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Know your statutory rights and obligations as a taxpayer as we welcome the new financial year!
By Joshua Kato.
As we come to the close of financial year 2022/2023 and welcoming the new financial year, it is key to note that tax compliance is a major factor affecting tax revenues. To determine the level of compliance of taxpayers in meeting their tax obligations can majorly be seen from the URA’s achievement of set revenue targets.
The Ugandan economy cannot realize a prosperous society without payment of taxes. Many national development is still lacking, even public facilities such as health centers, roads, village and local council offices and other public institutions that need to be repaired.
A few weeks ago, Ugandans on social media platforms started an exhibition of the ailing issues in service delivery beginning with the roads, where they showcased potholes in Uganda’s finest Kampala city and its suburbs, they went on to the health sector and their exhibition is ongoing.
Society seems un-satisfied with the government’s policy in terms of national development. The condition is influenced by so many factors among which disobedience of the taxpayers in the community to pay taxes, a state income tax that in turn gets back to the community in form of public facilities. Many people are still unaware about this. There is therefore need for society to know the role of tax knowledge correctly which is very important for the progress of the economy of Uganda.
Taxation has a variety of laws that have been set in legislation through Acts of the Parliament. Every taxpayer is required to understand all the rules and applicable taxes. Not all tax payers have full access to information.
The URA has done a great job in sensitizing the public about taxes through their programs, and this explains reasons why there is a slight increase in number of registered taxpayers in Uganda because of public awareness and the tax benefits of ownership of Taxpayer Identification Number (TIN).
Uganda follows the self-assessment tax system where by taxpayers, guided by the existing tax laws, determine the taxes due to the URA, proceed to file the relevant returns and make payments where applicable.
Responsibility is shifted to the taxpayer for proper accounting, assessment and payment of their tax liability with limited or no intervention by tax officials. The URA may occasionally carry-out compliance checks to make sure a specific tax return or claim is correct.
I would like to briefly educate you about your rights and obligations as a tax-payer whether you are an individual, or a company.
The Right to Be Informed
As a taxpayer, it is your right to know what you need to do to comply with tax laws. You are entitled to clear explanations of the law and URA procedures in all tax forms, instructions, publications, notices, and correspondence. For example, you receive a notice fully or partially disallowing your refund claim, including a refund you claim on your income tax, VAT return, it must explain the specific reasons why the claim is being disallowed.
The Right to Pay No More than the Correct Amount of Tax
You have a right to pay only the amount of tax legally due and to have the URA apply all tax payments properly. If the URA is proposing to adjust the amount of tax you owe, you will typically be sent a notice which informs you of the proposed change. This notice provides you with a right to challenge the proposed adjustment through objections, the Tax Appeals Tribunal and Litigation, Alternative Dispute Resolution, the High Court, and Court of Appeal.
The Right to Quality Service
As a taxpayer, it’s your right to receive prompt, courteous, and professional assistance from the URA. You have a right be spoken to in a way you can easily understand, to receive clear and understandable communications from the URA officers. There is a suggestions box at the URA for you to file complaints about inadequate service.
The Right to Challenge the URA’s Position and Be Heard
Taxpayers have the right to challenge decisions of the commissioner by raising objections and provide additional documentation in response to formal URA actions. A dispute may arise where the URA, through the commissioner, issues a taxpayer with an additional assessment.
Where the Commissioner makes an additional assessment, the Commissioner is required to serve the taxpayer with a notice of assessment and a decision notice can be any one of the following:
- An assessment or amendment to an assessment;
- A penalty notice if a penalty is due;
- A letter setting out the final position.
A taxpayer who is dissatisfied with an assessment may lodge an online objection with reasons to the Commissioner within 45 days after being served with a notice of assessment.
Upon submission of the objection to the assessment, the Commissioner is required by law to issue an objection decision within a period of 90 days from the date of receipt of the objection. Should the objection decision not be served within 90 days, then the taxpayer objecting may by notice in writing to the Commissioner, choose to treat the Commissioner as having decided to allow the objection.
