Almost all civil law matters result from disputes relating to the accuracy of assessments from the URA. These include; – Assessments for all types of tax, administrative decisions taken by the URA against a taxpayer, CG’s response to a taxpayer’s complaint or dispute.
On the other hand, the criminal tax law covers offences like; – smuggling of goods, bribing of URA officers, Issues arising out of tax investigations.
There are actions that can constitute criminal offences under the tax statues, but usually attract a civil penalty rather than a custodial sentence. These include; – Failure to file returns, failure to maintain proper records, delays in paying taxes and the like!
In my previous articles, I explained the rights and obligations of a taxpayer, among which include the right to Challenge the URA’s Position and Be Heard.
Below I explain to you a step by step procedure of resolving tax disputes between the taxpayer and the URA.
- Objection to a tax decision. A taxpayer who is dissatisfied with a tax decision may lodge an objection with the commissioner within 45 days after receiving the notice of a tax decision. It should be in the prescribed form and shall state the grounds upon which it is made and contain sufficient evidence to support the objection. The commissioner may make a decision on an objection; – To a tax assessment, affirming, reducing, increasing or otherwise varying the assessment to which the objection relates; or to any other tax decision, affirming, varying, or setting aside the decision.
The commissioner shall serve notice of an objection decision on the person objecting within 90 days from the date of receipt of the objection. Otherwise, the person objecting may, by notice in writing to the commissioner, elect to treat the commissioner as having made a decision to allow the objection.
- Tax Appeals Tribunal and Litigation. If you are still aggrieved with the objection decision, you may lodge an appeal with the TAT, the court of first instance for all tax related matters. This must be done within 30 calendar days from the date of receipt of the objection decision. In special circumstances, a taxpayer can apply to the TAT for an extension of time within which to file an application for review of a tax decision. The application for extension must be made within six months of the tax decision. If the taxpayer is not satisfied with the objection decision, the taxpayer can then lodge an application with the Tax Appeals Tribunal (TAT), within 30 days from receipt of the decision. The taxpayer may proceed to lodge an application with the High Court if they are not satisfied with the decision from TAT. This “quasi-judicial” process has traditionally been the main dispute resolution mechanism in Uganda.
- Alternative Dispute Resolution (ADR). ADR is a process where the taxpayer and URA voluntarily agree to settle a tax dispute outside the Tax Appeals Tribunal or the Courts of Law. Some of the mechanisms used under ADR are; reconciliation, mediation, negotiation and settlement. The process in ADR takes a period of 2 months to be completed and this starts running from the date of receipt of your application for the matter to be resolved through ADR. Therefore, a taxpayer who is aggrieved with a tax decision can either apply to resolve the dispute amicably through ADR mechanisms including mediation or settlement or file an application in the Tax Appeals Tribunal to have the matter resolved through the judicial system. Where parties fail to agree, then an ADR report is generated stating failure by the parties to reach an agreement. The taxpayer is at this point advised to either pay the taxes in contention or explore other dispute resolution options like the Tax Appeals Tribunal.
A taxpayer who appeals to the TAT is required to pay 30% of the tax in dispute or that part of tax assessed not in dispute, whichever is greater to the URA before lodging the appeal. The Constitutional Court decision however recently held that the mandatory payment denied taxpayers the right to a fair hearing and should not be enforced in cases arising out of principle. Matters of principle include a taxpayer who is challenging the URA on interpretation of a legal provision should not be required to pay the 30% deposit.
It is prudent that for taxpayers to explore options of out-of-court settlement even after a tax matter has been referred to the TAT. Court issues everywhere in the world becomes costly, lengthy and ends in a winner-loser scenario. Out of court settlement usually leads to a win-win result from both the taxpayer and URA side after consensus.
The writer is a chartered Tax Advisor and accountant
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