Tax evasion cited in delayed city arcades reopening

Men hawk fruits and vegetables on a deserted Kampala street recently

Kampala- Besides failing to meet public health and safety standards as one of the conditions for reopening city arcades, owners are also evading taxes, sources have told Daily Monitor.

A source privy to the discussions between government and arcade owners for reopening the buildings said arcade owners have been under declaring their rental income to Uganda Revenue Authority (URA).

The source said the tax evasion issue was raised during the meeting between Trade minister Amelia Kyambadde and traders last week but the matter was referred to Cabinet to take a decision today.

When contacted for a comment yesterday, Mr Issa Ssekito, the Kampala City Traders Association (Kacita) spokesperson, confirmed the tax evasion allegation, but said it was one of the reasons they are demanding reopening of the arcades.
Mr Ssekito said they will be able to tell the compliant and non-compliant landlords on both their tax obligations and enforcement of the Covid-19 standard operating procedures.

“That has been a common complaint. We are also asking that how will you know the number of tenants in a shop if it is not open? You open the arcades so that you can compare and deduce the tax,” he said.

Mr Vincent Seruma, the URA head of communications and corporate affairs, said they had previously given landlords the responsibility to assess and declare their rental tax after deducting their expenses but the latter abused the system.
Mr Seruma said they received more complaints from tenants about landlords charging higher rent and issuing them receipts reflecting less payments.

He said this forced government to gazette rental tax rates for different parts of the city, including the arcades because denying the tenants legitimate receipts was wrong and putting them in a situation where they could not defend their true expenses to determine their taxable income.

“That is why we came up with the electronic invoicing system where any tax return without the proper invoice will not be accepted. It must have the taxpayer’s name and tax identification number. It is important because it helps the landlord declare the proper amount,” Mr Seruma said.

He added that it helps the tenant to be able to compute and determine the taxable income after their expenses, which was not the case when the landlords do not provide the receipts.

Mr Fred Enanga, the police spokesperson, told Daily Monitor yesterday that besides crowding tenants in shops, the multiple, uncontrolled entry and exit points, the closure of more than 200 arcades, had exposed how the arcade owners have been verbally forcing their tenants to pay rent of Shs2m but issuing them receipts of Shs300,000.

However, Mr Enanga said the tax liability is not a police concern and cannot constitute the reason they stopped the arcades reopening last Friday.
“Police have nothing to do with tax collection but it is true that the lockdown enabled us to know the tax fraud which has been going on where a landlord charges rent of Shs2m and gives the tenant a receipt of Shs300,000,” he said.
Mr Enanga said this will help URA come up with better audit processes for the arcade owners, sensitise them and the tenants to ensure the buildings have suitable working environment for businesses that adheres to public health and safety standards.

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