Reference is made to the notice of tax waiver a copy of which is attached hereto in which Masaka district offered tax relief to the residents of Masaka as a result of Covid 19 lock down. Some seem to suggest that it was not a proper move and others even wrongly assert that the District has no powers to do that.
We are all aware, there is an outbreak of a virus, Corona or COVID-19. COVID-19 was declared a pandemic by the World Health Organization.
World over with the increasing travel restrictions, quarantines and fears surrounding the outbreak of the Coronavirus (COVID-19), inevitably, many businessmen, suppliers, contractors and service providers are or will be unable to fulfill their contractual obligations. Undoubtedly, there is a profound impact on supply chains across various industries such as fashion, entertainment, e- commerce, manufacturing, food processing among so many others.
In law we have what we call a force majeure event, this refers to the occurrence of an event which is outside the reasonable control of a party and which prevents that party from performing its obligations like tax payment.
Force majeure essentially frees both parties from liability or obligation when an extraordinary event or circumstance beyond the control of the parties, such as a war, strike, riot, crime, epidemic or an event described by the legal term act of God, prevents one or both parties from fulfilling their obligations.
Force majeure principle is adopted in our law, the Judicature Act Cap. 13.
Under the law, force majeure leads to frustration of a contract [without default of either party and for which the contract makes no sufficient provision] which so significantly changes the nature of the outstanding contractual rights and/or obligations from what the parties could reasonably have contemplated at the time of its execution, that it would be unjust to hold them to the literal sense of its stipulations in the new circumstances. Thus, the law declares both parties to be discharged from further performance as stipulated under Section 66 of the contracts Act, 2010.
It is therefore a right interpretation that the declaration of COVID-19 as a global pandemic by World Health Organization, and the restrictions announced by the President, make COVID-19 an “act of God” that has prevented our residents in Masaka to fulfill their tax obligations because thier businesses have been frustrated by a situation beyond their control. Forcing them to pay Trading or Property taxes is not only illegal but a sin in the eyes of God. In law they cant be sued or prosecute for non payment of the taxes because they have a lawful excuse for failing to pay the said taxes. Their defence is Force Mejeure.
Section 17(c) of the Local Government Act Cap 243 empowers the Executive Committee of the District while implementation it’s Council’s work plans and programs like tax collection to take remedial measures/actions where they deem it feet or necessary or if they sense danger or difficulty.
Masaka District executive having sensed danger that if it insists on collecting taxes yet the tax payers’ businesses were affected by conditions beyond their control, and in order to help the businesses mitigate the impact of Covid, has taken a remedial measure using the said legal provision to waive the said taxes. It would not be proper to levy trading license fees when the taxpayers have not been trading. That would be broad day robbery.
Those Local Governments that will fail to follow suit and insist on forcing their people to pay taxes risk being sued and may be forced to pay back the money collected as tax as well as paying damages and costs of the suits.
I am happy other tax collectors like KCCA have already taken action similar to ours and of course else where in the world the same has been done.
E-signed
Jude Mbabaali (Advocate & Commissioner of Oaths)
Chairman, Masaka District Local Government.
