AM I STILL OBLIGATED TO PAY TAXES WHEN I HAVE BEEN DECLARED BANKRUPT ?.

Of all the debts that landed Kingo in trouble, the biggest was the unpaid taxes. 3 people demanded from him a combined UGX 11 million while the unpaid taxes were UGX 67 million. Unfortunately, those demanding the 11 million could not wait and the courts declared Kingo bankrupt. This allowed the 3 creditors to take and sell the house which Kingo had used as ‘security for the loans. However, Kingo thought he had survived the taxes since he was now bankrupt. But he has been told that taxes cannot be avoided. So Kingo wants to know if taxes are still payable after he is bankrupt.

WHAT DOES THE LAW SAY?

A tax is a compulsory non quid pro quo payment. In less Latin, this means a tax is a financial charge expected from an individual or organization to fund government spending. You cannot choose whether to pay it or not. If a person does not pay their taxes on time, then it becomes a debt that they must pay.

WHAT ARE THE CONSEQUNCES OF BEING DECLARED BANKRUPT OR INSOLVENT?

Just like the other debts do not expire, taxes which are unpaid remain unsettled debts that must be paid off. Taxes are a matter of law and the law does not excuse you from paying if you were required to pay before you became ‘too broke’ to pay your debts.

WHAT ABOUT NEW TAXES?

There are 2 types of taxes. Direct and indirect taxes.

Direct taxes are those taxes where you make the tax payment separately from any other payment. For example, a tax for using a service such as mobile money, while an indirect tax is attached to the price or cost of something. For example, when you buy a bar of soap, or kilo of sugar, there is a tax added to the price that you may never know about unless you ask.

Being bankrupt, does not mean you stop paying these indirect taxes if you continue to buy those same goods like sugar and soap while some direct taxes cannot be avoided especially if you are within the section of people supposed to pay them. For example PAYE (pay as you earn) is paid by all people who earn a certain amount of money every month. Therefore if the bankrupt person does not earn that money, he/she will not be required to pay that tax.

📷:Unsplash

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