URA fails to collect Shs1 trillion in taxes

Uganda Revenue Authority (URA) has come under fire for not collecting up to Shs1 trillion from Uganda’s gold exports, Sunday Monitor can reveal. 

The revelations, unearthed by Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) on Friday, showed that Shs340.56b in taxes went uncollected by the taxman from exports of the precious metal in the Financial Year (FY) 2021/2022. 

URA failed to collect Shs616.587b in taxes on gold exports in previous FYs.

The Auditor General’s report for FY2021/2022, spotlights the failures, with Mr John Muwanga—the pointsman in the Office of the Auditor General—noting that “documented step-wise processes on how the importation and exportation of precious minerals should be handled by customs officials” are conspicuous by their absence.  

“Whereas other mineral exports such as iron ore, vermiculite, marble, rare earth metals and salt were captured in the ASYCUDA world customs clearance system, I noted that the exportation of gold was being facilitated manually, with only two entries captured during the year under review,” Mr Muwanga wrote, adding that it is curious that gold exports are “not embedded in the customs business compendium despite [it] being of high value.”

ASYCUDA or Automated Systems for Customs Data is a computerised customs management system used to put a finger on the pulse of customs declarations and accounting procedures. 

In doing so, it generates trade data that can be used for statistical economic analysis.

Taxman responds
In its defence, the taxman’s top brass told Cosase that enforcement of the Mining Bill (Amended) 2021 that imposes a five percent and 10 percent levies on unprocessed and processed gold respectively has not been uncomplicated.

“Following that law being passed, the gold exporters stopped exporting any gold … they appealed to the Ministry of Finance, saying the new levy was prohibitive to their business [because] it would not make business sense for them to pay 10 percent on unprocessed and five percent on processed gold and still find market for their product,” Mr John Musingunzi Rujoki, the URA commissioner general, told the committee.

He proceeded to reveal that the Finance ministry asked the taxman to stay the implementation of the tax regime, reasoning that “government would undertake to change the rate to a more favourable rate for the sector after consultation with the sector. So that points to the reason why we could not collect.”

It was not until after nearly a year, the URA commissioner general disclosed, that changes were effected. This was after the Energy ministry came up with a statutory instrument to offer guidance on tax collectable from gold exports.

“The new rate was $200 (about Shs729,000) per four kilogrammes,” Mr Rujoki revealed, adding, “We issued demands for the companies that had made exports over the previous year to pay this, but the companies immediately rushed to court and the court issued an injunction.” 

The injunction told URA in no uncertain terms, Mr Rujoki said, “not to enforce these arrears because of these appeals.” 

Ms Patience Rubagumya, the commissioner of Legal Services at URA, told Cosase that the court order was issued on “April 4, 2023 and it was extended to September 24 this year.”

Tribalism, nepotism
Cosase has resolved to invite and engage other stakeholders in a bid to understand, Mr Joel Ssenyonyi, its chair said, why gold exporters are insulated from paying tax when the working poor are not. 

The Cosase chair also expressed his dismay at perceived tribalism and nepotism at Uganda’s top tax body. 

He specifically noted with concern that six out of the eight top brass “are actually from one region of the country.” 

The Nakawa West lawmaker read out the top brass that has Mr John Musinguzi Rujoki (the commissioner general); Mr Richard Kariisa (the commissioner of corporate services); Ms Patience Tumusiime Rubagumya (commissioner of legal services); Mr Abel Kagumire (the commissioner of customs); Ms Sarah Chelangat (the commissioner of domestic taxes); Mr Denis Kugonza (the commissioner of tax investigations); and Mr Robert Mutebi (commissioner of information technology and innovation). All but the latter two hail from one region.

“Things like these become problematic,” Mr Ssenyonyi said of the perceived tribalism.

It was also discovered that Mr Julius Rubagumya Ahimbisibwe, the assistant commissioner of customs external operations, is the husband of Ms Patience Tumusiime Rubagumya, the commissioner of legal services.

