URA Tax Litigation Costs are now at the center of a policy debate in Uganda as the government seeks to limit the growing financial burden of tax disputes. For years, tax courts have quietly become a profitable arena for legal practitioners. While the Uganda Revenue Authority collects billions in taxes annually, it has also paid substantial sums in legal costs to litigants who successfully challenge tax assessments.
In the 2024–2025 financial year alone, URA paid Shs17.24 billion in litigation costs. These payments form part of what officials now describe as a slow but significant leak from the public purse. As tax disputes increase in value and complexity, the government faces growing pressure to contain the financial consequences of losing cases.
The proposed solution appears in the Draft Tax Policy Measures for the 2026–2027 financial year. Through these reforms, policymakers aim to make tax disputes less profitable for lawyers while reducing the financial risk to public funds.
The proposed reforms introduce a statutory cap on recoverable legal costs. Under the new structure, lawyers’ fees decrease as the value of a claim rises. Claims below Shs2 million allow cost recovery of up to 8 percent. Claims between Shs2 million and Shs20 million allow recovery of 6 percent. Disputes valued between Shs20 million and Shs50 million allow recovery of 4 percent. Claims between Shs50 million and Shs100 million allow recovery of 2 percent. Disputes exceeding Shs100 million allow only 0.5 percent in recoverable costs.
The reform also introduces another important limit. No litigant will recover legal costs exceeding the value awarded in a judgment. This rule effectively shrinks the potential payout for lawyers as the size of the case increases.
Government officials argue that URA Tax Litigation Costs must reflect proportionality rather than profit. According to the draft policy, legal cost awards should regulate litigation behavior rather than reward procedural tactics.
Another proposed reform addresses the handling of evidence during tax disputes. Under the draft measures, taxpayers who introduce documents that should have been submitted during the objection stage may lose their right to claim legal costs even if they win the case at the Tax Appeals Tribunal.
This rule aims to encourage taxpayers and their lawyers to present evidence earlier in the administrative process. URA believes this change will discourage strategic withholding of documents until the litigation stage.
Officials also emphasize that cost awards serve a broader regulatory function in legal proceedings. In the government’s view, legal costs should promote fairness and responsible conduct rather than encourage aggressive litigation strategies.
However, the most dramatic proposal involves the potential removal of legal cost awards altogether. The draft policy states that courts handling tax matters may no longer award legal costs in tax proceedings.
If approved, this rule would eliminate the long-standing practice in which the losing party pays the winner’s legal bill. In practical terms, it would mean that taxpayers and the tax authority would each carry their own legal costs regardless of the outcome.
URA frames the proposal as a matter of administrative principle. Officials argue that tax litigation differs from ordinary commercial disputes because it concerns public administration rather than private business interests.
Government lawyers who represent URA do not earn instruction fees. When the authority loses a case, the financial burden falls on the Consolidated Fund. Large cost awards therefore translate directly into public expenditure.
URA also believes the reform could strengthen internal accountability within the tax authority. Policymakers suggest that eliminating large cost awards could reduce opportunities for collusion between officials and external legal counsel.
At the same time, URA expects the reforms to change taxpayer behavior. By reducing the financial incentives associated with litigation, the authority hopes to encourage early settlements and greater reliance on alternative dispute resolution.
Yet many lawyers within Uganda’s tax profession see the situation differently. Several senior tax practitioners argue that the central issue is not legal fees but the quality of tax assessments issued by the authority.
According to some lawyers, URA faces internal pressure to meet revenue targets. That pressure may lead to assessments that later collapse under legal scrutiny.
Practitioners claim that when URA issues incorrect assessments, legal costs become a necessary corrective mechanism. The financial consequences of losing cases, they argue, create pressure for more careful decision-making within the authority.
One senior tax lawyer explained that legal costs impose accountability on administrative decisions. When authorities lose cases and must pay legal costs, they feel the financial consequences of inaccurate assessments.
Another practitioner suggested that the proposed reforms may instead shield the tax authority from the financial impact of losing cases. In this view, reducing URA Tax Litigation Costs weakens an important safeguard that protects taxpayers from administrative overreach.
At the center of the debate lies the concept of the “bill of costs.” In many legal systems, the party that wins a case can recover the legal expenses incurred during litigation. This recovery compensates the successful party and discourages weak claims.
If legal costs disappear entirely from tax disputes, the financial sting of losing a case diminishes. Some lawyers argue that this change could weaken incentives for careful tax administration.
Legal practitioners also point to the volume and value of disputes currently before the Tax Appeals Tribunal. According to the tribunal’s first quarter progress report for the 2025–2026 financial year, 121 new applications were filed within a single quarter. The total value of these disputes reached Shs260.3 billion.
During the same period, the tribunal resolved 74 disputes. These resolutions unlocked approximately Shs72.98 billion through rulings, settlements, withdrawals, and dismissals.
Meanwhile, 529 pending applications collectively represent around Shs1.4 trillion in disputed tax assessments. These figures indicate that many tax disputes involve substantial financial stakes.
Lawyers note that the tribunal already has the authority to dismiss weak claims and penalize unsuccessful taxpayers. If frivolous litigation were widespread, they argue, the tribunal’s caseload would show many low-value repetitive claims.
Instead, the data suggests that most disputes involve large financial sums and complex tax questions.
URA’s reform package also proposes tighter procedural rules governing evidence. Amendments to the Tax Procedure Code aim to limit the introduction of new documents during later stages of tax litigation.
Officials say these restrictions will prevent situations in which taxpayers introduce new evidence that should have been submitted earlier. The authority believes this measure will strengthen administrative procedures and improve fairness.
However, critics argue that limiting evidence could disadvantage taxpayers who uncover new information after the objection stage. Legal practitioners therefore warn that procedural changes must balance efficiency with fairness.
Some lawyers also express concern about the consultation process surrounding the reforms. Industry sources say authorities circulated consultation documents on February 20 and required responses by February 24.
For reforms affecting billions of shillings in tax disputes, some practitioners consider that timeline too short. They argue that complex tax policy proposals require longer consultation periods to allow meaningful feedback.
Ultimately, the debate over URA Tax Litigation Costs centers on incentives within the tax system. Legal costs compensate parties who successfully challenge incorrect decisions. They also discourage weak legal positions by imposing financial consequences.
URA views the current system as an unnecessary fiscal burden that drains public funds. Many lawyers view the same system as an essential safeguard against administrative errors.
The policy question therefore becomes fundamental. Should the government reduce the financial consequences of losing tax cases? Or should it focus on reducing the likelihood of losing them in the first place?
