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Published online by Cambridge University Press: 21 May 2020
Value Added Tax (VAT) is a tax on the value added at each stage of the production and distribution process and on the importation of goods. VAT registered importers in Uganda are charged the statutory VAT rate of 18 per cent, however, importers that are not VAT registered are charged both the 18 per cent and an additional 15 per cent, which is designated “Domestic VAT”. The statutory basis of the 15 per cent is unclear. Domestic VAT appears to be a tax created by the Uganda Revenue Authority in a bid to raise revenue from a largely non-compliant base. The legality of the tax was challenged in Margaret Akiiki Rwaheru and 13,945 Others v Uganda Revenue Authority. The court ruled that Domestic VAT was irregular when applied to importers who qualified to register for VAT but had not registered, but was illegal when applied to importers who did not qualify to register for VAT. Despite this ruling, the URA has continued to charge all importers Domestic VAT, regardless of whether they qualify to register for VAT. This article seeks to re-examine the legality of Domestic VAT.
Associate, Mawazo Policy Research Institute, Kampala.
1 Cap 349.
2 The Value Added Tax (Rate of Tax) Order SI No 51 of 2005.
3 VAT Act, sec 28(1).
4 Id, sec 4.
5 Id, sec 18(1).
6 Id, sec 6.
7 Id, sec 4.
8 Id, sec 23.
9 Id, sec 28(1)(b). Except in a few instances, import VAT is generally disallowed as an input credit for services.
10 Turnier, WJ “Accommodating to the small business problem under a VAT [sic]” (summer 1994) 47/4The Tax Lawyer 963 at 963Google Scholar.
11 Cawley, G and Zake, J “Tax reform” in Kuteesa, F et al. (eds) Uganda's Economic Reforms: Insider Accounts (2010, Oxford University Press) 103 at 109Google Scholar.
12 VAT Act, sec 7(2), amended by the Value Added Tax (Amendment) Act No 5 of 2015.
13 The URA is the country's tax administration body set up under the Uganda Revenue Authority Act cap 198.
14 VAT Act, sec 8(6).
15 Id, sec 65(1).
16 [2014] UGCOMMC 2.
17 O Tindyebwa “Why does URA collect domestic VAT?” (13 June 2007) Daily Monitor (Kampala), available at: <https://allafrica.com/stories/200706130361.html> (last accessed 8 April 2020).
18 VAT Act, sec 6.
19 Id, sec 18(1).
20 Rwaheru v URA, para 62.
21 The URA's guidelines on importation included a reference to Domestic VAT, as was highlighted in Rwaheru v URA: URA “What is Value Added Tax (VAT)?” (vol 2/4, FY 2016–17).
22 URA Research and Planning Division “Uganda's tax structure FY 2017/18” (2018, URA).
23 URA Annual Report 2014/15 (2015, URA) at 52.
24 URA Annual Report 2015/16 (2016, URA) at 74.
25 The objections and appeals procedures are as follows. Any person dissatisfied with an assessment may lodge an objection with the URA commissioner general within 45 days of receiving the assessment. She must then issue a decision affirming, reducing, increasing or otherwise varying the assessment within 90 days from the date the objection is filed. A person dissatisfied with an objection decision may within 30 days of receiving the decision apply to the Tax Appeals Tribunal (TAT) to have the decision reviewed. TAT was set up under the authority of the Constitution and an act of Parliament to review decisions by the URA. A taxpayer must deposit 30% of the tax assessed by the URA before contesting a final resolution of an objection before TAT: TPC Act, secs 24 and 25.
26 Ntale v URA [2012] UGCOMMC 80.
27 The Constitution, art 26.
28 URA v Rabbo Enterprises (U) Ltd SCCA No 12 of 2004.
29 Attorney General v Silvatori Abuki SCCA No 1/98.
30 VAT Act, sec 8(6).
31 Id, sec 65(1).
32 One study revealed that 37% of SMEs have access to the internet and use it primarily for communication with suppliers: National Small Business Survey of Uganda (March 2015, Financial Sector Deepening Uganda) at 29.
33 Thuronyi, VTax Law Design and Drafting (1996, International Monetary Fund) at 30Google Scholar.
34 Ntale v URA [2012] UGCOMMC 80.
35 IRC v Hinchy [1960] 1 All ER 505.
36 In Re HK (An Infant) [1967] 1 All ER 226, Lord Parker CJ held (at 230) that, before an immigration officer can decide whether a prospective immigrant satisfies the statutory criteria for entry to the UK, the officer is required “to let the immigrant know what his immediate impression is so that the immigrant can disabuse him”. See also Secretary of State for Education and Science v Metropolitan Borough of Tameside [1976] 3 All ER 665; Grey, JH “Discretion in administrative law” (1979) 17/1Osgoode Hall Law Journal 107 at 118Google Scholar.
37 HCCA No 004 of 2016, para 32.
38 [1979] 3 All ER 976.
39 Id at 984.
40 URA Act, sec 3(1)(b).
41 Vestey v IRC [1979] Ch D 177 at 198 at first instance, per Mr Justice Walton.