BY Celia Becker , Phillip Karugaba AND Anita Kenyangi
Uganda Revenue Authority issues public notice on voluntary disclosure under the Tax Procedures Code Act
The Uganda Revenue Authority (“URA”) issued a public notice on voluntary tax disclosure on 16 July 2020. The notice highlights the Tax Procedures Code Act (the “TPCA”) provisions that a taxpayer who voluntarily discloses any tax that should have been declared to the Commissioner, may enter into an agreement with the Commissioner to pay the outstanding unpaid tax and that person will not be required to pay any interest or fine due.
The notice defines a voluntary disclosure as where a taxpayer voluntarily discloses what ought to have been disclosed but was not declared or partially declared before being prompted by any action or threat of action by the URA such as a tax investigation, request for tax information, tax advisory, tax health check or review, notice for tax audit, tax query or a compliance visit by URA officers.
The voluntary disclosure should be in writing, duly signed by the taxpayer and be accompanied by evidence of relevant omissions and proof of payment of the principal tax relating to the disclosure. The disclosure must be complete and accurate highlighting any previous inaccuracies, incomplete or non-disclosure of tax. The benefit will not apply once non-disclosure is discovered through the intensive tax compliance activities which URA plans to undertake soon.
The TPCA provides that where a person has committed an offence under a tax law, the Commissioner may enter into an agreement with the offender to compound the offence if the following three requirements are met:
- the taxpayer has committed an offence under a tax law, including the under-declaration of a tax liability;
- at any time prior to the commencement of court proceedings the taxpayer voluntarily discloses such offence to the URA; and
- the taxpayer agrees to pay the outstanding unpaid tax.
The public notice is welcome as it attempts to explain the concept of voluntary disclosure, which has not previously been defined. However, the public notice departs from the TPCA in some significant aspects and to that extent, its validity can be questioned.
First, the TPCA only requires voluntary disclosure to be made prior to the commencement of court proceedings, whereas the public notice attempts to exclude the application of the law where the tax offence is discovered through the intensive tax compliance activities. Should the taxpayer not be encouraged to “turn themselves in” or surrender when URA’s troops arrive at their doorstep? Will it not assist the URA in their investigative process to incentivise the taxpayer even at that stage? Certainly in the main criminal justice system, an accused person who turns State witness or opts to testify against his co-accused does receive a benefit of clemency. Interestingly, in Kenya, the Tax Procedures Act does not refer to commencement of court proceedings and appears to leave it open for a voluntary disclosure to be made at any time.
Secondly, the requirement for the disclosure to be complete and accurate highlighting any previous inaccuracies and incomplete or non-disclosure of tax, is not contained in the TPCA. It is not clear what is meant by “complete and accurate”. Is it sufficient for the taxpayer to whisper to URA that they have not been declaring income from a side hustle? Must the taxpayer make their own calculations and assessment of the chargeable income, and arising tax? Should it not be sufficient for the taxpayer to state the offence committed and let URA take it from there?
The public notice contradicts the provisions of the TPCA in as far as it sets out new requirements for the application of the provision on voluntary disclosure. While the TPCA gives the Commissioner power to issue practice notes setting out the Commissioner’s understanding of the application of a provision in a tax law, a public notice is not such practice note. A public notice is aimed at encouraging tax payers to comply with the law and should not be used to set out the URA's interpretation of the provision.
The URA should issue a practice note providing guidance on the interpretation of the provisions of the TPCA to establish what amounts to a valid voluntary disclosure. The URA compliance strategies should also aim to strike a balance between encouraging and supporting voluntary compliance and countering non-compliance.
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