In a judgement delivered on 9th March 2020, a panel of three Court of Appeal Justices (Kakuru, Madrama and Musota JJA) has ruled that the Court of Appeal has no appellate jurisdiction to hear and determine appeals from decisions of the High Court, having heard and determined an appeal from a decision of the Tax Appeals Tribunal.
The case, Housing Finance Bank v URA, civil appeal No. 22 of 2012 involved a dispute as to what amounts to financial services for purposes of Value Added Tax exemption.
The genesis of the dispute is a VAT assessment to a tune of Ush. 5.4bn raised by the respondent against the appellant.
The assessment was in respect of certain services rendered by the appellant to the Government of Uganda and National Housing & Construction Corporation.
The services, involved the appellant administering credit sales of three housing projects as an agent of Government and National Housing & Construction Corporation.
Under the agency agreements, the appellant was tasked with collecting proceeds of the sale and in some instances, advancing credit facilities to potential purchasers of houses comprising the said three projects.
The appellant objected to the assessment whereupon the Commissioner revised the tax assessed to Ush. 2.5bn.
The appellant, dissatisfied with the revised assessment challenged the same in the Tax Appeals Tribunal on the ground that the VAT in question was assessed in respect of financial services which are statutorily exempted from VAT under section 19 and the second schedule of the VAT Act Cap 349.
The question before the Tribunal was whether the services rendered by the appellant were in fact financial services and therefore exempt from VAT. URA contended otherwise.
The Tax Tribunal decided for the appellant and the respondent, being aggrieved by the decision of the Tribunal appealed to the High Court.
The High Court reversed the decision of the Tax Appeals Tribunal, hence the appeal by Housing Finance Bank to the Court of Appeal.
At the Court of Appeal, a preliminary point of law arose as to whether the Court of Appeal had jurisdiction to hear and determine the appeal before it.
The court, after an analysis of the law relating to resolution of tax related disputes, concluded, correctly in my view, that there is no law permitting an appeal from the decision of the High Court having heard and determined an appeal from the decision of the Tax Tribunal.
The Court stuck to the time tested aphorism that an appeal is a creature of statute, meaning that to appeal a decision of any judicial or quasi-judicial body, there must be a law expressly permitting an appeal against such a decision.
Section 27 of the Tax Appeals Tribunal Act and Section 25 of the Tax Procedure Code Act which delineate the jurisdiction of the Tax Appeals Tribunal only provide for an appeal to the High Court.
Both provisions are silent on whether a party aggrieved by the decision of the High court, may appeal to the Court of Appeal.
This effectively denies the Court of Appeal and Supreme Court jurisdiction in tax disputes
The effect of the decision and the position of the law represent an absurdity within Uganda’s tax justice system.
Tax disputes give rise to some of the most contentious and difficult questions of law world over.
The case under consideration for instance involved a difficult and complex question of what amounts to a financial service for purposes of VAT exemption.
Indeed, Justice Kakuru held a minority view that the questions of law presented by the appellant were peculiar and of great public importance.
With a bulk of tax disputes, such difficult questions are bound to emerge quite frequently.
To that extent, it is implausible in my opinion to tolerate a legislative framework that denies Uganda’s two upper most courts, jurisdiction in tax matters.
At the height of tax avoidance schemes in England, carried through pre-ordained transactions, the House of Lords and the English Court of Appeal were instrumental in devising a test to be employed in drawing a line between acceptable and unacceptable tax avoidance.
This harmonized the law on tax avoidance without necessarily doing away with a tax payer’s right to arrange his or her affairs in a way that mitigates the tax burden.
Under the doctrine of precedent, which is deeply entrenched within Uganda’s legal system, a High Court judge is not bound by a previous decision of the High Court.
Denying the Court of Appeal and Supreme Court appellate jurisdiction in tax matters leaves little or no room to reconcile and harmonize conflicting decisions of the High Court.
This is bound to spur confusion and lack of uniformity in Uganda’s tax jurisprudence.
For instance, there is divided opinion within legal circles on whether rental expenses incurred on a lease should be treated as deductible expenses for purposes of computing a lessee’s chargeable income.
With only a High Court decision on the matter and virtually no hope of having either the Supreme Court or Court of Appeal address the question, the confusion is likely to linger on.
The need to have the Supreme Court pronounce itself in tax matters cannot be overstated.
For now, it appears Parliament will have to undertake legislative reform to address the anomaly.