30% payment by aggrieved tax payers unconstitutional

By Farooq Kasule

The judgment follows a 2009 constitutional petition reference by Fuelex Uganda Limited against Uganda Revenue Authority (URA).

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COURT | TAXES | UNCONSTITUTIONAL

The Constitutional Court has nullified the legal provision requiring aggrieved tax payers to pay 30% of the disputed tax assessments prior to being heard in the Tax Appeals Tribunal. 

The judgment follows a 2009 constitutional petition reference by Fuelex Uganda Limited against Uganda Revenue Authority (URA). 

Fuelex contested payment of sh160m as tax payable from its fuel business covering period running from June 2005 to September 2006.  

During the hearing of the dispute, the issue of the constitutionality of the mandatory payment of 30% of the tax levy arose before the Tax Appeals Tribunal which consequently referred the matter to the Constitutional Court for determination. 

Fuelex argued that the legal provision requiring aggrieved tax payers to pay 30% of the disputed tax assessments prior to being heard in the Tax Appeals Tribunal is unconstitutional as it contravenes Article 44 of the Constitution. 

In a 4:1 judgment dated July 24, the Constitutional Court has declared section 15 of the Tax Appeals Tribunals Act unconstitutional on grounds that it is inconsistent with Article 44 of the Constitution.  

Deputy Chief Justice Alfonse Owiny-Dollo, Kenneth Kakuru, Frederick Egonda-Ntende and Ezekiel Muhanguzi allowed the application while Justice Hellen Obura dissented.  

Majority justices noted that the provision has been subjecting an objector to a tax assessment whose objection does not relate to the amount of tax payable. 

"The framers of the 1995 Constitution purposely intended to ensure that parties before courts of law at same footing. Section 15 of the Tax Appeals Tribunals Act, derogates from the principle and the right to affair hearing enshrined in the Constitution to the extent that it places one party to a disadvantage," Owiny-Dollo noted. 

Under the impugned section 15 of the Tax Appeals Tribunals Act, a person who cannot raise the 30% of assessed tax is denied justice on account of inability to pay. 

"A law that requires one party to a civil dispute to pay 30% of the amount of money that has been determined as payable by the adverse party places on the objector at disadvantage," Kakuru observed. 

Kakuru equated the provision of the impugned section to a boxing match at which one of the contestants' arms tied behind his back. 

"We accordingly declare section 15 of the Tax Appeals Tribunals Act unconstitutional and award half of the costs of this reference to the applicant," they ruled. 

The judgment is described by many as a big blow to Uganda Revenue Authority.  

On the other side, business personnel have welcomed the judgment saying it overdue.   

Edirisa Kakembo says the provision has been making them guilty before being heard. 

Why Obura dissented  

Obura ruled that there was no need to make the reference to Constitutional Court as the question relating to the Constitutionality of payment of the 30% of the tax in dispute is guarantee by a person lodging an application with TAT already been determined.