Tax Ombudsman_Ug

To promote a smoother interaction between the Taxman and Taxpayers; To help in resolving disputes or prevent disputes from arising; and to help in arriving at the right decisions.

Operating as usual



Section 24 of the Tax Procedures Code Act was amended to allow a taxpayer who is dissatisfied with an objection decision of the Commissioner to apply to the Commissioner to resolve the dispute using Alternative Dispute Resolution (ADR) procedure. This procedure is expected to be prescribed by the Minister of Finance in Regulations. The amendment introduces a two-tier system that offers a taxpayer two stages of internal review. In other words, after an initial review of an objection by Uganda Revenue Authority (URA) and the service of an objection decision, a taxpayer who is not satisfied with the decision can request another internal review by another team. After the internal ADR process, the taxpayer can then choose to appeal to the Tax Appeals Tribunal.

The Tax Appeals Tribunal (Tribunal) derives its origin from Article 152(3) of the Constitution, which directs the establishment of tax tribunals for the purposes of settling tax disputes. The tribunal itself was established under the Tax Appeals Tribunals Act, with powers to adjudicate on all disputes arising from the administration of various tax statutes by URA. It was set up to provide taxpayers with an easy, timely and independent alternative avenue for tax arbitration by 5 members i.e., a chairperson who must be qualified to be appointed a judge of the High Court, and 4 other members with requisite qualifications and experienced conceptual understanding to decide tax matters. To get the best judgments from the Tribunal, this mix of experience and skills are necessary.

In executing its mandate, TAT operates as an appellate court to confirm or reverse the decisions of URA. It is literally supposed to stand in the shoes of the Commissioner General and re-examine all powers and discretions available that are relevant to the challenged objection decision. In its arbitration of tax disputes, TAT may affirm, set aside, vary or refer back an objection decision with recommendations or directions, for reconsideration by URA. Moreover, the TAT Act was amended to provide for mediation to the TAT Registrar or other mediator, including powers to make orders as to damages, interest or any other remedy against any party.

The question that pops to my mind is why introduce a two-tier internal review system when we have a Tax Appeals Tribunal that exists to provide taxpayers with access to an independent and impartial tax dispute resolution process, and whose primary objective is to ensure that taxpayers who want to challenge a tax assessment are spared from going to a court of general jurisdiction that is encumbered with complex and onerous procedural rules? Is it because TAT has failed to efficiently and effectively execute its mandate?

Let’s examine the !

The grapevine has it that the tax review system is being reformed to maintain, if not restore, its effectiveness and therefore ensure that it achieves the intended objective of providing taxpayers with access to a swift, independent and impartial tax dispute resolution process. This is because it has also become evidently clear that the operations of TAT have run into several challenges that have inhibited its effectiveness, with tax resolution of disputes taking longer than expected and thus resulting in a backlog of outstanding disputes.

Arguments have been made that the presence of the TAT chairperson for each and every hearing for which a ruling must be made is a procedural requirement that delays the resolution of disputes, and those familiar with the process will attest to the fact that it could also lead to potential biases in decisions. Although each panel sits 3 members, the Tribunal’s decisions generally do not reflect the separate views and reasoning of each member who, by virtue of their skills, should present their own views, including reasons for arriving at that position especially where there are dissenting views amongst the members.

While it is possible for TAT decisions to be unanimous, it does not help the system when there has hardly been a dissenting view even on issues that are seemingly controversial. From the judgements, it would appear that most decisions represent the view of a single member. This is not consistent with having three members whose presence should ordinarily enrich and further develop our tax jurisprudence. Presenting dissenting decisions would allow the Tribunal produce more robust decisions, and thus giving room for healthier debates on tax disputes.

Still on the question of judgements, it is worth noting that in applying the law and administering justice in the disputes that are brought before them, Members of the Tribunal have a duty to make reasoned judgements based on the law, and in this regard have three important functions to perform:

(1) To provide clear answers to the parties as to who is right or wrong, and why. The parties in a court action expect the court to provide an answer to the question of who is right and who is wrong. They also want to know why the court has ruled in the way that it has and not otherwise.

(2) To effectively communicate their reasoning to parties. The parties expect to be guided on how to amend their decision-making to ensure that it conforms with the court’s interpretation of the law.

(3) To effectively communicate their decisions to the wider public, so that a taxpayer who may be contemplating legal action knows exactly what can be expected of the court.

Clarity in a judgement made by TAT and the appropriate reasoning would be the answer to the above requirements. This is far from the current reality. TAT ought to know that well-reasoned judgements give the parties certainty that the determination is fair, and that the members have performed their task in a competent, impartial and independent way. Consequently, URA would know precisely what it must do to improve its decision-making process. Similarly, taxpayers who are contemplating legal action would be able to work out how advisable it would be to file a suit and what protection the court can provide. The contents of a decision are prescribed by law and the courts apply a specific method of legal reasoning, based on a collation of facts and legal rules, in order to arrive at the concrete application of the tax law in a particular case. The objective should be to arrive at a clear result, and to provide answers to specific questions on whether a tax is due from a specific taxpayer or not. The objective should not be to achieve a reconciliation of the taxpayer’s arguments with the position of the tax administration, as is common with TAT judgements.

That said, the relevance of the ADR process will hinge on its efficiency, credibility, transparency, and above all its ability to reach determinations that are generally regarded as satisfactory and fair. Various factors will influence the independence of the ADR team, including the rules for appointing its officials, its integration into the institutional hierarchy, its supervisory structure and the administrative status of its employees. According to the OECD guidelines for tax administration, an internal review process has three main objectives, which must be prioritized:

(1) Efficiency - Where judicial procedures are particularly slow, ADR procedures that focus on serving low-income taxpayer should resolve tax disputes in a more timely and less expensive manner than courts of law. These objectives can be accomplished by minimizing procedural rules, allowing informal communication within the tax authority and with the taxpayer, and adopting a flexible approach to dispute resolution that focuses on achieving mutually agreeable outcomes.

(2) Self-control - The review process should give the tax authority an opportunity to evaluate its own systematic accuracy and administrative capacity. The primary purpose of the tax authority is not to maximize revenue collection, but to apply tax laws correctly. ADR process can help the authorities ensure equal treatment of taxpayers, identify and correct recurring errors, reduce corruption, and enhance the overall quality of tax administration. Where judgments were inconsistent and uncoordinated due to differences in the efficacy of TAT, ADR will provide a vital measure of consistency and predictability.

(3) Justice - In jurisdictions where litigation is especially slow and expensive, many taxpayers may be effectively unable to obtain legal redress in tax cases. A swift and inexpensive review process that focuses on serving lower-income taxpayers., can greatly enhance the perceived fairness and credibility of the dispute-resolution process.

Finally, beyond affording taxpayers the opportunity to have inaccurate tax assessments revised and errors redressed without the burden of litigation, it is hoped that ADR will offer taxpayers a realistic chance to be heard, and it should ultimately speed the process of redressing taxpayer grievances, and ultimately ease the caseload faced by TAT. Moreover, the requirement to pay 30% of the tax in dispute prior to the appeal being heard by TAT arouses the taxman’s appetite for excessive assessments in a bid to frustrate a taxpayer’s right to challenge them through litigation. This previously created a huge barrier for many taxpayers in accessing justice before the Tribunal.


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