The East African Community Protocol on the Common Market is under test following a ruling by the Arusha based court restraining government from determining tax rates on its tobacco.
The British American Tobacco company, previously operating in Uganda, shifted base to Kenya but successfully protested attempts by government to tax it on foreign based factory rates.
According to the Common Market Protocol, goods manufactured in East African countries, which are a party to the Treaty, should be taxed on local rates lower than levies on foreign based factories.
Through the Excise Duty (Amendment) Act 2017, the legal instrument that determines taxation rates, Parliament nonetheless levied foreign tax rates on the company, which prompted the protracted legal battle.
Rising on matters of national importance – a plenary segment which allows MPs to introduce urgent issues, MP James Kakooza (Ind., Kabula) said the ruling has caused revenue shortfalls.
“One company is importing and paying less than what we passed in the law. This means that government is losing revenue totaling to Shs4.4 billion,” said Kakooza.
Attorney General William Byaruhanga said government has appealed the ruling noting that the matter could be a problem of conflicting jurisdictions.
“It is true that this company is importing cigarrates and paying less tax. We have filed an appeal…the main problem is going to be the ranking of the laws,” said Byaruhanga.
Byaruhanga added; “we are part of the East African Community. Our question is the superiority of jurisdiction.”
Finance Minister Matia Kasaija said government is losing revenue, but added that he will ask Uganda Revenue Authority to explain the matter.
“Why did they [URA] disregard the laws of Uganda and consider the East African Community law. Is URA obligated to disown the law made here in Uganda and apply the EAC law?” said Kasaija.
Conflict of laws arises when a country, which is party to an international treaty, has domestic laws that conflict with international law.
Government has to decide on whether the East African Community Common Market Protocol can overwrite domestic tax laws or vice versa.
Byaruhanga said officials from URA, Ministry of Finance and the Attorney General’s chambers would meet on the matter.