The Right to Appeal an URA Decision in an Independent Forum.
As a taxpayer, if you are not satisfied with the objection decision of the Commissioner, you can lodge an application with the Tax Appeals Tribunal (TAT), within 30 days from receipt of the decision. The Tribunal was set up by an Act of Parliament as a specialized court to provide taxpayers with easily accessible, efficient and independent arbitration in tax disputes with URA.
The Right to Privacy
The URA in its inquiry, examination, or enforcement action must comply with the law and not be intrusive than needed, to respect with all due process rights to the taxpayer. The URA cannot levy any of your personal property in any situations before it sends you a notice of demand or while you have a request for a payment plan pending.
The Right to Confidentiality
You have the right to expect that any information you provide to the URA will not be disclosed unless authorized by you or by law. Therefore your information must be safe from disclosure to third parties.
The Right to a Fair and Just Tax System
Taxpayers have the right to expect the tax system to consider facts and cURAumstances that might affect their underlying liabilities, ability to pay, or ability to provide information timely. Taxpayers through the Tax procedures code (amendment) bill, 2023 under “40D Waiver of interest on payment of principal tax
- The Commissioner shall waive the payment of interest and the penalty by a taxpayer, where the taxpayer voluntarily pays the principal tax outstanding at 30th June, 2023, by 31st December, 2023. This is a good one for a taxpayer who would wish to clear and reconcile their ledgers with the URA.
Much as you have your rights as a tax payer, you have obligations that you must fulfill as a good citizen of Uganda to enable government do its role of service delivery. Among the many obligations you have, I explain a few below for your attention.
The obligation to file and pay taxes on time
Just like all tax systems around the world, you are required to pay your taxes on time. Late payment of government taxes expose your business to risks, being listed and monitored as a high risk tax payer, penalties, and interests that come thereof. Note there are monthly taxes like VAT, PAYE, NSSF WHT where all taxable persons are required to file a return for every tax period within 15 days after the end of the month.
The obligation to keep records
You are supposed to furnish returns based on accurate information to the revenue authority. As a taxpayer you should keep reasonable periodic records of your financial transactions. Such records help the revenue authority to verify that the information provided is accurate.
A side benefit is that record keeping also makes good business sense and will enable you in financial planning and decision making, increasing their likelihood of success. The URA has assisted in this with the introduction of EFRIS which is now used from small, medium to large business taxpayers. Failure to keep records comes with a huge penalty that may cripple your business.
The obligation to be honest
You are supposed to embrace honesty in your tax dealings and transactions. Suppose most taxpayers did not pay their taxes, the tax system would be placed under a severe compliance strain and GoU wouldn’t have be unable to finance the expenditures as voted for by the citizens. Taxpayer honesty is fundamental to the operation of tax system. Failure to exhibit honesty gives the URA investigatory powers with penalties and sanctions in place to cater for instances where there is non-compliance.
The obligation to be co-operative
Modern tax systems world-over function effectively where there is a high degree of voluntary compliance, keeping the need for enforcement activity at a minimum. Co-operation of taxpayers allows the government to run the taxation system at a relatively low cost and minimizes unnecessary intrusion into taxpayer affairs by the URA and those of third parties.
The obligation to provide accurate information and documents on time
The URA uses information provided by taxpayers to identify the taxpayer and their address and to account for taxes paid or payable. Thus, as a taxpayer you should provide accurate information to revenue authorities.
The tax procedures code (amendment) bill, 2023 provides for taxpayers providing the required information to the URA for conflict resolution before going to the Alternative dispute resolution procedures. Taxpayers must be therefore keen with information provided, and should be provided at the needed time.
Have you been part of the unaware group of taxpayers who didn’t know their rights and obligations? The right time to start is now! In the tax system, taxpayers must obey the tax laws. There’s an important legal principle that says “ignorance of the law is no excuse.” You can’t defend your actions by arguing you didn’t know they were illegal, even if you honestly did not realize you were breaking the law.
The writer is a Chartered Tax Accountant
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