Cosase said it will have an interface with the URA board of directors to, among other things, establish the process used to recruit and elevate staff. 

“There is a lot of transformational effort that is going on in our organisation,” Mr Rujoki said, brushing off the tribalism and nepotism claims.

Unutilised funds
The taxman was also faulted for its failure to utilise Shs60b as planned. On Thursday, Cosase members pressed URA officers for specific explanations regarding the unutilised funds, which had been allocated in the budget.

During the inquiry, Mr Ferigo Kambale (Kasese Municipality) pressed Mr Rujoki on the circumstances surrounding URA’s failure to utilise the funds despite having a procurement plan in place prior to the budget approval.

“If the procurement plan was approved, which should have been used for these procurements, how is it possible that over Shs60b was left unutilised?” he questioned.

In response, Mr Rujoki attributed the matter to the outbreak of the Covid-19 pandemic, which disrupted their procurement plans.

He explained that the majority of the items on the procurement list were intended for the IT department.

The URA top boss went on to reveal that pandemic-related delays and supply chain disruptions meant that the necessary materials, particularly micro-chips, could not be acquired.

Mr Rujoki further emphasised the challenges faced in purchasing vehicles due to the pandemic’s impact.

“Buying vehicles in large quantities has also been hindered due to the disruptions caused by the pandemic. Additionally, there were internal challenges, particularly in our IT systems,” Mr Rujoki told the committee.

Mr Muwada Nkunyingi (Kyadondo County East) noted that there is need to investigate URA’s delayed initiation of procurement that led to failure to absorb the funds. 

Ms Diana Kisaka, URA’s assistant commissioner for finance, reported that there is a list of items that took longer than was unexpected and they were not able to absorb the funds.

“Indeed, in some rare cases, the procurement did not start in time, but those are really rare, mostly because the process took really longer,” she said.

Other concerns
The developments on Friday capped what has by all accounts been a tumultuous week for the taxman.

On Wednesday, its top brass was booted out of a Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (Cosase)  session after submitting inconsistent documents in regard to queries concerning land that was procured.

Mr Ssenyonyi was forced to call off the probe into circumstances under which URA procured 1.563 hectares of land. The said land was procured at Shs443.9 million, using “direct procurement without the approval of the contracts committee.” Cosase says this is contrary to the Public Procurement and Disposal of Public Assets (PPDA) Act, 2003.

The Auditor General’s report addressed the issue, noting that “whereas management had not budgeted for funds for land purchase during the period under review, Shs443.93 million was paid for the land, resulting in an unauthorised excess expenditure on the land of Shs443.94 million.”

The report also shows that the same land was secured without involving Uganda Land Commission (ULC).

URA’s top brass also laboured to explain the circumstances under which Shs101.5b was received from United Nations Capital Development (UNCD). The taxman also got $113,555 (about Shs414m) from the World Bank without the knowledge and clearance of Parliament. 

The House committee also heard that in FY2019/2020, the taxman registered an unspent amount of ShsShs34.711b. This amount was not returned to the Consolidated Fund as required by law. URA’s top brass told lawmakers that it had sought and got the clearance of the Ministry of Finance over retaining the said money.

Parliament is also looking into why URA only managed to execute 227 tax compliance audits against the planned 493 tax compliance audits of the same year under review. This translated into a 46 percent performance.

Whereas URA budgeted for Shs112.42b for getting IT systems, eight IT projects costing Shs2.5b were not implemented within required timelines.

It is worth noting that URA, during the FY2021/2022, set a revenue collection target of Shs22.802 trillion but only managed to collect Shs22.098 trillion, indicating a shortfall of Shs704.55 billion.

Tribalism
The Cosase chair also expressed his dismay at perceived tribalism and nepotism at Uganda’s top tax body.

He specifically noted with concern that six out of the eight top brass “are actually from one region of the country.” 

Additional reporting by Tom Brian Angurini.

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