The government of Uganda has asked Parliament to exempt 8 companies and individuals from paying taxes worth Shs13.391Bn, citing reasons like effects of Covid-19 pandemic on their businesses and ill health.
This is despite a recent report revealing that Uganda lost over Shs12Trn in 5 years through these tax waivers.
Appearing before Parliament on Tuesday, Henry Musasizi, Minister of State for Finance, listed the beneficiaries of the latest tax waivers as; Nkumba University, J2E Investment Corporation Limited, Nicontra Ltd, Kisiizi Hospital Power Ltd, Busoga University, Makerere Business Institute, Peter Lokwang and businessman Donati Kananura.
However, when Ibrahim Ssemujju (Kira Municipality) demanded details on the owners of some of the companies like J2E Investment Corporation whose tax obligation is to a tune of Shs2.718Bn, and has close ties with the Army, the Minister admitted that he doesn’t know the individuals behind this company.
Ssemujju also raised concerns over the reasons for having businessman Kananura’s tax obligation worth Shs3.776Bn waived off due to ill health.
“They said that this company (J2E Investment Corporation Ltd) is constructing barracks for the Army in Kaweweta, but because Government delayed to pay it. Government wants taxpayers to pay on behalf of this company its taxes because it has interests. What is shocking, UPDF these days has contracts in the construction industry, it is constructing stadia, and roads but when it comes to constructing the Army barracks, there is only one company doing that job,” said Ssemujju.
MPs also raised questions on the criteria used to award these tax waivers to which Minister Musasizi explained that if any taxpayer feels the need to benefit from the waiver, they submit your request to the Commissioner General of Uganda Revenue Authority & section 40(1) of the Tax Procedures Code Act gives the powers to the Commissioner General to recommend taxpayers for tax waivers.
“Where the Commissioner is of the opinion that the whole or any part of the tax payable under the law by the taxpayer can’t be effectively recovered, by reason of hardship, impossibility and due difficulty or excessive cost of recovery, the Commissioner may refer the taxpayer’s case to the Minister. And when the Minister receives the case, the law requires that we submit the case to Parliament and it is on this basis that I submitted a request,” explained Minister Musasizi.
Hon. Patrick Ocan (UPC, Apac Municipality) said the absence of audited accounts and articles of association for the company made it questionable to grant a waiver.
“Today, the minister has presented to us non-existent companies. If they are existent, I am sure the minister can provide the necessary documents for this company. How can we process a waiver for a company that is not known? How do we ascertain reputation and credibility?” Ocan asked.
Kira Municipality MP, Hon. Ibrahim Ssemujju and Hon. Maximus Ochai (NRM, West Budama County North) put the minister and URA to task on the procedures that were followed in granting tax waivers to selected companies.
Hon. Jane Pacuto (NRM, Pakwach District Woman Representative) wondered on why the companies were granted a 100 per cent tax waiver.
“I need a clarification on whether or not, an entity or individual must meet all the criteria or part of the criteria, to qualify for a waiver. The minister also chose to waive 100 per cent and I want to know why they chose to go that direction,” Pacuto noted.
Sarah Chelangat, the Commissioner Domestic Taxes at URA said applications for tax waivers are received and assessed on a case by case basis adding that companies are granted a grace period within which to pay the tax.
“We also look at the big picture in terms of the impact of this business on the community it serves. Businesses like universities employ families, so we consider that if this company gets a relief, it can continue paying more tax in the near future,” Chelangat said.
She also clarified on the matter of audited accounts.
“When a tax payer is doing a self-assessment return, they normally summarise all their account information in their tax returns. Sometimes, assess based on third party information whereby if you work with a ministry, we can get the information from that ministry,” Chelangat added.
The Committee Chairperson, Hon. Amos Kankunda, asked the minister and URA to present the requisite information on M/S J2E Investment Corporation Limited to the committee before a final report is made on its waiver.
Other individuals listed for a tax waiver are Donati Kananura, who as at 12 September 2023 sought a waiver on rental income tax amounting to Shs1.69 billion and a waiver on Value Added Tax amounting to Shs2.08 billion.
Legislators noted that grounds on which URA granted the tax waivers including health and advanced age were not justifiable.
“I want to withdraw Donati Kananura from my list so that we limit debate on the matter. We will find another way of rescuing him,” Musasizi responded.
