Hon. Justice Stephen Mubiru, head of Uganda's specialist Commercial Court, is renowned for his encyclopaedic judgments, which provide a full discourse on the applicable relevant law in each case. His extensive research makes the study of his judgments a valuable resource for students and practitioners alike.
It is almost unthinkable to label a decision by Justice Mubiru as per incuriam, made in ignorance of the law. But this is exactly what the Tax Appeals Tribunal did.
The case
In Black COB v Uganda Revenue Authority (URA), the question was whether the Tribunal had jurisdiction to hear an informer's complaint. The URA contended that such a dispute was contractual and should therefore be heard by the ordinary courts and not the Tribunal. However, the Tribunal dismissed this argument, setting a new precedent on its jurisdiction.
Black COB provided the URA with information regarding tax evasion by East African Breweries and Uganda Breweries. With this information, the URA assessed and collected some taxes from the errant brewers. Black COB's claim for its lawful reward of 10% of the taxes collected was only partially compensated with URA arguing that the remaining recovered taxes were unrelated to the information provided.
In reference to the Tribunal, URA argued that the Tribunal's jurisdiction only applied when a person was aggrieved by a decision made under a taxing act or by a committee established under the Tax Procedures Code Act (Cap. 343) (the "TPCA")...According to the URA, the TPCA under which Black COB's claim was made, was not a taxing act, therefore the Tribunal lacked jurisdiction. On the contrary, the matter was a contractual dispute and as such, it fell under the jurisdiction of the High Court.
Black COB argued that the Tribunal had jurisdiction over all other taxation-related decisions under various laws, including the TPCA. They argued that the URA Commissioner's decision, approval and exercise of discretion of whether or not to pay an informer falls within the Tribunal's jurisdiction.
The Tribunal ultimately ruled that the penal taxes claimed from the errant brewers under the TPCA were taxes. The Tribunal relied on the TPCA definition of "penal tax" as "tax imposed as a penalty for failure to perform an act required by or under a tax law." Therefore, by this definition, the TCPA was a taxing act, and the Tribunal would have jurisdiction.
The departure
The Tribunal acknowledged that in Bank of India Uganda v NC Beverages and URA, Justice Mubiru ruled that the TPCA was not a taxing act, and decisions made under it were not taxation decisions and, therefore did not fall under the Tribunal's jurisdiction. According to Justice Mubiru, the TPCA's long title indicated that it was entirely procedural in nature and designed to guide processes in the administration of specified tax laws. He ruled that decisions taken under the TPCA, without an underlying controversy arising out of a taxing Act, were not taxation decisions under the jurisdiction of the Tribunal.
However, the Tribunal ruled that given the clear provisions of the TPCA and the definition of penal tax under the same act, Mubiru's decision that the TPCA is not a taxing act was made per incuriam or in other words that Mubiru had overlooked a statute relevant to the decision made. The Tribunal then relied on another encyclopaedic decision by the same Justice Mubiru, Continental Tobacco v Global Hardware Company, to explain how a lower court may depart from a binding but wrong decision.
Respectfully, the Tribunal focused too narrowly on the definitional provisions of the TPCA and read them in isolation from the whole scheme and frame of the TPCA. On the other hand, by appreciating the long title of the TPCA, Justice Mubiru gave context to the TPCA definitional provisions and their interpretations.
Consider these examples for context: A weed is defined as a plant that grows where it is not wanted. By this definition, a fragrant rose growing in the middle of a coffee plantation would be a weed, whereas if the same rose graced the front porch of a house in some leafy suburb, it would not be considered a weed. Similarly, a tomato is botanically a fruit, but you would be more than surprised to find it at the dessert table.
Penal tax, defined as a tax imposed as a penalty for failure to perform an act required by or under a tax law, is by characteristic not a tax but a fine or sanction for errant behaviour. In contrast, a tax is levied on some gain such as income, profit or benefits from the sale of goods or ownership of property.
The definition of penal tax in the TPCA, as well as in the Kenya Tax Procedures Act and Tanzania's Tax Revenue Appeals Act, appears to be for no other purpose than to ease recovery of penalties from the taxpayer. By bringing penalties within the definition of taxes, tax authorities can rely on their usual statutory mechanisms to collect the penalties.
In all of this, the URA must be left feeling quite bewildered. In the Bank of India, URA argued that the TPCA was a taxing act to found jurisdiction for the Tribunal and lost the case. Now the Tribunal has reversed its course and asserts that the original argument was correct all along.
What about Cape Brandy?
No doubt, the tax purists must be in uproar with the position in this article. Cape Brandy Syndicate v Commissioners of Inland Revenue is a staple for all tax practitioners and posits that tax legislation must be strictly interpreted in its own language, with nothing to be read, and nothing to be implied.
By this authority, the Tribunal's interpretation would be supported, relying as it does strictly on the definitions of penal tax in the TPCA without looking to the aides of statutory interpretation such as the long title relied on by Justice Mubiru. But, surely it would go against other rules of statutory interpretation to exclude the long title of a law when interpreting the law itself. The long title cannot be said to be extraneous material.
We should also consider that Cape Brandy centred on the interpretation of a charging statute (i.e., a taxing act) rather than procedural legislation; thus, it is arguable that the TPCA was probably not the kind of legislation contemplated.
We also must not forget that there was no tax dispute between Black COB and the URA in the ordinary sense, that this was not a contest of a tax assessment against Black COB. This explains why URA insisted on calling this a contractual dispute, arising out of a contractual and yes statutory promise for reward.
Conclusion
By classifying the TPCA as a taxing act, the Tribunal has broadened the scope of its jurisdiction to include all disputes arising under the TPCA. The ruling sets a broader precedent beyond affirming that penal tax provisions under the TPCA qualify as a form of tax for purposes of the TAT Act. Beyond penal taxes, the TPCA governs various aspects of tax administration including registration and deregistration of tax, collection and recovery of tax, tax refunds, tax representatives, record-keeping requirements and other general procedural decisions all of which will now fall under the TAT's purview for determination.
No doubt URA will appeal the Tribunal's decision, with the appeal to be heard by the very court headed by Hon. Justice Mubiru.
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