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The Tax Procedures Code (Amendment) Bill 2023 has a number of provisions that attempt to correct the complications and injustices related to the waiver of penalties and interest that has been enacted since 2017.
The proposed amendment to Section 39 of the Principal Act reads;
“(4) For the avoidance of doubt interest due and payable under the tax law as at 1st July 2017 exceeds the aggregate of the principal tax and penal tax the interest in excess of the aggregate is waived”
There are three issues with this proposal;
- The words ‘for the avoidance of doubt’ have been used in the amendments before without sufficient explanation. The aim of the amendment is to clarify that the previous law had a fault and it is being corrected retrospectively. But the use of the words “for avoidance of doubt ‘without pointing out where the doubt lies means that one may have to seek guidance from Court to interpret what the doubt that is being avoided is.
- The URA e-tax provision system has had challenges in implementing the amendment to Section 40 of the TPCA which also provides for waiver of interest and penalty, especially when coupled with Section 38 that allocates payment to principal first then penalty and interest. The algorithm applied by the URA software and the law have failed to match. This is evidenced by the finding of the Tax Appeals Tribunal in the case of K-Files Ltd V URA TAT No. 69 of 2021 that URA’s application of Section 38 in practice is completely different from the position set out under Section 38.
- The Report of the Committee of Finance Planning and Economic Development on the Tax Procedure (Amendment) Bill 2022 noted the complications in the amendments to Section 40 C of the TPCA and recommended as follows;
“Section 40C of the TPCA be amended by including Section 40 C (2):
Bridging the digital divide: A new era for Uganda’s education — Writes Bryan MbasaNotwithstanding Section 38(2) of this Act then in force, for purposes of effecting the waiver under Section 40C (1), payments made by the taxpayer on or before 30th, June 2021 shall be applied in the following order –
- (a) in payment of all principal tax previously owed by the taxpayer as at 30th June 2021;
- (b) in payment of all penal tax previously owed by the taxpayer as at 30th June 2021;
and
- (c)the balance remaining is applied against all interest previously owed by the taxpayer as at 30th June 2021.”
We note that the recommendations by the Sectoral Committee were not tabled in Parliament and the law was passed without the amendment.
It is therefore proposed that Parliament revisits the above recommendations before attempting new amendments.