Ronald Amega
When will the waiver that was granted for interest and penalties as at 30 June 2023 be effected in the URA tax ledgers? This is the big elephant in many taxpayer “ledger rooms”. The waiver is conditional in the sense that it is proportionate to the amount of the principal tax liability that is paid. For this article, we shall call the waived interest and penalties “forgivable” liabilities. The last time there was a general waiver of interest as at 01 July 2020, it was automated and taxpayers instantly had updated eTax ledger positions that they now worked with to settle any outstanding principal tax liabilities. There is a tax proposal to extend the waiver period to 31 December 2024, probably to facilitate achieving the desired purpose and make up for the period when the new URA ledger system was being perfected.
A lot has been said about the waiver of interest and penalties but the reality is, that not many taxpayers and tax accountants alike are technical enough to split the principal tax amounts from the other “forgivable” liabilities in the taxpayer’s eTax ledgers. Currently, when a tax ledger is generated, it reflects running balance. That balance includes both principal tax (from return submissions and additional URA assessments), penalties and interest.
As of today, you as a taxpayer are not in position to reliably break down that balance into outstanding principal tax, penalty, and interest unless you seek help from the URA ledgers team.
Automation would ideally sort this matter with a simple click. The anticipated process would be that if a taxpayer pays some principal tax, the proportionate “forgivable” liability is also waived and reflected in the taxpayer’s eTax ledgers. To many people out there, seeing is believing and that may motivate taxpayers to settle the liabilities in installments before the December 31, 2024 deadline.
URA is yet to formally send communication on how and when the waiver will be effected in the eTax ledger system. We appreciate the efforts URA has put into creating awareness of the available waivers but it is now time to see how it is actioned in the corresponding taxpayer eTax ledgers. We can only watch this space and wait for how it is implemented.
One would argue whether reconciliation and eTax ledger positions should be that complicated or take long to be updated. URA has put in great work in simplifying eTax ledger positions and correcting any misstatements or omissions. The eTax ledger system still has underlying issues that should be rectified.
URA ledgers have inherent problems that should be resolved once and for all. It is unexpected but probable that two different learned individuals will arrive at different positions for the same ledger as at a certain date. eTax ledger reconciliations should ideally not be this difficult. Also, not all URA offices can handle tax ledger reconciliations. This in itself is a problem. An automated e-Tax ledger should remedy this.
Effective 01 July 2017, the Tax Procedures Code Act has streamlined the allocation of order of tax payments. The relevant section 38 of the Tax Procedures Code Act reads; when a taxpayer is liable for penal tax and interest in relation to a tax liability and the taxpayer makes a payment that is less than the total amount of tax, penal tax, and interest due, the amount paid is applied in the following order; (a) in payment of the principal tax; (b) in payment of penal tax; and (c) the balance remaining is applied against the interest due. This means that any payment made by a taxpayer will first be allocated to the principal tax liability and any balance subsequently allocated to penal tax and any interest.
It is always prudent for each taxpayer to calculate their tax position and present it to URA as per the provisions of the law rather than wait for URA to have their own interpretation of their tax matters.
Hopefully, URA can help taxpayers with clean tax ledgers to facilitate peace of mind. Let me remind you though that hope is not a strategy, and that tax theory is different from tax practice.
Mr Ronald Amega is a senior tax manager, Ernst & Young Uganda.
