Habasa v Uganda Revenue Authority (Civil Suit 192 of 2019) [2024] UGHCCD 70 (13 March 2024)

#### THE REPUBLIC OF UGANDA

### IN THE HIGH COURT OF UGANDA AT KAMPALA

## [CIVIL DIVISION]

#### **CIVIL SUIT NO. 192 OF 2019**

NELSON HABASA ================================ PLAINTIFF

#### VERSUS

UGANDA REVENUE AUTHORITY ================== DEFENDANT

# **BEFORE: HON. JUSTICE EMMANUEL BAGUMA**

### **JUDGMENT**

#### **Background.**

The plaintiff sued the defendant for recovery of Ug. Shs 853,581,354/= (Eight Hundred fifty-three million, five hundred eighty-one thousand, three hundred fiftyfour shillings) being due as informer fees, plus interest thereon, general damages and costs of the suit.

The plaintiff alleges that the cause of action arose out of tax evasion information he supplied to the Defendant about Civil Aviation Authority which was concealing or refusing to pay rental taxes due to the defendant which information was used by the Defendant and recovered 8,535,813,541 (Eight Billion, five hundred and thirty five million, eight hundred thirteen thousand five hundred and forty one shillings) to which he is entitled to get 10% but the Defendant has refused to honour its obligation.

The defendant on the other hand denied use of the information supplied by the plaintiff stating that the discoveries were after the usual inspections with Civil Aviation Authority and the revenue collection was a result of the usual declarations of the Authority. They contended that the revelations of the plaintiff yielded nothing and hence he is not entitled to informer fees.

## **Representation.**

Counsel Patrick Kabagambe represented the Plaintiff while Counsel Gloria Twinomugisha represented the defendant.

At scheduling parties agreed on the following issues for court's determination; -

- *1. Whether the plaintiff is entitled to 10% of tax recovered by the Defendant?* - *2. Whether the plaintiff is entitled to the remedies sought.*

Parties gave evidence by way of witness statements and tendered in exhibits. At the end of the hearing parties agreed to file written submissions whose details are on record.

## **Submissions by counsel for the plaintiff.**

## **Issue No. 1** *Whether the plaintiff is entitled to 10% of tax recovered by the Defendant?*

Counsel submitted that section 8 of the Finance Act 2014 provides for payment of informers who provide information leading to recovery of a tax or duty equivalent of 10% of the principle duty or tax recovered.

Counsel submitted that the plaintiff having discovered that there was tax evasion at the Civil Aviation Authority, he submitted information to the Defendant on 8th June 2018. The information submitted to the Defendant included tax invoices from Civil Aviation Authority, list of tenants of Civil Aviation Authority and rent paid. The information was formerly received by the Defendant and an acknowledgment was sent to the plaintiff. When the plaintiff demanded for the money due to him as an informer, he was informed by the Defendant in a letter dated 2nd November 2018 that investigations were still ongoing following the information supplied and promised to supply him with feedback from time to time.

Counsel contented that following the evidence supplied, investigations were commenced into the tax affairs of Civil Aviation Authority which led to receipt of taxes from Civil Aviation Authority and accordingly the plaintiff demanded for the fees due to him.

Counsel argued that the defendant just shifted goal posts in his letter dated 2nd November 2019 and moved away from its commitment in the letter dated 10th April 2019 which stated that they were using the information supplied to conduct an audit.

Counsel submitted that the information supplied to the Defendant led to recovery of a tax of 8, 535, 813, 541 to which the plaintiff is entitled to 10% of the same as per section 8 of the Finance Act 2014.

## *Issue No. 2 Whether the plaintiff is entitled to the remedies sought.*

Counsel submitted that having proved that the plaintiff supplied credible information to the Defendant that not only led to investigation into the tax affairs of Civil Aviation Authority but also led to collection of taxes by the defendant amounting to Ug. Shs. 8, 535, 813, 541/= to which the plaintiff is entitled to 10%.

