Court Declares Tax Appeal Deposits Unconstitutional

Taxpayers disputing assessments by Uganda Revenue Authority will no longer be required to deposit 30 per cent of the amount in dispute before launching a challenge at the Tax Appeals Tribunal (TAT).

Section 15 of the Tax Appeals Tribunal Act requires a company or any taxpayer who disputes a tax bill to deposit 30 per cent of the money in dispute to URA before launching a challenge. But the  Constitutional Court Judges led by 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, Justices Alfonse Owiny Dollo, Kenneth Kakuru, Egonda Ntende and Ezekiel Muhanguzi said that the requirement for payment of 30 per cent before challenging URA assessments contravenes Article 44 (c) of the Constitution. The cited article guarantees everyone to a fair hearing.

The ruling today is a huge boost to business owners that have for long argued that their money is unnecessarily held up at URA as cases drag on for years at the Tax Appeals Tribunal. It is, however, a blow to URA that has been collecting this money before one could challenge its decisions.

It is an outcome of a petition lodged by  Fuelex Uganda Limited, in 2009 after it was presented with a tax bill of 160.5 million Shillings by URA. URA said Fuelex had not paid the money between June 2005 and September 2006. But Fuelex objected to the tax bill, but it had to deposit 30 per cent 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 per cent of the tax it had objected to prior to lodging the objection hence the application was incompetent. The court rejected this. Only Justice Hellen Obura dissented the majority ruling, arguing that there was no need to make reference to the constitutionality of the payment of 30 per cent 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 per cent 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 instalments.