The Constitutional Court sitting in Kampala has ruled as illegal a request by the Uganda Revenue Authority – URA to all banks to provide it with all the details of their customers.
In a lead judgement written by Justice Christopher Madrama Izama, the court found that URA’s request went beyond what is acceptable in a free and democratic society and therefore couldn’t stand a constitutional test.
All the 29 commercial banks in Uganda joined by Uganda Development Bank and the Uganda Bank’s Association, in 2018 dragged to court URA and the Attorney General who is the respondent in cases where the government is sued, challenging a March 2018 notice by URA to all Banks to furnish it with details of all bank accounts held by them for the two-year period of January 2016 to December 2017.
In a letter to all managing directors of Banks, URA wanted customer accounts details which include; the account number, the name of the signatory, the type of account, a taxpayer identification number, the national identification numbers or business registration numbers, totaI credits for each of the two years, totaI debits for each of the two years, current balance, account holders telephone contact and email.
In their petition, the Banks contended that sections 4l and 42 of the Tax Procedures code Act, 2014 under which URA made the request, was inconsistent with and contravened artrcles 27 (2) and 28 of the constitution read together with articles 2, 20 and 43 (2) (c) of the constitution. The petition also contended that the notice issued to the all banks contravened and was inconsistent with the provisions of the Constitution in that; it was issued to all banks in an indiscriminate fishing exercise lacking any objective and rationale which impaired the right to privacy of all bank account holders in Uganda enshrined under article 27 (2) of the Constitution.
They argued further that the request exceeded what is necessary to accomplish the objective of tax collection and was accordingly beyond what is acceptable and demonstrably justifiable in a free and democratic society, contrary to article 43 (2) (c) of the Constitution. In his response, the Attorney General said the petition was not justiciable before the court because the allegations complained about do not contravene or are not inconsistent with the articles of the Constitution and that URA acted within its mandate to seek the bank details. The banks were presented by lawyers; Masembe Kanyerezi, David F.K. Mpanga, Brian Kalule and Timothy Lugaizi, while the Attorney General was presented by State Attorney Ojambo Bichachi and Sam Tusibira, while Alex Alideki and Ronald Batuku Masamba represented URA.
In his ruling, Madrama found that the petitioners had ably laid down their case to the effect that there were constitutional controversies that the court had to pronounce itself on.
“I find that there are questions as to interpretation of the Constitution that has generated sufficient controversy for debate between the parties which ought to be resolved by this court one way or the other because they are not obvious questions whose answers are straight forward…Uganda is a constitutional democracy where the Constitution is the supreme law of the land binding on all authorities and agencies of the estate inclusive of the Parliament…any law enacted by Parliament which is inconsistent with any provision of the Constitution is null and void to the extent of the inconsistency,” Madrama’s ruling reads before delving into the three issues that were agreed upon for determination.
The first issue that involved the allegation that the request by URA contravened the right to fair hearing, Madrama held that the petitioners had overstretched the meaning of fair hearing. He added that section 41 and 42 of the Tax Procedures Act, under which the request by URA was made cannot be understood in the meaning of fair hearing as provided for under article 28 of the Constitution.“ln the circumstances of this petition, issue 1 of the petition as to whether sections 4l and l and 2 of the Tax procedures Code Act, 2014 to the extent that it purports to nullify the law relating to privilege violates article 28 and of the Constitution cannot be answered in the terms prayed for by the petitioners because the principles of fair hearing under article 28 do not relate to the principles for investigation of the tax matters as the Commissioner is not an independent tribunal or court established by law. ln the premises, I would answer issue No. 1 in the negative,” Madrama held.
On whether sections 21 and 42 of the Tax Procedures Code Act, 2014 are inconsistent with and contravene article 27 (2) of the Constitution read together with articles 2, 20, and 43 (2) (c) of the Constitution that allow the Commissioner General of URA to gain access to any premises and get any information or seize any property, the court held that this is only allowable where there is probable cause of breach of tax laws.“The Commissioner should comply with article 27 of the Constitution and only exercise the powers in accordance with the accepted principles such as when there is a real investigation of suspected tax evasion or breach of a tax law of a specified individual. ln the premises, the blanket notices issued by the Commissioner violated the rights of the account holders and were further in breach of article 2l of the Constitution of the Republic of Uganda. Though the respondents counsel submitted that the notices were withdrawn, I would declare that the notices were unconstitutional, null and void…” Madrama held.
Having ruled in the affirmative that the order violated the right to privacy of account holders, even issue number three that the notice was inconsistent with and contravened Article 2l (2) of the Constitution, read together with Article 43 (2) (c) of the Constitution was held in the affirmative.
“ ln the resolution of issue 2, issue 3 was resolved in that the notice issued found to be inconsistent with the rights under article 27 (2) of the Constitution because there was no probable cause, it was issued generally to 3rd parties affecting account holders without any investigation into any possible breach of the tax law any of the account holders thereby arbitrarilly violating their right to privacy,” Madrama’s ruling which was agreed to by justices; Fredrick Egonda-Ntende, Elizabeth Musoke, Monica Mugenyi and Christopher Gashirabake read in part.
The court also awarded costs to Banks because of the “unnecessary costs and inconveniences,” that URA subjected them to. URA is the one to meet the costs because according to the judge, the Attorney General was not involved in the case.
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