A new report authored in March 2019 finds that tax disputes at Tax Appeals Tribunal (TAT) take a long time to be finalized. “On average, only 6 cases worth Shs2.3 billion were finalized within 12 months of lodgment during the period of the study, representing yearly average completion rates as low as 16.6 percent,” says the report by7 the Economic Policy Research Centre (EPRC).
“The timeliness of tax dispute resolution by the TAT was taken into account by considering the number of tax dispute cases finalized within 12 months of lodgment,” report, dubbed ‘Court Actions and Boosting Domestic Revenue Mobilization in Uganda’says.
A total of 37 finalized tax cases spanning the period 2000 to 2017 were reviewed in order to identify the major facts of disputation involved in tax disputes at says EPRC in its report. The tax disputes were between the Uganda Revenue Authority (URA) and individual taxpayers and companies.
While the number of tax disputes finalized within 12 months of lodgment doubled between 2015 and 2016, overall, the number of cases finalized beyond 12 months of lodgment was greater for all years studied. “The high number of cases finalized beyond 12 months of lodgment partly explains the large amount of tax revenue trapped in tax disputes,” the report says.
Outcomes of tax dispute cases
According to Brian Sserunjogi and Paul Corti Lakuma, EPRC researchers, who authored the report, the results on the outcome of tax disputes indicate that during the study period, the tax commissioner’s assessment and… decisions were upheld in about 24 percent of the tax disputes and varied in only 13 percent of the cases.
In addition, about 25 percent of the tax disputes lodged at TAT were withdrawn by applicants while 13 percent of the tax disputes were dismissed by the tribunal. It is also worth noting that about 25 percent of the cases at TAT were finalized by mutual consent between URA and companies.
According to the report, the large percentage of cases finalized through mutual consent and withdrawn is an indication of the aggressive assessments and tax audits undertaken by URA in order to meet annual revenue targets. This is because after a review with TAT, most taxpayers reach an agreement with the URA.
“Taxpayers withdraw their applications in the interest of saving time, since the court process takes a long time. As already mentioned, the TAT does not have targets with regards to the number of cases to be finalized within a particular time. Unlike in Rwanda, where the law stipulates a maximum period of six months from filing to judgement for all courts, tax disputes in Uganda can last for significantly longer periods,” the report says.
It says the lack of performance targets derails the speed of resolution of the cases at TAT. Furthermore, a breakdown of the outcome of the tax disputes between URA and taxpayers reveals that during the study period, on average both sides won an equal number of cases. The findings reveal that there is no overt bias in the TAT ruling.
Nonetheless, the report says, the value of taxes involved for cases decided in URA’s favour were on average greater than that decided in the favour of taxpayers. “This is an indication that URA audits and reassessments tend to be skewed toward large taxpayers. The evidence further reveals that overall, both the number of cases decided in favour of the URA and taxpayers exhibited a declining trend during the study period,” it says.
The observed trend in the outcome of the tax disputes could be partly be attributed to an increasing number of cases that are either dismissed, consented or withdrawn before final TAT ruling is reached. Hence is a need to strengthen URA’s audit and assessment functions to reduce on aggressive assessments which sometimes result in frivolous cases which are either dismissed, withdrawn or consented after reassessment by TAT.
Appeals to the High Court
According to the report, with regards to the number of tax disputes for appeal to High Court, findings reveal that during the study period, an average of one case per year proceeded for appeal at the High Court from the TAT. The low number of cases that proceed for appeal to the High court is partly attributed to the heavy backlog of cases at the High Court. According to the National Court Case Census (2016), the High Court, registered the second highest number (32 percent) of pending cases in the Judiciary.
The report says: “The High Court registered a total of 36,313 pending cases of which 10,723 were civil cases. The high contribution of civil cases to the total pending cases at the High Court is an indication that tax disputes take significant amounts of time to be heard and let alone resolved. There is no priority given to tax related disputes at the High Court since all cases are treated the same way.”
The report cites Section 27 of the TAT Act states that appeals to the High Court from TAT are to be made on questions of law only. Therefore; it says, filing of appeals to the High Court implies that tax disputes are heard like conventional cases, requiring strict adherence to the Civil Procedure Act, which follows the law and court procedures strictly. “This slows down the process of tax dispute resolution at the High court,” it says.
Types of tax dispute cases
The report indicates that majority of tax disputes lodged at TAT are filed by the large taxpayers. Specifically, tax disputes filed by corporations averaged 24 cases per year worth Shs19 billion against an average of 2 cases per year worth Shs390 million from individual small tax payers.
The results confirm the barriers that confront small taxpayers in accessing tax justice in Uganda. A number of reasons are provided for the observed trend. First, small taxpayers are unable to pay the mandatory 30 percent of the tax assessed or that part of the tax assessed not in dispute whichever is greater as specified in the TAT Act, the report says.
Secondly, it says, small taxpayers lack the necessary requisite requirements such books of accounts, formal registration, and legal representation of a tax lawyer required for a formal TAT hearing. In addition, small taxpayers fear to approach the court because they fear that URA may harass them. Moreover, it says, URA tax audits have previously targeted large tax payers, with little or no concern on the small taxpayers. Also, the tax amounts involved with small taxpayers are usually small and do not attract small taxpayers to go through all the bureaucracy of the TAT process.