Justice Susan Odongo of the Commercial Division of the High Court has saved more than 3500 Ugandans working with Massalia SMC Limited a betting company from losing their jobs by staying the enforcement of Uganda Revenue Authority (URA) collection to a tune of Shs24.7bn from the company’s trustee portal.
In her ruling, the judge agreed with the affidavit evidence of Francis Xavier Drani the betting company’s authorised Tax Agent who stated that URA’s actions were in total violation of the orders issued by the Tax Appeals Tribunal which declared that using a wrong methodology in assessing the betting company’s taxes is illegal.
Drani told court that URA’s Shs24.7bn new tax assessments was made based on the wrong assumptions that all deposits are stakes and all withdrawals are payouts for winnings.
The judge disagreed with URA’s evidence filed by Teddy Kyaligonza, the authority’s Acting Manager of the Information Communication Technology and Gaming Sector, that the assessments in dispute were fresh and different in both substance and form.
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She explains that the assessments relate to a new tax period (September 2023 to June 2024) and the figures were reconciled based on workings provided by the betting company insisting that the authority is executing its duty-bound by law to collect taxes, which are the lifeblood of the economic development of Uganda.
However, the judge noted in her ruling that the core of the dispute lies in whether a change in the tax period constitutes a change in the taxation substance.
She based on the Tribunal’s decision which held that treating all deposits as stakes and all withdrawals as winnings was legally flawed, excessive, and unlawful noting that Gaming Tax must be computed on the net difference between stakes and payouts as stated in Section 48 of the Lotteries and Gaming Act.
The judge wondered why URA based its findings on assessing tax on data obtained from payment aggregators MTN, Airtel, and Pegasus which are third party well knowing that the tribunal directed them to base their assessment on the betting company’s Apollo Soft transactional data.
She added that treating all withdrawals as taxable winnings without reconciliation to the Apollo Soft system, which is the only system capable of identifying actual wins was a wrong.
The judge explained that staying the actions of URA against a taxpayer was helping the appeal before her which resulted from the decision of the Tax Appeals Tribunal from turning academic.
“I, therefore find that the impugned assessments are not substantively fresh. They represent a persistent administrative refusal to adhere to a valid and binding judicial directive,” she stated.
She added, “The Respondent cannot circumvent the Tax Appeals Tribunal’s Ruling by simply changing the date of the assessment while retaining the identical, unlawful computation logic. To allow this would be to sanction a cycle of administrative defiance that undermines the rule of law.”
She agreed with the betting company that it is facing imminent risk of substantial loss and irreparable injuries if court allows them to lose Shs24.7bn, a portion of which is punters’ money held in trust.
The betting company added that enforcement would lead to business closure, loss of customer confidence, and the immediate loss of jobs for 3,500 employees noting that the balance lies in their favour because URA already holds their Shs8bn.
The judge disagreed with URA’s submissions that the balance of convenience favours the State, which is duty-bound to collect taxes described as the lifeblood of the economic development of Uganda.
“Such a collapse and the subsequent loss of employment for thousands cannot be adequately compensated for damages. On balance of convenience, the Respondent argues that the lifeblood of the economy is at stake. However, the Applicant has demonstrated good faith by expressing a willingness to pay the lawfully assessed amount of Shs4bn based on the Tax Appeals Tribunal’s mandated methodology,” she stated
The judge asked URA for a predictable investment climate rather than allowing administrative actions that may lead to business insolvency before a legal dispute is fully resolved.
She emphasised that allowing URA to continue enforcing a methodology that has been declared unlawful under the guise of fresh assessments while its own appeal is pending would signal regulatory arbitrariness and undermine public confidence in the judicial process.
“I find that the public interest heavily favours the preservation of the status quo. Protecting the integrity of the appellate process and preventing the irreversible destruction of a major employer outweighs the immediate collection of a disputed tax amount derived from a discredited methodology,” she noted.
