Understanding ADR in resolving tax disputes 

Understanding the legal framework of tax dispute resolution is crucial for taxpayers.  A tax dispute is any disagreement arising between the Uganda Revenue Authority (URA) and the taxpayer relating to an assessment, audit, request for information, investigation or collection action relating to taxes in respect of which a liability to tax may arise. 

Before the coming into force of the Tax Procedures Code (Alternative Dispute Resolution Procedure) Regulations of March 6, litigation was the only dispute resolution mode that was available to a taxpayer who would be dissatisfied with an objection decision by URA.

Today, within seven days of being served with such a decision, a taxpayer may apply to URA to resolve the dispute using the Alternative Dispute Resolution (ADR) procedure. 

ADR means a voluntary facilitated process of settling disputes. It is up to URA to determine whether the application is eligible or not for ADR, and that depends on whether using ADR will likely promote fairness; it is cost efficient; there are complex, factual or quantum issues in contention; it will promote tax compliance; or the dispute is a result of miscommunication or misunderstanding. 

The application can be held to be ineligible on grounds that: the settlement is likely to contravene any law; the matter in dispute regards the interpretation of the law; it’s in the public interest to have the court or tribunal determine the tax dispute; there is evidence of tax evasion by the taxpayer; the tax dispute relates to a case of an informer; the tax dispute involves fraud; or the application is filed out of time.

A taxpayer is informed of the ineligibility within 15 working days.  If the application is eligible for ADR, the taxpayer is informed within seven days.

The process commences with a pre-ADR procedure meeting to determine the costs of participating in the procedure and which party shall bear them; the method to be adopted (conciliation or negotiation); the timelines and schedule of the proceedings; the issues to be considered and resolved; the terms and conditions to govern the proceedings and any other relevant matter. 

The ADR proceedings are envisaged to uphold and maintain decorum and confidentiality; fair and diligent participation in the proceedings; full disclosure of material facts and documentation; attendance of scheduled proceedings; and adherence to the agreed timelines, the failure of which entitles the parties to terminate the proceedings. 

If URA and the taxpayer settle the tax dispute, the issues agreed upon are set out in a settlement agreement, signed by both parties and binding on them.

URA is obliged to, within 14 days of the signing, amend the assessment to give effect to the terms agreed upon. Such an agreement is not subject to an objection or appeal: to correct an arithmetical error in the ADR decision; to correct an error on the face of the amended/altered assessment; or to set aside the ADR decision. 

The downside to the ADR mechanism is that it does not affect the time limits within which one is required to apply to the Tax Appeals Tribunal. To be on the safe side, the taxpayer would still have to commence litigation at TAT.

This is counterproductive as two concurrent dispute resolution mechanisms would both be ongoing, one collaborative and another adversarial, and the latter may negatively affect the former. It also doesn’t eliminate the costs of litigation even if the parties ultimately settled their matter and applied to TAT to withdraw proceedings. 

It would have been prudent for the law to set limits within which to conclude ADR proceedings, and also provided that where a taxpayer has applied for ADR, he/she is not bound by the time limits of applying to TAT; and subsequently the law should have set the days within which one may file at TAT, after the ADR process. 

Mr Allan Atwiine  is a tax consultant. [email protected]