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11 Aug 2020
BY Celia Becker AND Phillip Karugaba

A pyrrhic victory: The Constitutional Court attempt to limit the 30% deposit rule for Tax Appeal Tribunal matters

Ugandan taxpayers were filled with jubilation at a recent decision by the Constitutional Court in Fuelex Uganda Ltd (“Fuelex” ) v Uganda Revenue Authority (“URA”), that the requirement for a taxpayer to pay 30% of a disputed tax as a condition to objecting against an assessment, was in part unconstitutional. According to media reports, the 30% rule had been scrapped by the court. However, as we show below, the 30% rule is very much alive.

The facts

Fuelex, a retailer of fuels petitioned the Constitutional Court for declarations that the requirement in section 15 of the Tax Appeals Tribunal (“TAT”) Act that, as a condition for objecting to an assessment an applicant must pay 30% of the assessed tax or of the assessed tax not in dispute, whichever is greater, was a clog on their constitutional rights to a fair hearing and access to justice as provided for by article 44 of the Constitution.

The Supreme Court had previously considered an identical provision in the Value Added Tax (“VAT”) Act. In Uganda Projects Implementation and Management Centre v URA, the Supreme Court in 2009 upheld the decision of the Constitutional Court that the requirement of the VAT Act for a similar 30% deposit before an objection by a taxpayer was not unconstitutional.

The decision in Fuelex

Hon. Justice Owiny Dollo DCJ ruled that the requirement of prior payment of 30% of the assessed tax before lodging an objection with the TAT was unjust as it favoured one of the disputants to the detriment of the other. It was his view that the requirement offended the constitutional guarantees of equal access to justice for everyone and negated all forms of equity known to law. The Judge found himself bound by the doctrine of precedent and therefore unable to depart from the Supreme Court’s decision in the Uganda Projects case.

Hon. Justice Kakuru JA was not to be constrained by the Uganda Projects case ruling and held that the Supreme Court’s decision was made without attaching sufficient weight to the non-derogable constitutional rights to a fair hearing and to access to justice. Indeed the Uganda Projects case was premised on article 21 (non-discrimination) and not article 28 (fair hearing) as the present case. He ruled further that section 15 refers to a dispute arising from the amount of tax assessed and did not extend to a situation where the taxpayer, for example, contends that he or she is exempted from a tax upon which the assessment is based, where a waiver has been obtained, the objector is not a taxpayer in Uganda or where the tax was assessed under a wrong or non-existent law. It was his proposed order that won the day.

With two dissents, the majority decision of the court was that section 15 of the TAT Act is not unconstitutional in so far as it applies only to disputes over the tax amounts as assessed. However, in so far as it compels a taxpayer objecting to a tax assessment whose challenge is not with regard to the amount of tax payable, to pay 30% of the tax assessed, it is inconsistent with article 44 of the Constitution and was unconstitutional.

Departing from precedent

It isn’t every day that you have dissenting judgments in the Constitutional Court. It is also quite rare that you see a lower court refusing to follow the decision of the Supreme Court. Add to this that the Supreme Court in the Uganda Projects case upheld the decision of the same Constitutional Court that the 30% rule under the VAT Act was not unconstitutional. So in Fuelex, the Constitutional Court was departing from a precedent that it had set itself.

Respectfully, the premise on which the Uganda Projects case was contested was primarily that the 30% rule was discriminatory. Little was said about the impact of the rule on the right to a fair hearing and the right of access to justice. The Constitutional Court likened the 30% requirement to an intended appellant who may be required to furnish security for the due performance of the decree or to deposit the decretal amount in court before proceeding with the appeal process. The court was not persuaded that the limitations imposed by the impugned section were arbitrary, unreasonable and demonstrably unjustifiable in a free democratic society.

The court in Uganda Projects was also strongly influenced by a decision of the South African Constitutional Court in Metcash Trading v The Commissioner, South Africa Revenue Service, where a similar argument was made against the principle of “pay now argue later” – that a taxpayer must first pay the disputed tax before contesting it in court. It was held that there were very good and sound policy reasons for the principle, being that there should be no unreasonable delay to the government in the collection of taxes. Further, that a taxpayer could under the VAT Act (then), seek the Commissioner’s dispensation with the requirement to pay. The taxpayer could also raise a challenge to the improper exercise of the Commissioner’s power if he did not grant a dispensation. The court observed the prevalence of the pay now argue later principle in several jurisdictions that were considered open and democratic. The court therefore concluded that the apparent restriction on the access to court was not unconstitutional but was fully justifiable.

What does this mean for applicants before the Tax Appeals Tribunal (TAT)?

The Constitutional Court did not nullify section 15 of the Tax Appeals Tribunal Act. Therefore the section and its interpretation by the Supreme Court still apply and are binding on TAT.

Applicants before TAT will still need to deposit the 30% prior to lodging an objection. It is doubtful that Fuelex itself will be allowed to continue its TAT matter without the 30% payment despite their apparent win. Relief can only come from Parliament or from the Supreme Court on hearing an appeal from the Constitutional Court. But it is a good question to ask whether URA will appeal the Constitutional Court decision. URA has nothing to gain from a successful appeal but a lot to lose if unsuccessful.

Even if one sought to insist that the Constitutional Court decision be applied, very few of the tax disputes relate to questions outside the quantum of the tax.

Some comfort may however be drawn from Century Bottling Company v URA where TAT underscored the Commissioner General’s discretion to allow payment of tax in instalments and added that such discretion has to be exercised judiciously. In that case TAT permitted payment of the 30% deposit in tightly controlled instalments over four months.


The Constitutional Court did not nullify section 15 of the TAT Act but only feebly attempted to limit its application to cases where the taxpayer’s claim was not related to the amount of the tax. The section and the Supreme Court decision upholding it are still binding on TAT.

The 30% rule is therefore very much still alive, kicking and waiting to bite.


Phillip Karugaba

Head of ENSafrica Advocates | Uganda

+256 772 785 332


Celia Becker

Executive | Africa Regulatory and Business Intelligence

+27 82 886 8744