The commissioner general of Uganda Revenue Authority (URA), Doris Akol, is under attack by President Museveni for failing to meet her targets. It is, therefore, no surprise her team is becoming more creative with the law.
Disgusted with the ever-changing tax laws, an American once vented his ire: “The difference between death and taxes is death doesn’t get worse every time Congress meets.”
Uganda can relate. Every year before the budget is read, the Income Tax Act (ITA) and other tax-related laws are amended. Every amendment comes with rigors, restrictions, fewer benefits to the payer, but more rewards to the treasury.
In 2014, parliament came up with the Tax Procedures Code bill whose objective was to provide a code that would regulate, harmonize and consolidate the procedures under the existing tax laws.
Although the objective was to ensure tax compliance, this law, which commenced in 2016, has the most intrusive and oppressive provisions against taxpayers.
It should be challenged in the Constitutional court because powers bestowed onto the commissioner general and various authorized officers are so wide that if enforced, they are likely to infringe on the privacy and property rights guaranteed by the Constitution.
Further, if enforced fully, it may result into unintended dire consequences such as unnecessary shutdown of businesses and massive imprisonment.
The public was recently jolted when it learnt URA had directed all banks in Uganda to provide vital information on their account holders for a period between January 2016 and December 2017.
URA seeks to know the current balances on individual accounts. Besides the account name, tax identification number (TIN), National Identification Number (NIN), physical address, telephone contacts and email address, URA also wants to know total cash deposits and withdrawals on individual accounts for the proposed period.
This request not only infringes on the customers’ right to privacy, but it is also illegal. It is also likely to impose unplanned financial burdens on banks as they would have to hire firms or persons to compile such information for URA. The banks may also experience a customer exodus; not that clients are many. Uganda has 23 licensed commercial banks sharing only eight million customers.
Therefore, if banks obliged to this blanket request, they would be breaching their confidentiality agreement with their customers. This confidentiality covers all transactions concerning the account and information obtained by virtue of the relationship between the two parties.
However, the duty is qualified by some exceptions laid down in various laws – which URA attempts to exploit. The duty to comply with legislation, such as The Tax Procedures Code Act (TPCA), overrides the duty of confidentiality and secrecy. For example, if the disclosure is intended to prevent a crime, it is a regularity requirement of the banks (and must be backed by law).
Details of customer accounts can also be disclosed for evidence in courts of law and/or tax purposes. In its request for the information, URA claims to be backed by section 42 of the TPCA.
I disagree with URA’s interpretation of this provision because it does not give blanket powers to URA to intrude into account affairs of bank customers. This provision falls under part X of the Act, described as ‘investigations’.
Only section 41 of TPCA authorizes the commissioner unfettered access to any record, data, and premises of the taxpayer that may help in the investigations. Under this section, the commissioner does not need to give any prior notice to the taxpayer under investigation.
Section 42 is headed: Notice to obtain information or evidence. A heading in an Act is a short pointer to the subject matter of the section. For the commissioner to invoke section 42 presupposes there is an investigation about tax non-compliance by certain persons and, therefore, seeks evidence or information from the bank to accomplish the investigation.
So, is URA suggesting all bank customers in Uganda are under investigation?
In my view, for section 42 to be applied by the commissioner, she must first establish whether there is an ongoing investigation that requires such confidential information. Like the Act stipulates, the person from whom information is sought doesn’t have to be liable for tax, but fundamentally there must be an ongoing investigation to warrant this intrusion.
The requests for information must be relevant for determining the correct amount of tax due. Unless URA proves it is investigating tax affairs of all bank customers in the country, banks are not obliged to surrender the information.
This indiscriminate request is illegal. All taxpayers have the right to not expect tax authorities to intrude unnecessarily into their privacy. This right is guaranteed under article 27(2) of the Constitution of Uganda.
Although parliament has not enacted an enabling law for this right, the supreme law guarantees avoiding unreasonable searches of people’s homes, correspondences, communication or any other property. This is the time to petition the Constitutional court for interpretation of some of the provisions in the TCPA.
The author is the business development director at The Observer Media Limited.