Uganda’s tax landscape saw a significant shift with the cessation of the tax relief provided under section 40D of the Tax Procedures Code Act 2014 as amended in 2023, that had provided waiver on interest and penalties accrued as of 30th June 2023. However, Uganda Revenue Authority (URA) has taken proactive steps to maintain a conducive atmosphere for compliance by recommending taxpayers to utilize the Voluntary Disclosure Program outlined in Section 66-1A of the Tax Procedures Code. This initiative offers a reprieve from penalties and interest that have accumulated, thus opening a gateway for taxpayers to clear their slate without additional financial burden.
So, what exactly does Voluntary Disclosure entail?
The VD program stands as a testament to URA’s commitment to encouraging a transparent tax culture. Designed as an incentive-based scheme, it facilitates a clean start for taxpayers who by engaging in the VD process, signifies a proactive step to rectify previously unreported or understated tax liabilities as well as misstatements in Tax Affairs. Here’s a closer look at the intrinsic objectives of embracing the VD initiative:
- Restoration of Good Standing: By coming forward voluntarily, individuals and businesses can restore their fiscal reputation and foster a positive relationship with tax authorities.
- Financial Relief: Participants in the VD program can breathe easier, as the dreadful accruals of penalties and interest, often a heavy fiscal yoke, are lifted, enabling them to regularize their tax affairs.
- Mitigating Legal Repercussions: Proactive disclosure reduces the likelihood of legal consequences typically associated with non-compliance.
Voluntary Disclosure embodies not just a chance for compliance, but a strategic move towards financial rectitude. URA’s VD program embodies a bridge to a clearer financial future, ensuring that the path to compliance is both accessible and more beneficial for all involved.
Equally important, understanding the distinction between Voluntary Disclosure (VD) and standard tax amnesties is crucial. Both are designed to encourage taxpayers to address unpaid taxes within a set timeframe, yet they drastically differ in mechanics and intent with Voluntary Disclosure marking a new direction in tax enforcement strategy. It steps away from traditional punitive measures and advocates for self-regulation as the linchpin in resolving tax discrepancies. This approach promotes an atmosphere of cooperation between taxpayers and the tax administration, fostering a more compliant tax culture over the long run.
So, who qualifies?
Uganda Revenue Authority (URA) has meticulously outlined the eligibility criteria and deadlines for Voluntary Disclosure to ensure clarity. Through this program, taxpayers are offered a chance for reconciliation, even when certain tax areas are undergoing scrutiny. For instance, if URA is examining a taxpayer’s Withholding Tax for the fiscal year 2022/2023, the taxpayer is still eligible to disclose voluntarily for either a different tax like Value Added Tax for the same period or for Withholding Tax for the previous year as long as the disclosure occurs for information that would not have been inevitably uncovered in the course of the ongoing compliance activities. This proactive step could result in partial immunity from prosecution, illustrating URA’s commitment to encouraging voluntary compliance over punitive action. Hence affirming that the window for Voluntary Disclosure is not just a chance for settling tax duties but a strategic turning point towards building a trusting relationship between the tax regulator and the public, critical for a well-functioning tax system.
Understanding the Voluntary Disclosure (VD) program is crucial for Ugandan taxpayers who wish to rectify past tax deficiencies without facing harsh penalties. Although this program doesn’t exempt one from all tax responsibilities—unreported income and previous inaccuracies will still be taxed—Uganda Revenue Authority (URA) only offers a form of relief by potentially waiving related fines and interest.
The “olive branch” extended by URA is the potential abatement of penalties and/or accruing interest. As stipulated in Section 66 1A, “a taxpayer who voluntarily discloses any tax that should have been declared to the Commissioner, may enter into an agreement with the Commissioner to pay the outstanding unpaid tax and that person shall not be required to pay any interest or penalty due.” This brings forth an opportunity for Ugandan taxpayers to correct past tax filings without the burden of added costs.
The evolution of the tax system has shown a shift from a confrontational approach, characterized by an immediate crackdown on tax defaulters—as seen with the now-defunct graduated tax—toward a modern, efficient self-assessment procedure. This move not only saves on administrative efforts but also encourages a culture of compliance among the most prominent contributors to the tax pool. The result is a reinforced and more effective tax collection system, offering a win-win for both the tax authority and the taxpayers.
Notable benefits of engaging in the VDP
The Voluntary Disclosure Program (VDP) offers several noteworthy advantages for taxpayers seeking to mend compliance gaps.
