URA fails to recover Shs710b in taxes from top companies

KAMPALA. The Uganda Revenue Authority is struggling to recover an estimated Shs710b from several top companies in the country, among them MTN Uganda, GM Tumpeco, Uganda Electricity Transmission Company (UETCL), BIDCO and Pioneer Easy Bus Ltd.
These uncollected billions are owed in customs and domestic taxes, some dating almost 10 years back, as reported in a new audit of the tax collection body. They represent an increase of 89 per cent in tax arrears from Shs334b recorded in the period ending June 2015. The report also reveals that an additional Shs63b assessed through investigations into non-compliance remain uncollected by URA.

Auditor General John Muwanga warned that this delay in collecting taxes poses the risk that the amount due may eventually reach unmanageable levels, leaving government with no option but to give up on the money.
“Delays in recovery of assessed taxes have greatly contributed to the growth in tax arrears,” the audit report for the period ending December 2016 indicates.
Mr Muwanga’s fears are expressed in an environment where the tax body yesterday said it prefers to “engage” the defaulters, instead of taking “harsh measures” to recover what is due.

The audit findings come at a time when URA has just recorded another revenue deficit of Shs392b during the last quarter, according to Bank of Uganda statistics released last week.
The audit report reveals there were incidences where there were delays in collecting the taxes assessed leading to accumulation. For example, the financially mismanaged and beleaguered Uganda Telecom has a tax liability bill of Shs85b that has been mounting since 2007, while former Wavah Broadcasting Services television’s (WBS), now Kwese Sports, Shs9b tax liability had accrued since 2006.
URA in April decided last year to place WBS under receivership instead of shutting it down, and later sold the station to Econet Media, a subsidiary of Econet Wireless owned by Zimbabwean businessman, Strive Masiyiwa. Econet Media operates the Kwese Sports line.

The electricity transmission company, UETCL’s tax liability of Shs14.9b has been accumulating since 2009. Both ROKO Construction’s tax liability of Shs1.3b, and that of the manufacturing and fabrications company, GM Tumpeco’s Shs5.8b, has accrued from way back in 2008.
“Although management had indicated that they had taken some actions aimed at recovery, only UETCL made some steps in recovering some funds and the rest had submitted commitments that have not yet yielded good results,” the audit reads.
Other companies with large tax liabilities included under custom taxes include BIDCO Ltd Shs20b since 2014; Pioneer Easy Bus with Shs5.7b since 2012 and MTN with Shs1.4b since 2013.
BIDCO is one of the 15 companies which the ministry of Finance has proposed to grant tax relief in the next financial year, a proposal which was this week opposed in Parliament.

In 2003, the government is reported to have agreed with Bidco that the Treasury would pay VAT on produce from the company’s oil palm project in Kalangala for 11 years after giving the company 26,500 hectares of land. The company would refund the tax[es] paid by the government with interest over an eight-year period paid in eight instalments, starting in the 12th year—2013. This, however, has not happened.
The audit, further, reveals that domestic tax arrears also more than doubled from Shs321b in 2015 to Shs671b in 2016, representing the highest growth of 108.69 per cent.
Several attempts to reach of the tax defaulting companies for comment were futile by press time but URA’s commissioner for public and corporate affairs, Mr Vincent Seruma, yesterday said: “Our goal is not to take harsh measures on businesses but rather to continue engaging them as much as we can. For example, in the case of WBS, we could not take the last resort of receivership as the way forward.”

The biggest percentage of that money documented is not the principal tax but rather interest that keeps growing and it is for that matter we keep engaging the companies. In the current budgetary proposals there is an element of managing these interests but it is very harsh to the companies, he said.
“The MTN case is in court; UETCL has so far cleared Shs13.4b (balance is Shs1b); we wanted to auction the Pioneer buses but opted against the idea and allowed them time because our goal is not to kill businesses, while for Roko we reached an agreement to just offset their liability.”
On the tax investigation cases, Mr Seruma said, “when the TID raises an investigation case and it is forwarded to the tax payer, they have two options to either pay or go to court. Some of these cases are currently before the Tax Appeals Tribunal (TAT) and as you know we cannot push court matters”.

This audit also shines the spotlight on URA’s failure to follow-up and recover another Shs63.8b, which was evaluated by its Tax Investigations Department (TID) through assessment of 39 cases during the period of the audit.
Out of the 39 cases investigated, the report shows 22 were submitted to the legal department for prosecution but there was no evidence that feedback is regularly provided to TID on the status of prosecution of cases forwarded.
“TID appears to be satisfied with their efforts as long as investigation results are forwarded to the respective departments for action without requiring feedback” leaving the assessments hanging, the report noted.

Since ministry of Finance rolled out the Integrated Financial Management System (IFMS) in 2014, to curb the financial bleeding in government, anyone seeking to do business with government is required to have a Tax Identification Number (TIN) through which their tax compliance/history is tracked.
But the audit shows that from a sample of 117 taxpayers who received payments to a tune of Shs14b from, among others, the ministries of Finance, Local Government and a dozen district administrations, majority made false declaration of VAT in their monthly VAT returns by excluding output tax (sales) arising from services rendered to government from their monthly VAT returns and some were not actually registered for VAT.

Tax compliance
Mr Seruma told Saturday Monitor that, “In as much as we use the IFMS to track tax compliance the law still puts the responsibility on the supplier to declare, so obviously there is bound to be some loopholes in that but we continue to engage them and following up on the matter”.

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