URA debts worry Auditor General

Jul 15, 2013

AN analysis of Uganda Revenue Authority (URA) accounts has established that the tax body has accumulated over sh44b in debts and unrecovered funds

By Chris Kiwawulo

AN analysis of Uganda Revenue Authority (URA) accounts has established that the tax body has accumulated over sh44b in debts and unrecovered funds, which auditors fear might be lost.

Auditors established that URA had not collected sh31.4b in accumulated tax arrears from the Government and sh8.1b from individuals and companies.

Investigators also found uncollected debts worth sh2.1b in sundry and bounced cheques, of which sh1.7b was owed by four firms and individuals for up to 11 years. Uganda Grain Traders Limited was the biggest debtor, with rent arrears of sh1.6b since 2002.

The others are; United Nations Development Programme (UNDP) with a debt of sh75.2m since 1991, while Fredrick Kitoogo and James Byamukama owe URA sh6.4m and sh36.4m respectively, and their debt has been outstanding since 2003.

The findings were contained in the Auditor General, John Muwanga’s annual report on statutory corporations for the year that ended June 30, 2012.

URA, however, explained that they were following up on the money and had dragged Kitoogo and Byamukama to court for non-payment. Without giving details, URA said the finance ministry was expected to pay the sh1.6b owed by Uganda Grain Millers Ltd.

An evaluation of ASYCUDA (customs computer system) showed that customs entries of sh1.2b were still outstanding by June 30, 2012, with some of them having been outstanding since July 2011.

“These outstanding assessments arose because of additional tax being assessed after post clearance audits, amendments to entries and availability of new information necessitating adjustments on the taxes for particular entries,” Muwanga stated.

The tax body was found to have collected sh760.9m that was posted to ledgers, but it was not credited on respective bank statements in the various banks as at June 30, 2012. 

The banks were; Orient Bank – Airport branch, Standard Chartered Bank Speke Road, Barclays Bank, Mukono and Bank of Uganda.

“There is a risk that these balances may not be recovered because of possible use of forged bank slips,” noted Muwanga.

But URA explained that save for sh67m at Bank of Uganda, they still considered the balance of sh693.8m as recoverable and that they were pursuing the matter. It was established that URA has several bank accounts in former Uganda Commercial Bank (UCB) and the defunct International Credit Bank (ICB) with balances of sh467.2m. 

The Auditor General was, however, highly skeptical that the money would ever be recovered given the time lapse.

“While ICB was taken over by Bank of Uganda and its assets disposed off, UCB was privatised in 1997 and taken over by Greenland Bank (through Westmont Land Asia Berhad). It was, however, noted that revenue on these bank accounts was not remitted to the Uganda Consolidated Fund (UCF) after the takeover and sale of the two bank assets,” he stated.

URA obligations

Auditors established that URA has not remitted over sh10b to National Social Security Fund (NSSF). In 2005, an audit showed that URA owed NSSF sh7.4b, including interest of sh767.1m. 

Then, URA had agreed to make annual payments of sh1b for seven years to offset the arrears, but the amount with interest is simply accumulating.

“The interest expense is deemed nugatory as it could have been avoided had the authority paid NSSF funds in time,” observed the Auditor General.

URA also has a liability of sh306.3m in accrued rent following the authority’s delay to pay for a period of between two to 39 months.

“There is a risk that property owners may resort to legal redress, resulting into unnecessary costs,” commented Muwanga. However, URA had paid rent of over sh1b in advance.

URA assets

According to the report, the authority had fully depreciated assets, particularly plant and machinery, motor vehicles, motorcycles, office equipment, floating craft and computer equipment, which had not been revalued to reflect their current value in use. 

Also, properties including floating crafts, land and buildings in Goli, Jinja and Oraba had expired leases or the legal titles of ownership missing.

URA lacked well established parking yards at customs offices in Elegu near River Aswa, as well as at Mutukula and Lwakhaka in eastern Uganda.

The goods’ verification bay at Lwakhaka was found in a poor state with broken parts.

A new block at Ishasha River customs office had cracks both inside and outside at the skirting level, while the concrete screed on the verandah was peeling off, an indication of poor workmanship. 

Besides, no fumigation was done, which enabled bats to settle in and the roof was leaking, thereby damaging the ceiling.

Tax evasion

Auditors established that vehicle registration number UAA 530X, which was meant to be part of a trailer that transported Portland cement to Southern Sudan via Oraba border post from Kampala on April 13, 2012, belonged to a Mitsubishi L200 pick-up of only 2,690 tonnes.

“The goods involved had been bonded for sh999,582. Given the weight of what was being exported, it was not possible that the pick-up could be used to transport it. It is likely the number plate of the pick-up was fraudulently used to register the reported exports which never took place,” he said.

Also, auditors found several cases where tax investigations were not followed and concluded, exposing the Government to a risk of losing revenue. Muwanga cited PAPCO Industries Ltd. which was supposed to pay Value Added Tax for August 2011 of sh62.4m in two installments, but issued two cheques which bounced.

The Auditor General said the Government risked losing the taxes since the directors and signatories to the dishonoured cheques were said to be on the run after selling PAPCO to Uganda Pulp and Paper Mills.

Auditors also found Jinja customs bonded warehouses storing prohibited goods, among them two consignments of acid valued at sh41.8m that was being kept, contrary to regulations.

Additionally, auditors found a land cruiser which had been impounded and coils of steel rods used in the nail manufacturing being stored in a bonded warehouse, but had not been entered in the warehouse register; meaning they could easily be taken away without paying taxes.

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