$480M LOST TO INSIDER FRAUD, TAX EVASION ABETTED BY URA
$480m lost to insider fraud, tax evasion at URA
• The EastAfrican has obtained confidential documents that show the country lost the money in the space of five years through a web of graft and other fraudulent practices, and that some officials who seem to be either too powerful or too well connected for top management to discipline, have hijacked the powers of their superiors.
• Staff members named in this racket continue to work at the tax body despite calls for investigations and an interdiction issued by Commissioner General Allen Kagina over their conduct in April last year.
• URA board chairman Gerald Ssendaula confirmed that internal rackets were indeed causing tax leakages.
• The gravity of the matter has now caused the Inspector General of Government to investigate how this loss was occasioned before going after the beneficiaries and culprits.
Insider fraud and tax evasion syndicates at the Uganda Revenue Authority, operating with senior management’s knowledge, have cost the country close to Ush1 trillion ($480 million) in lost revenue.
The EastAfrican has obtained confidential documents that show the country lost the money in the space of five years through a web of graft and other fraudulent practices, and that some officials who seem to be either too powerful or too well connected for top management to discipline, have hijacked the powers of their superiors.
Staff members named in this racket continue to work at the tax body despite calls for investigations and an interdiction issued by Commissioner General Allen Kagina over their conduct in April last year.
The documents of an audit reveal that a big chunk of the money — over Ush800 billion ($327 million) — was lost in fraudulent VAT deferment since 2010.
VAT deferment relates to business entities that apply for its remission or those that import plant machinery and equipment, and are given a future date to pay VAT to URA’s domestic taxes department once they start producing goods and services.
The audit questions the basis of this waiver, and concludes that the government lost revenue due to fraudulent clearances. e
“There is no legal basis for VAT deferment. Section 40/4 of the VAT Act 1996 states that upon written application by a person liable for tax, the Commissioner General may, where good cause is shown, extend the time for payment of tax.
“In regard to plant and machinery, an amendment was inserted in 2003 to the effect that, notwithstanding the dates when the tax is due, the minister may by regulation prescribe the terms and conditions of payment of tax,” one document reads, concluding that URA’s failure to follow up and collect the taxes under the deferment in question, violated Section 40/4 of the VAT Act.
The documents further reveal that, while the minister had, since 2003, not issued a legal instrument to enable importers of plant machinery and equipment to benefit from VAT deferment, officials at the URA had knowingly invoked the waiver for certain importers.
URA board chairman Gerald Ssendaula confirmed that internal rackets were indeed causing tax leakages.
“That’s true, but we need to sit down and look at your information when I return,” said Mr Ssendaula, in a phone interview with The EastAfrican last week.
However, Mr Ssendaula, a former minister of finance who assumed the chair at URA in 2010, promising to plug such leakages and widen the tax base, said information relating to beneficiaries of VAT deferment needed to be put to further scrutiny.
“We need to be very sure and well informed about this one. It could be that these are concessions where the government pays on behalf of the company. We’ve also internally expressed concern, but we need to find out more,” he said.
The gravity of the matter has now caused the Inspector General of Government to investigate how this loss was occasioned before going after the beneficiaries and culprits.
Besides the irregular handling of the VAT postponement, another tax fraud is raising eyebrows. One Experito K. Kisekka on August 17 filed a notice at the Chief Magistrates Court, seeking to sue the URA Commissioner General.
The notice accuses Ms Kagina of neglect of “her statutory duty of control and supervision of other officers and staff of Uganda Revenue Authority.”
It details the cavalier manner in which the URA staff members aided 116 ineligible importers between 2008 and 2010 to benefit from tax exemption, coded as CPC 450 under the East African Community Customs Management Act.
The importers brought in goods whose cost insurance and freight value was Ush734.4 billion ($300 million), attracting Ush184 billion ($75 million) in taxes, which the country lost under the watch of Ms Kagina, the notice says.
“We support this suit because our concern is that some URA officials are exploiting this for their own benefit. Some of them abuse their positions and impound or destroy goods of importers who pay taxes. These irregularities compromise every ethical practice. It is our resolve that if the irregularities are not investigated and action taken, we will start a campaign to discourage our members from payment of taxes,” said Issa Sekitto, spokesman of the Kampala City Traders Association.
Last month, the Special Investigations Unit of the Uganda Police also opened an inquiry into how the goods were allowed into the country without being declared as raw materials or appearing on the approved list of Uganda’s raw materials and industrial inputs published in the EAC Gazette under legal notice No. EAC/10/2007.
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