- It helps reintegrate “marginal” tax evaders back into compliance, allowing those who have momentarily fallen off the grid, for reasons such as not filing for a single year, the chance to rectify the situation and “turn over a new leaf”.
- Lowered Tax Burdens: Participating in voluntary disclosures can significantly alleviate the weight of accumulated tax responsibilities. This includes taxes owed, along with related interest and penalties, offering a more manageable financial scenario.
- A New Beginning: Settling outstanding taxes opens a fresh chapter for taxpayers. This reset not only unshackles them from past tax troubles but also qualifies them for exemptions associated with Withholding Tax (WHT) and allows them to obtain Tax clearance certificates.
- Enriched Understanding: Engaging with the VDP equips taxpayers with the Tax Authority’s tailored guidance. This helps maintain adherence to tax laws, averts future oversights, and ensures alignment with the “gold standards” of the taxation framework.
Despite these benefits, it’s imperative to clarify that the Voluntary Disclosure doesn’t apply retroactively to principal tax (due from VD) as well as penalties, interest, or fines previously levied due to delayed or unfiled returns. In essence, once such financial penalties are in place, the Voluntary Disclosure won’t provide a reprieve from them—even with proactive disclosure.
Notably; For a Voluntary Disclosure (VD) to be valid, certain criteria must be met:
- Full Disclosure: The taxpayer must provide comprehensive details of their non-compliance, including specific taxes involved, time periods, and the nature of the discrepancies.
- Accurate Disclosure: Information must be truthful and complete. Half-truths or omissions will invalidate the disclosure.
- Timeliness: Proactive engagement is key. If disclosures are only made following URA investigations or whistleblower revelations, they lose their voluntary nature and may not be treated as a VD.
Guide to Applying for a Voluntary Disclosure Certificate through the URA Portal:
Uganda Revenue Authority (URA) provides a structured approach to assist taxpayers in correcting past tax records. If you’re looking to apply for a Voluntary Disclosure Certificate (VDC), here’s a more thorough walk-through of the process:
- Access the URA Portal:
Begin by visiting the URA portal at ( https://www.ura.go.ug ).
- Download and Complete the VD Form:
Once on the URA portal, your next step is to locate and download the specific Voluntary Disclosure (VD) form. This document will require you to fill in key information such as your Tax Identification Number (TIN), alongside other relevant tax history details. Accuracy and honesty are crucial in completing the form, as this is a step towards transparency and compliance.
- Remit the Payment:
Subsequent to filling out the VD form, you are required to make a payment for the principal tax amount. This is based on the self-assessment arising from the voluntary disclosure you have made.
- Await Confirmation:
Once your submission is complete and payment is made, wait for the URA’s response for the subsequent steps.
The URA provides additional resources, which can be accessed through this link: https://t.co/2zwCqtaHRf
Upon the settlement of the principal tax from the assessment that emerges from your voluntary disclosure, the Commissioner General will issue a signed Voluntary Disclosure Certificate. This certificate verifies the name of the taxpayer, the nature of the offense, the amount paid, and the date of the transaction.
Grasping the nuances of the Voluntary Disclosure Program (VDP) is crucial. One key aspect to recognize is the program’s approach to penalties and interest. Engaging in the VDP typically leads to the exclusion of penalties and interest accrued which is a significant relief. However, it should have necessitated that what remains in place is the interest—which would have stood as a reasonable measure, mirroring the missed opportunity for the government to use these funds, had the taxes been paid on time hence preserving the principle of reparation.
Moreover, it’s essential to remember that the VDP is not a gateway to tax amnesty. While it does offer a leeway for individuals to rectify their tax reporting without facing the full brunt of penalties, the program’s design doesn’t intend to reward or encourage future lapses in tax compliance. Instead, the VDP’s purpose is twofold: to promote proactive correction of tax affairs and to uphold equity among taxpayers. This approach ensures that those who have conscientiously fulfilled their tax responsibilities are not disadvantaged in comparison to those who have not.
URA has recognized that many taxpayers would benefit from the VDP as part of a broader compliance improvement strategy. Although the VDP can yield immediate benefits, fostering a culture of lasting compliance and boosting tax revenue requires a multifaceted strategy. This not only involves robust auditing and strict enforcement measures but also subscribing to international transparency standards, aligned with the broader perspective of Automatic Exchange of Information (AEOI) standards with URA being commended since it recently in 2023 made a commitment to implement the Automatic Exchange of Information Voluntary Disclosure Program with a network of over 120 countries for resident tax payers that hold assets in foreign jurisdictions. Commendable efforts indeed!!
By Abigaba Chrispus