MPs call for investigation into steel sector

Apr 07, 2017

A number of steel companies are reportedly evading billions in tax.

PIC: A machine operator in a steel milling factory. (File photo)

Bukooli county Member of Parliament, Gaster Mugoya, has moved a motion in parliament to investigate allegation of tax evasion in the steel sector.
 
According to Mugoya, a number of steel companies are evading billions in tax through non-invoicing of local and export sales, partial invoicing, as well as misclassification and under declaration of imported steel products. He moved the motion on March 15, 2017.
 
In a document New Vision has seen, Mugoya says the steel companies are also depriving the national treasury through under declaration of PAYE and what he called invisible financial transactions.
 
"Whereas the steel sector has potential to greatly contribute to the development of the country, this is not the case because of chronic and systematic tax evasion prevailing in the sector," Mugoya said.
 
Uganda currently has 12 registered steel mills with a combined production capacity of five hundred thousand tonnes per annum, and more than twenty three steel manufacturers and importers.
 
Data from the ministry of energy shows the country's reserves boast of more than 200 million tonnes of hematite iron ore and 60 million tonnes of magnetite iron ore in the West and South Eastern parts.
 
Mukoli says most of the steel companies are also evading tax through concealed transactions and documents, undocumented supply of finished steel products as payment for scrap and non-invoicing of scrap deliveries.
 
Under the Uganda income tax Act, the value added tax Act, Excise Tariff Act and the East Africa Management Act, 2004, all persons operating businesses in Uganda are obligated to pay tax.
 
Section 3 of the Uganda Revenue Authority Act also mandates the tax body to assess and collect taxes, as well as account for all revenues to which the tax laws apply.
 
Previously, government has initiated a number of laws aimed at protecting the domestic iron and steel mills against unfair competition from cheaper imported products, especially from COMESA.
 
Dealers and manufacturers however say their biggest competition consists of imports from China, Egypt and Spain, which flood the market and chock local manufacturers on loses.
 
In its latest review of the country's mineral sector, the ministry of energy and mineral development said Uganda has a combined iron ore deposit of close to 300 million tonnes.
 
According to experts, 80% of works required to realize Uganda's vision 2040 will be in the construction sector, and take off of substantial projects has already happened.
 
In a telephone interview with Jim Kabeho, the Uganda iron and Steel Manufactures' Association (UISM) secretary, he said the association received a letter from president Museveni and consequently met with officials from URA last week.
 
He said the president's letter was complaining about the massive evasion of taxes through importation of iron bars and plastics disguised as raw materials.
 
"It's true that some companies may have engaged in unscrupulous methods of work, but this is not representative of the entire industry. Therefore, in the meeting with URA, we agreed that the tax man should do audits on all of us, to establish our compliance levels," he said.
 
Roofings' economic advisor, Dr. Martin Kyeyune said in a phone interview that many of the large manufacturers and importers have an open book policy and adhere to tax compliance.
 
"We saw the president's letter but many of the big manufactures like Roofings have an open book policy. It is also true that there should have been a few unscrupulous companies that engaged in messy dealings, but overall, the industry is compliant," he said.
 
Repeated efforts to reach URA‘s assistant commissioner for public and corporate affairs, Vincent Seruma, were fruitless as calls went repeatedly unanswered.

 

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