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Court dismisses application challenging URA implementation of Digital Stamps

Kampala, Uganda | THE INDEPENDENT & URN | High Court has dismissed with costs an interim application seeking to block the government and Uganda Revenue Authority (URA) from implementing and enforcing the Digital Tracking Systems (Tax Stamps).

Justice Musa Ssekaana of Civil Division of High Court on Tuesday dismissed the application filed by Alcohol Association of Uganda and 38 companies led by Nile Breweries Limited-NBL arguing that courts cannot grant an injunction which will have the effect of suspending the operation of the legislation.

“Suspending the operation of a law that has not been declared unconstitutional is a very serious matter. The grant of this application would amount to just that and this would be without hearing any evidence”, said Ssekaana. He said the laws are made for the good of the State and the power to tax as quite rightly pointed out by the Attorney General is a power upon which the entire fabric of society is based.

“The courts should consider and take into account a wider public interest. The Public bodies should not be prevented from exercising the powers conferred under the Statute unless the person seeking an injunction can establish that the public authority is acting unlawfully”, he said.

URA effective the Financial Year 2019/2020 announced the implementation of digital stamps on beers, sodas wines and other soft drinks with an aim of addressing issues related to tax avoidance, counterfeit goods and forgery. (see details of the tax page 2)

However, Last month, the Alcohol Association of Uganda, 38 manufacturing companies led by Nile Breweries Limited -NBL ran to court seeking to block the implementation arguing that the actions to launch and enforce the Digital Tracking Systems-DTS pursuant to the Tax Procedures Code (Tax Stamps) Regulations, 2018 is illegal and therefore unenforceable.

Through NBL’s Director of Legal and Corporate Affairs Onapito Ekomoloit , the companies further argued that prior to the DTS implementation notice issued by URA , the Minister of Finance formally communicated that the costs of the DTS for manufactured goods was to be borne by the government and the cost of the digital stamps would be at a flat rate.

The companies reportedly made no objections to the cost of implementation but URA took arbitrary revenge actions against them by deregistering them from the withholding tax exemption list. They also argued that they were threatened with alleged investigative audits, denial of tax clearance certificates, cancellation of excise duty licenses deportation contrary to the URA mandate and tax laws.
During the hearing, the application was challenged by George Senyomo an Officer in the Legal Services and Board Affairs Department of URA. Senyomo said that the injunction should not be granted because the application is seeking to deter the tax body from enforcing its tax laws like the Tax Procedure Act of 2014 as amended and the Tax Procedure Code (Stamps) Regulations, 2018.

He said that the mentioned laws mandate URA to determine the effective date for the implementation of the digital stamps system of which the Judge has agreed with them. On November 1st URA through their spokesperson Vincent Seruma gave the manufacturers up to January 2020 to have cleared all their products without the digital stamps.

Earlier, the implementation of Digital Stamps was delayed by shortage of resources after parliament queried over 103 billion shillings required by URA to conduct the exercise. This is the second case challenging implementation of digital stamps to be dismissed.  Last month, the same applicants filed the case before the Tax Appeals Tribunal and it has since been dismissed too.

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