Even with the increased tax education and reduction in corruption cases at Uganda Revenue Authority (URA), some taxpayers want the tax body to review its policies to allow them to pay willingly.
According to Patience Tumusiime Rubagumya, URA Commissioner for Legal Services & Board Affairs, over shs 1 trillion is locked up in tax related court cases and most of the cases are filed by tax payers who do not agree with the authority’s tax assessment.
Rubagumya explains over 300 tax cases valued are in the Tax Appeal, Tribunal High Court and Court, advising tax payers to take on the alternative dispute resolution.
In the recent years, there has been a surge in the number of tax disputes in Uganda which are attributed to several factors.
Some of the factors include; a rise in disputes around tax computation methodologies, vagueness surrounding tax exemptions caused by the constant and rapid amendments to tax laws, poor record keeping by tax payers, increased taxpayer activism and general economic hardships.
A tax dispute generally arises where there is disagreement between the tax payer and URA on the tax payable.
Traditionally, the adversarial system of dispute resolution, for example court, has been the most commonly used approach. However, this system poses several challenges, including increase in case backlog, affects government revenues, inhibits voluntary tax compliance, affects stakeholder relationships and also affects foreign direct investment.
It is also time consuming, costly and creates unpredictability.
URA Commissioner General, John R. Musinguzi has on several times advised tax payers to explore alternative dispute resolution methods rather than courts, especially on cases relating to tax.
“We have also embraced alternative dispute resolution methods, other than use of courts of laws. We encourage those in court to come forward for alternative settlement; we shall follow the law, engage you and ensure compliance,” Musinguzi said.
Speaking during URA e-bomba ya business summit on the topic “Alternative dispute resolution: The role in domestic revenue mobilization”, the Director Tax and Regulatory Services at Libra Associates and Consultants, Joseph Okuja said taxpayers should maintain records of their assessments so that they have evidence to back their position in case a dispute comes up.
“It is very important that taxpayers keep proper records. Besides keeping all records that relate to its transactions, a business has to ensure records are properly dated in order to understand which ones relate to what period,” he said.
According to the tax experts, Uganda has a modern tax system that is widely recognized and used by many other modern countries therefore, it is based on voluntary compliance whereby a taxpayer has an obligation to self-assess and comply.
Besides voluntary disclosure, there isn’t any other specific provision on the use of alternative dispute resolution for tax disputes in tax laws. Generally, any taxpayer aggrieved by a tax decision may file an objection to the Commissioner which maybe allowed completely, partially or maybe disallowed.
If the taxpayer is still not satisfied with the decision, they may seek an administrative review which is an internal mechanism or file a review application with the Tax Appeals Tribunal.
The challenge with filing at the Tax Appeals Tribunal is that the taxpayer is required to pay a mandatory 30% of the sum in dispute or not in dispute whichever is greater.
The Tax Appeals Tribunal has a mediation option to the parties, which has gone a long way in enabling settlements but again, this is only available to tax payers who have complied with the filing requirements.
Some tax payers said the 30% requirement has been a barrier to access justice, especially for small and medium enterprises.
The Director of Economic Affairs at the Ministry of Finance, Planning and Economic Development, Moses Kaggwa advised Ugandans not to look at paying tax as a punishment, but as a contribution that they are supposed to make.
“We need to be independent from endless borrowing and this cannot happen, if we don’t normalize clearing taxes. A tax should be a contribution not a burden. Unless we look at it that way, we shall continue borrowing. Therefore, URA should provide incentives to the people in order to encourage them to invest and pay taxes,” said Kaggwa.
He said they are looking more at sensitization of taxpayers because most of these taxpayers don’t know why they should pay taxes.
The President of Uganda Law Society (ULS) Pheona Wall believes there are many groups of people that URA needs to attract. It needs to create a system that is trusted by taxpayers.
This is to ensure that taxpayers give correct information about their business, but with emphasis of being very strategic: “What value doesn’t URA get by having a more human face? Can we start by trusting our system because when you go to South Africa, Kenya and Rwanda, they don’t have unreasonable requirements?” she asked.
Rubagumya stated that the only way to improve on domestic revenue mobilization is through alternative dispute resolution instead of going to courts.
“Alternative dispute resolution is a win-win situation for both URA and the taxpayer because cases are resolved faster. We spend a lot of time and money in court, but if tax payers opted for alternative dispute resolution, time and money will be saved,” said Rubagumya.
