The Tax Procedures Code (Amendment Bill) 2023 which was published in the Gazette of 30th March 2023 has many novel amendments but this commentary focuses on the proposed amendment to Section 42 of the Act.
Section 42 empowers the Commissioner to require any person by notice in writing, whether or not liable for tax to furnish within the time specified in the notice any information that may be stated in the notice. This Section is couched in such strong terms as evidenced in clause (4) which states that;
“This section has effect despite-
- any law relating to privilege or the public interest with respect to the giving of information or the production of any record, including in electronic format; or
- any contractual duty of confidentiality evidently this section is aimed not at the taxpayer but at a third party that has information about a taxpayer which information needs in order to make an assessment.”
The proposed amendment is to the effect that;
“Where a taxpayer fails to provide the information requested under this section, the taxpayer shall not be allowed to provide that information at the objection to a tax decision or during alternative dispute resolution procedure proceedings”
An amendment of this nature is about the process and not the technical substance covering things like the tax rate or the tax base. This proposal is about how URA requests for information from any person who has information about a given taxpayer.
The question then becomes; what was wrong with the existing provision system, that warrants the amendment and how does the proposed amendment correct the wrong in the current law?
The amendment is drafted in a way that is aimed at a taxpayer who is responsible for the delay to provide information. It should be noted that Part XIV of The Tax Procedures Code Act clearly provides for penalties for default by taxpayers or any other person that the Commissioner finds at fault.
Therefore, where a person is requested to provide information but does not comply, the sanctions should be found in the part of the law dealing with penalties. However, what is being proposed is to the effect that URA will reject the information that it directed a person to provide if it is provided during the objection process or during alternative dispute resolution proceedings. It does not make any logical sense that the taxman demands for information badly needed to make an assessment and then when it is provided it is rejected on the basis that it is late.
What is clear is the underlying purpose of the proposed amendment which is to stifle information that may help the taxpayer’s objection or case whether the information is correct or not.
This amendment seems to attempt to grant the tax authority power to deny the taxpayer a fair hearing and due process.
In addition to its technical flaws, the amendment goes counter to the taxpayer’s charter that tax bodies are expected to adhere to. The URA Client Service Charter provides that taxpayers have the right to raise objections and provide additional documentation in response to tax decisions and to expect that URA will consider their objections promptly and fairly.