In Matters Of Tax Law, The Taxman Towers Over The Judiciary!

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Someone inboxed me:

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“Hi Joe! Hope all is well with you and family. I saw your recent post on Facebook concerning whether or not URA applies the law unfairly to tax Ugandans. I may be wrong but I think at least in the importation of used vehicles URA acts arbitrarily and in the interests of meeting targets and not in terms of the interests of taxpayers. I say this because of their preference to impose values on vehicles as opposed to transactional values.

” This is also in spite of a clear court precedent where the assessment method they use was found illegal by the High Court in at least one taxpayer’s case. I have attached the ruling for you to look at. When I have challenged friends at URA over the same, they always claim that they have no choice because many dealers falsify the transaction value but I always ask them why then they punish the innocent along with the guilty?

” It should be incumbent on URA to prove that a declared transactional value is false as opposed to imposing a value unilaterally. Please have a look at the case and help me understand whether at least in the case of vehicles it is not more of meeting targets than fairness to taxpayers.”

I received the above comment that touches on the question of NON-ACQUIESCENCE by Uganda Revenue Authority (URA). My response was short – In tax matters, URA is always right! And when they are wrong and actually know they are wrong, the tax law commands that they are right until successfully challenged! Even when challenged, the burden of proving that a decision taken by URA is wrong lies with the aggrieved taxpayer!

‘Alternative Facts’

URA is notorious, rightly so or otherwise, for selectively practising non-acquiescence, a term that essentially means they sometimes neglect to appeal court decisions that go against them and refuse to follow or accept their validity as binding precedent established by the Judiciary.

In many of the cases that URA loses, they refuse to accept the precedential value of the decision. Let me hasten to add that this does not necessarily mean that URA will refuse to follow the ruling of the court on a particular case; rather it means they will not apply the ruling to other cases that may qualify for the treatment determined by court.

Ignoring and refusal to follow the precedential value of a court’s ruling is what is termed non-acquiescence.

Except as to the party involved in the immediate litigation, many a time URA will continue to assess taxes based on their interpretations, notwithstanding contrary interpretations of the Court. Moreover, most taxpayers cannot afford the expense of contesting URA actions in court.

In a few cases, the taxpayer may be confronted with the choice either of paying the assessed taxes or appealing to court to rule again on a point of law it has already decided. URA’s use of this non-acquiescence policy to maximize tax revenues, arguably at the expense of principles of law and equity, is adopted in the hope that a more favourable decision may ultimately be rendered, or that the unfavourable provision will be amended.

You may express the view that this practice borders on lawlessness and should not be tolerated. You may even argue that in no circumstances should URA be allowed to disregard the rulings of a court since it is contrary to the rule of law, but the fact of the matter is that rules of legal precedents only prevail in the adjudication system and not outside it. An aggrieved taxpayer must appeal URA’s wrong actions if they are to have their claims successfully evaluated under the court’s legal precedents.

It is not surprising therefore, that URA will rarely appeal some decisions with which it disagrees beyond the High Court, so as not to create a binding unfavourable precedent issued against it. They would rather ignore the TAT or High court decision since this is much easier and safer from their perspective of non-acquiescence.

You may further argue that non-acquiescence violates the most fundamental tenet of judicial review which binds agencies and individuals to follow the law as interpreted by the courts, and that this behaviour unnecessarily burdens the courts with the time consuming, costly and unnecessary litigation of deciding the same issue over and over merely because URA refuses to follow court decisions.

I can even hear a constitutional lawyer argue that executive agencies that ignore the role and the decisions of the courts, offend and undermine the basic notion of separation of powers, with three equal branches of government.

Perhaps most offensive to the legal profession is that the refusal to follow precedent violates the basic tenet of stare decisis which embodies the fundamental principle of common law that each judicial decision sets or follows a precedent to be applied in deciding similar cases arising within the same jurisdiction. It is this adherence to legal precedent, they will argue, that ensures the law is uniform, predictable, and impartial.

Finally, I can hear the argument that this form of defiance produces discrimination based on resources by limiting the benefits of favourable tax law application to those litigants who are able to seek judicial review of URA’s action, thus creating a different set of rules for taxpayers who lack the resources for an appeal, and must therefore accept unfavourable tax assessments.

Of course, URA’s non-acquiescence runs counter to the legal principle of stare decisis and forces a taxpayer to litigate in court to overcome a decision which supports his claim. Such actions are most onerous on the small taxpayers who must litigate to take advantage of a precedent which the URA chooses to ignore. Where the stakes are bigger, it may be worth the time and expense to litigate, like a few taxpayers do.

But this result is anomalous since the taxpayer is forced to go to court to hear again what the court has said in an earlier case. The time and expense involved may cause the small taxpayer to choose not to litigate an issue which a wealthier taxpayer with a large claim may be able to challenge.
This results in one set of rules, established by URA, being applicable to small taxpayers while another set, mandated by the courts, is available to large taxpayers. In all cases, a taxpayer’s right to rely on precedent and assert the law of the case should be assured once the issue has been fully and fairly litigated in a court of competent jurisdiction.

With all said and done, it is undeniable that the status of Agency non-acquiescence in our legal system remains uncertain. The selective refusal of administrative agencies to conduct their proceedings consistently with adverse rulings of the courts is not new. Many agencies insist, in varying degrees, on the authority to pursue their policies, despite conflicting court decisions.

I will not mention Uganda Police Force here , but there is a famous quote that “…whoever has an absolute authority to interpret any written or spoken laws, it is he who is truly the lawgiver, to all intents and purposes, and not the person who first spoke or wrote them”.

In other words, Parliament may have the first word and the Courts the second, but the Commissioner General has the last word when exercising the power to non-acquiesce in the precedential value of court decisions. Taxpayers may win an occasional battle, but the Commissioner inevitably wins the war.

While URA is bound by any court’s decision regarding the particular case that the court heard, it is under no obligation to follow any precedent set by the ruling unless the ruling is issued by the Court of Appeal or the Supreme Court. This is clearly unfair to taxpayers and it denies the courts the traditional respect accorded them as final impartial arbiters. Is class action the solution to non-acquiescence?


 

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