Tax disputes arise when there is a difference of opinion between URA and taxpayers. This may relate to one or more entries on the tax return. Tax disputes arise primarily from the assessment or enforcement of tax laws.
The increase in tax disputes is due, on the one hand, to the enhanced awareness of taxpayers’ rights and obligations, and on the other hand, the Urban Redevelopment Bureau’s concern about taxpayers’ tax behaviors, resulting in many eligible taxpayers not yet paying taxes. Register, and close the gaps taxpayers use to avoid taxes.
Uganda implements a self-assessment tax system. Under the guidance of the current tax law, the taxpayer determines the tax payable to the URA, and then submits the relevant return and pays it (if any). URA occasionally conducts compliance audits to ensure that tax returns or claims are correct, and they also check that payments are being made correctly and on time.
Often, the main cause of dispute is the URA issuing additional assessments to taxpayers through the Commissioner. These incidents lead to an assessment by the URA, which may come from a full audit or a desk audit. Taxpayers are advised that the first step in resolving disputes is to avoid disputes before they are evaluated through so-called voluntary disclosures.
If the agreement is consistent, it is recommended to pay taxes on time to avoid interest accumulation. The URA also provides the opportunity to negotiate a tax payment plan. It’s worth noting that in a payment plan strategy, interest on unpaid amounts continues to accrue.
However, there are times when taxpayers disagree with URA in principle or otherwise. This would leave taxpayers unhappy with the assessment or unhappy with the Commissioner-General’s decision. Tax law provides for well-established objection and appeal procedures for handling URA disputes after an assessment has been filed.
Some of the most common tax litigation issues include criminal law and civil law issues. Almost all civil law matters stem from disputes related to the accuracy of URA’s assessments. These include; – Assessment of all types of taxes, administrative decisions made by URA against taxpayers, CG response to taxpayer complaints or disputes.
On the other hand, the Criminal Code covers the following crimes: – Smuggling of goods, bribery of URA officials, problems arising in tax investigations.
Some conduct may constitute a criminal offense under tax statutes, but usually carries civil penalties, rather than imprisonment. These include; – Failure to file returns, failure to keep proper records, late paying taxes and more!
In my previous articles, I explained the rights and responsibilities of taxpayers, which include The right to challenge the URA’s position and express its opinion.
Below I will give you a detailed introduction to the steps to resolve tax disputes between taxpayers and URA.
- Challenging tax decisions. Taxpayers who are dissatisfied with the tax decision can lodge an objection with the tax office within 45 days of receiving the tax decision notification. Objections shall be in the prescribed form and shall state the reasons for the objection and contain sufficient evidence in support of the objection. The Commissioner may make a decision on an objection; – a tax assessment, confirming, reducing, increasing, or otherwise changing the assessment related to the objection; or any other tax decision, confirming, varying, or revoking the decision.
The Commissioner shall give the objector a notice of the objection decision within 90 days of the date of receipt of the objection. Otherwise, the objector may choose to have the Commissioner deemed to have made a decision allowing the objection by giving written notice to the Commissioner.
- Tax Appellate Tribunal and Litigation. If you are still dissatisfied with the opposition decision, you can appeal to the TAT (the court of first instance for all tax-related matters). This must be done within 30 calendar days of receipt of the opposition decision. Under special circumstances, taxpayers may apply to the State Administration of Taxation for an extension of the deadline for tax decision review applications. The extension application must be made within six months of the tax decision. If the taxpayer is not satisfied with the opposition decision, he may apply to the Tax Appeals Tribunal (TAT) within 30 days of receiving the decision. If the taxpayer is not satisfied with the decision of the TAT, he can apply to the High Court. This “quasi-judicial” procedure has historically been Uganda’s main dispute resolution mechanism.
- Alternative Dispute Resolution (ADR). ADR is a process whereby the taxpayer and the URA voluntarily agree to resolve tax disputes outside of the Tax Appellate Tribunal or the courts. Some of the mechanisms used in ADR are: conciliation, mediation, negotiation and settlement. The ADR process takes 2 months to complete, starting from the date your application is received in order to resolve the issue through ADR. Therefore, taxpayers who are dissatisfied with tax decisions can apply to resolve disputes amicably through ADR mechanisms including mediation or conciliation, or they can apply to the Tax Appeals Tribunal to resolve issues through the judicial system. If the parties fail to reach agreement, an ADR report is generated stating that the parties failed to reach agreement. At this point, taxpayers are advised to either pay the disputed tax or explore other dispute resolution options, such as the Tax Appellate Tribunal.
A taxpayer who appeals to the TAT must pay to the URA 30% of the contested tax or the undisputed tax assessed, whichever is higher, before filing an appeal. However, a recent ruling by the Constitutional Court held that mandatory payments deprive taxpayers of their right to a fair hearing and should not be enforceable in cases arising in principle. Issues of principle include that taxpayers should not be required to pay a 30% deposit when they challenge the URA’s interpretation of legal provisions.
Even after tax matters have been referred to the TAT, it is prudent for taxpayers to pursue the option of out-of-court settlement. Court battles around the world have become costly, lengthy and end in winners losing. Out-of-court settlements often result in a win-win agreement between the taxpayer and the URA.
The author is a chartered tax advisor and accountant
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