The plaintiff prayed for interest since the Defendant collected revenue amounting to Ug. Shs. 8, 535, 813, 541/= yet illegally withheld his pay on the same.

The plaintiff prayed for costs of the suit as per section 27 of the CPA which states that costs follow the event.

## **Submissions by counsel for the Defendant.**

## **Issue No. 1** *Whether the plaintiff is entitled to 10% of tax recovered by the Defendant?*

Counsel submitted that it is not contested that the plaintiff provided information as exhibited in A1 which is a letter addressed to the Assistant Commissioner Public Corporate Affairs of the Defendant whistle blowing about evasion of Rental Income taxes by Civil Aviation Authority for the last 3 years prior to 2018. This information was acknowledged by the Defendant on 8th June 2018.

Counsel submitted that however, the alleged tax was collected as a result of selfdeclaration by Civil Aviation Authority of its rental monthly VAT returns and the invoice number SI/021741 date 14th June 2016 provided by the plaintiff had already been declared by the Authority in the returns of May 2016.

Counsel further submitted as per the Defendant's witness statement that the payment amounting to Ugx. Shs. 8, 535, 813, 541/= collected by the Defendant from Civil Aviation Authority were normal flows based on the Civil Aviation Authority selfdeclaration. For one to qualify for an informer reward, there must be a nexus between the information provided and taxes collected. counsel referred to the case of **Matagala Vincent Vs Uganda Revenue Authority HCCS No. 274 of 2008**.

Counsel contended that according the Defendant's witness statement, he testified that on 6th March 2018, the Defendant initiated a tax audit of the Civil Aviation Authority based on Defendant's compliance improvement plan and on 13th March 2018, the Defendant held an initial audit meeting with the Authority at its premises in Entebbe and several meetings followed thereafter, he referred to D-EXH 2.

Counsel submitted that upon examination of Civil Aviation Authority's tax declaration, the Defendant established that it makes declarations of its rental income in its monthly VAT returns and that invoice number SI/021741 dated 14/06/2016 provided by the plaintiff had already be declared in Civil Aviation Authority VAT returns for May 2016 and as such the tax collected by the Defendant had no bearing with the information provided by the plaintiff to the defendant. He referred to the case of **David Olaka Vs Uganda Revenue Authority HCCS No. 92 of 2014** while referring to the case of **Matagala Vincent Vs URA HCCS No. 274 of 2008** where it was held that; -

*"That URA as a revenue collector receives payments from tax payers on a regular basis and so in a claim by an informer, if the evidence is not properly evaluated there is a danger of awarding a 10% award on normal tax recovery or taxes recovered based on information given by another informer or even tax recovered on the basis of routine audit by the defendant."*

Counsel contended that the information supplied by the plaintiff did not lead to recovery of any tax and hence he is not entitled to any fees as an informer.

### *Issue No. 2 Whether the plaintiff is entitled to the remedies sought.*

Counsel submitted that the plaintiff having failed to prove that it is his information that he provided that lead to recovery of the tax collected is not entitled to any remedies sought. He prayed that the suit be dismissed with costs.

In rejoinder, counsel for the plaintiff reiterated his submissions in chief.

#### **Analysis of court.**

**Issue No. 1** *Whether the plaintiff is entitled to 10% of tax recovered by the Defendant?*

**Section 8 of the Finance Act 2014** provides for Payment to informers and it states that; -.

*"The Commissioner General shall pay to a person who provides information leading to the recovery of a tax or duty, the equivalent of ten percent (10%) of the principal tax or duty recovered".*

Black's Laws Dictionary 19th Edition defines an informer as

## *"a person who furnishes information on which a civil or criminal case is based".*

Further, The URA Informer Management and Reward Policy defines an informer as

*"any person who has provided information to Uganda Revenue Authority on tax offences or any other contraventions of the tax laws administered by Uganda Revenue Authority".*

From the above section, for one to succeed as an informer, the following must be proven; -

(a*) that there must be a person,*

*(b) that the person must provide information to the Commissioner General of the Respondent,*

*(c) that the information should lead to the recovery of a tax or duty,*

*(d) that the Commissioner General is able to recover the tax or duty; and finally;*

*(e) that if the Commissioner General recovers tax or duty, the informer shall be paid the equivalent of 10% of the principal tax or duty recovered.*

In the instant case, the plaintiff had to prove with evidence that its by his information that he provided that the Defendant actually collected the evaded taxes.

