AG unearths graft at URA

PARLIAMENT- Evidence of corruption at Uganda Revenue Authority involving the loss of billions of shillings to tax evasion, fraud and unexplained payments to ghost suppliers has been uncovered by the Auditor General (AG).
The AG wants the tax body to explain the alleged financial indiscipline which MPs on Tuesday blamed for “poor service delivery” in their constituencies as they talked of a return of corruption to an institution previously pigeon-holed by the President as “a den of thieves”.
In one scenario quoted in the AG’s annual report for 2013 currently before the House Public Accounts Committee (PAC), officials paid out Shs12.9b for goods and services, inclusive of VAT of more than Shs444.6m to ghost suppliers.

The report shows 28 companies in Arua that were paid Shs1.8b, 55 Gulu companies paid Shs5.3b, 33 Moyo companies paid Shs1.2b, 32 Nebbi companies paid Shs1.1b and from the centre several departments and agencies paid 56 companies Shs3.3b.

An additional Shs693.8m was lost due to fraud on URA accounts. URA officials, however told Daily Monitor on Tuesday that the fraud was committed by non-URA employees and the process of recovering the money is ongoing.

Daily Monitor has seen the URA’s statement of financial position which shows that revenue collection bank account balances were reported as Shs196m. Included are two accounts that were classified as inactive with a total balance of Shs365.2m. This money, according to the AG report, vanished due to fraud. URA Commissioner General Allen Kagina is quoted in the report as having told auditors that the inactive status was a result of a fraud and that the offenders were called to order, leading to the recovery of Shs33. 6m so far.

A follow-up inquiry by this newspaper at URA confirmed the fraud even as URA’s assistant commissioner for compliance management, Mr Protazio Begumisa, said it was committed outside URA and that the tax body has been successful because it has fought corruption.

“It will be a lie to say that there is zero corruption at URA but it’s not true that there is widespread corruption at URA,” Mr Begumisa said on Tuesday.
“We have a zero tolerance policy to corruption and we have put in place systems to combat corruption. We have asked the taxpayers and the general public to report our staff who solicit bribes and we continue to sensitise staff and other stakeholders on integrity issues.”

While URA management had told the AG that the data on the alleged ghost suppliers who took Shs12.9b had been forwarded to the respective tax stations for reconciliation and action, Mr Begumisa told this newspaper that whereas it was true that some firms may not be traced, a good number exist on the URA register. “It’s only that sometimes where they do work is not where they are registered,” he said.

The AG also found that revenue receipts worth Shs328.5m were not credited to bank statements according to the reconciliations under the Barclays Bank. Ms Kagina said the uncredited revenue receipts was a fraud case which was investigated and culprits convicted. She said options to recover the revenue are being explored.

Another analysis captured in the report revealed that Shs3.4b was paid to the contractors for goods and services rendered inclusive of Shs519.4b VAT. Many entities also understated their sales and others filed nil returns, resulting into “revenue leakage to the authority”, the report said.

On Tuesday, PAC members noted how the AG found that a review of VAT returns filed by taxpayers revealed that one tax payer in Nebbi District was paid Shs197.9m between December 2012 and June 2013. However, it was noted that this taxpayer last filed a VAT return in January 2013.

Contrary to the VAT Act, this payment was not disclosed to URA. The AG said there was a likelihood that this tax payer could have been deregistered for VAT yet is still in active.

Mr Begumisa, maintained that URA has established a “robust” e-tax system that efficiently tracks compliance.

“There is no laxity in collecting taxes,” Mr Begumisa said. “If nobody is complaining about URA, then it means URA is not working. Taxpayers are complaining that we are on their case and a taxman cannot relax when there is a shortfall. We are missing the target but every year there is growth in tax collections,” she added.

About the Nebbi case, he said this taxpayer was actually registered in Mbarara District according to their records and that the individual has since petitioned the Inspectorate of Government contesting the transaction. “This is outside our hands,” Mr Begumisa said.

The AG’s report also says a statement of comparison of target and actual revenue collections revealed unallocated revenues of Shs2b and an additional Shs277.4m in respect of direct domestic taxes and customs taxes, respectively. The auditors found that particulars of tax payers could not be established.

Frustrated by endless corruption scandals at URA, President Museveni in 1999 publicly declared the tax body “a den of thieves” which he said, needed “infiltration” to break a racket of thieving officials.

The NRM leader, who was responding to public outcry at the time, restructured URA.

In March 2002, a commission of inquiry into corruption at the URA was appointed by the government. This inquiry was chaired by Justice Julia Ssebutinde, who had previously headed inquiries into corruption in the police. She was assisted by two co-commissioners, Fawn Cousenes and James Kahoza

The Ssebutinde inquiry started its work in May 2002 and was expected to deliver its report and recommendations after three to four months. However, the hearings took much longer amidst reports of attempts to compromise investigations, including an alleged assassination attempt on Ms Ssebutinde.

The Ssebutinde report was presented to the government in February 2004. However, the two commissioners distanced themselves from the report, and it was not made public because its legality was questioned by those Ssebutinde accused of wrongdoing. Later in August 2004, the High Court nullified the report and described it as “naked” and “without legal clothing”.

It is against this background that in the appointment of Ms Kagina, the President hoped to sanitise URA. And the reforms have worked, according to Information Minister Rose Namayanja.

“Under the leadership of Ms Allen Kagina, we have successfully cleaned URA and tax collections on a year-to-year basis have gone up,” Ms Namayanja told the Daily Monitor, echoing a view routinely held by the President. “The situation is not as bad as it used to be.”

Talking about corruption at URA, Kampala City Traders Association spokesperson Issa Ssekitto told the Daily Monitor that he was aware of a situation where a container of shoes was entered into URA’s system as mosquito nets and instead of paying Shs30m, only Shs4m was paid in taxes.

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