How 'pay-to-play' proposal will deny taxpayers access to justice at appeal

KRA headquarters at Times Tower building, Nairobi. [Jenipher Wachie, Standard] One of the more controversial proposals in the Finance Bill, 2023 is the requirement that a taxpayer aggrieved by a decision of the Tax Appeals Tribunal should deposit 20 per cent of the disputed tax with the Commissioner, or provide security for an equivalent amount, as a pre-requisite to appeal at the High Court. The proposed amendment further requires that should a decision at the High Court be in favour of the taxpayer, the Commissioner shall refund the deposit or relinquish the security within 30 days. This proposed change is not the first of its kind. The Finance Bill, 2022 proposed similar amendments which at the time required a deposit for 50 per cent of the tax in dispute prior to an aggrieved taxpayer challenging a TAT decision at the High Court. The proposal did not see light of day. It would, however, seem the government is keen to introduce this provision into the tax regime. If anything, the two attempts are indicative of this position. Perhaps the government wishes to borrow a leaf from its peers in the region. Uganda, for instance, has provisions under its tax law that requires a person who lodges a notice of objection to deposit 30 percent of the tax assessed or the tax not in dispute, whichever is higher. Importantly, such payment ought to be made prior to issuance of a final resolution on the objection. Similarly, Tanzania under its Tax Administrations Act, requires the deposit of a third of the assessed tax or the tax not in dispute, whichever is higher. Such amount should be deposited prior to lodging an objection. It should be noted that Kenya's Tax Procedures Act only considers an objection valid to the extent that any tax not in dispute has been settled or an extension for such payment has been obtained. This requirement aligns in a way to those in Uganda and Tanzania as above. To then demand an extra 20 per cent of the tax in dispute at the point of appeal to the High Court is quite punitive. We contend that the proposed amendment creates a condition precedent or stringent qualification to an appellant's fundamental right to access justice. Article 48 of our 2010 Constitution entitles all persons to access to justice and, should a fee be required, such fee should not impede access to justice. In addition, by requiring taxpayers to deposit the tax in dispute with the Commissioner, who is a party to the same appeal, the proposed amendment would be biased against one party and potentially infringe on taxpayers' rights to a fair hearing. Further, the proposed amendment would unduly usurp powers of the courts, seeing as security for costs or tax in dispute typically falls within the courts' discretion, pursuant to the court's own rules or sometimes in line with provisions of the law. Conversely, it is also arguable that the condition requiring aggrieved taxpayers to provide a deposit or security of 20 per cent of the tax in dispute would be within the confines of constitutional provisions to the extent that it does not unreasonably stifle or oppress proceedings. However, questions abound as to the extent within which such a stringent qualification of the right to appeal may operate reasonably without violating the right to access justice. Tax disputes may involve significantly huge amounts of money. It follows that the application of the proposed condition to provide a deposit or security of twenty percent of the tax in dispute would deny aggrieved parties access to justice where they are not able to meet this condition precedent. Put simply, the proposed amendment would deny any aggrieved party their right to appeal to the extent that they cannot settle or place a security of 20 percent of the disputed tax. The constitutionality of this proposed change would therefore be called to question. In the constitutional spirit of public participation, taxpayers have made extensive submissions to the Departmental Committee on Finance and National Planning as to why the proposal to introduce the 20 per cent deposit or security should not pass. The committee seems to have considered views of taxpayers on the subject. The Committee's Report on The Consideration of the Finance Bill, 2023 indicates that the proposal may altogether be dropped. It is our considered view that this move is the right one as it safeguards taxpayers' fundamental right of appeal on decisions reached by the Tax Appeals Tribunal. It therefore behooves the government to maintain current practice where taxpayers have a right of appeal against the decisions of the Tax Appeals Tribunal without paying to play. -Mr Gathecha is a tax associate and Mr Musyoka is a senior tax manager at Deloitte East Africa. The views presented are their own and do not necessarily represent those of Deloitte. ngathecha@deloitte.co.ke and cmusyoka@deloitte.co.ke.

How 'pay-to-play' proposal will deny taxpayers access to justice at appeal

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How 'pay-to-play' proposal will deny taxpayers access to justice at appeal

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