The plaintiff claimed that he discovered that there was tax evasion at the Civil Aviation Authority, he submitted information to the Defendant on 8th June 2018. The information supplied included tax invoices from civil aviation authority, list of tenants of civil aviation authority and rent paid. He claimed that the defendant relied on that information and conducted investigations which led to the recovery of 8, 535,813,541/= to which the plaintiff is entitled to 10%.

To the contrary, the defendant admitted receiving information from the plaintiff relating to tax evasion by Civil Aviation Authority but contends that the information provided by the plaintiff did not lead to realization of any revenue/tax and that the money collected was out of usual self-declaration by Civil Aviation Authority and nothing more.

It was further the evidence of the Defendant that by the time the plaintiff supplied the alleged information in June 2018, it had already initiated a tax audit with the Civil Aviation Authority in March 2018 as per D-EXH 2 and investigations revealed that the invoices supplied by the Plaintiff had already been declared by the Civil Aviation Authority in May 2016.

From the evidence adduced by both parties, it is this court's finding that the plaintiff did not adduce cogent evidence to prove that indeed it was his information that led to the recovery of Ugx. Shs. 8, 535, 813, 541/= and if it was not for his intervention the same would not have been realized.

In the case of **Matagala Vicent v Uganda Revenue Authority C. S No. 274 OF 2008** court stated that; -

*" it was not enough to merely show that an informer gave information produced receipts to show taxes had been recovered but there should be direct evidence to show that the information given led to recovery of taxes".*

It was further held that

*"....that URA as a revenue collector receives payments from tax payers on a regular basis and so in a claim by an informer, if the evidence is not properly evaluated there is a danger of awarding a 10% award on normal tax recovery or taxes recovered based on information given by another informer or even tax recovered on the basis of routine audit by the defendant."*

In a similar case of **KB Serial No. 056 vs. The Commissioner General Uganda Revenue Authority HCCS No. 294 of 2015** court held as follows; *"....the plaintiff failed to prove to court that the defendant indeed used their*

*information to collect the tax from the said tax evading companies. The plaintiff instead relied on the tax evaders information form. It is the observation of this court that TIF was a mere acknowledgement of receipt of the plaintiff's compliant. The plaintiff is only entitled to the claimed whistle blower's payment where they could adequately prove that their provided information indeed led to recovery of tax dues from the alleged offender."*

It would be unfortunate for court of law to force an entity like URA to pay 10% informer fees to individuals whose revelations did not lead to recovery of any revenue, otherwise it would to loss of tax payers' money.

If the evidence of nexus of a nexus between the information provided by an informer and tax recovered is not evaluated carefully, we would run a risk of awarding fees on normally recovered taxes which will affect the tax flow of the country.

In the final analysis, the plaintiff has failed to prove to this court that the information provided to the Defendant led to the recovery of the tax realized by the Defendant and as such, he is not entitled to informer fees.

Issue No. 1 is resolved in the negative.

## *Issue No. 2 Whether the plaintiff is entitled to the remedies sought.*

Since the plaintiff has failed to prove his case, he is not entitled to any remedy sought.

Issue No. 2 fails

### **Conclusion.**

This suit is dismissed with the following orders; -

- **1. The suit is hereby dismissed** - **2. Given the nature and circumstances of this case, no order as to costs.**

Dated signed, sealed and delivered by email this **13th** day of **March 2024.**

Emmanuel Baguma

Judge.