The Tax Appeals Tribunal has dealt a significant blow to the Uganda Revenue Authority (URA) after overturning key portions of a Shs4.9 billion customs tax assessment issued against Kansai Plascom Uganda, ruling that parts of the assessment and penalties imposed on the company could not stand.
The dispute stemmed from a customs audit conducted by URA on Kansai Plascom’s imports of raw materials from Egypt between 2017 and 2021. Following the audit, the tax authority assessed the company for Shs4.904 billion in customs taxes over disputed tariff classifications and COMESA preferential treatment, and further imposed a penalty of $50,000.
However, in its decision, the Tribunal largely found in favour of Kansai Plascom, cancelling about Shs800 million of the customs assessment, setting aside the $50,000 penalty, ordering URA to refund the mandatory 30 percent tax deposit paid by the company, and directing the authority to recalculate the firm’s final tax liability in accordance with the ruling.
“The assessment must be founded on proper investigation, sound legal interpretation and objective evidence. A taxpayer should never bear the burden of correcting an assessment that could have been avoided through greater care at the point it was issued,” the Tribunal ruled.
The judgment is expected to have implications beyond the parties involved, with tax experts describing it as an important reminder that taxpayers have a legal right to challenge assessments they believe are excessive or inconsistent with the law.
While URA has the statutory mandate to assess and collect taxes to finance government programmes and national development, the Tribunal emphasised that the exercise of those powers must be fair, evidence based and legally sound.
The ruling also highlights the broader consequences of disputed tax assessments on businesses. Apart from the tax liability itself, companies often incur substantial legal and professional costs, spend months responding to audits, divert management resources from business operations, experience cash flow disruptions and postpone investment decisions while disputes remain unresolved.
“An assessment is not correct simply because it has been issued by the tax authority,” the Tribunal observed, noting that every tax demand must be capable of withstanding legal scrutiny.
The Tribunal further said that the strength of a tax system should not be measured by the number of assessments issued, but by public confidence that tax decisions are fair, lawful and supported by evidence.
According to the ruling, confidence in the tax system grows when taxpayers know that disputes will be determined independently and that both the revenue authority and taxpayers are held to the same standard of accountability.
The decision is expected to provide reassurance to businesses that tax assessments are subject to independent review and that the country’s tax dispute resolution framework offers an avenue for correcting assessments found to be inconsistent with the law.
The ruling also serves as a reminder that effective tax administration depends not only on efficient revenue collection but also on fairness, transparency and respect for due process.
“When fairness guides tax administration, compliance becomes stronger, businesses become more confident and the relationship between taxpayers and the revenue authority shifts from confrontation to trust,” the Tribunal said.
