Uganda: Grant of Tax Waiver to Companies Queried

Kampala, Uganda — Legislators on the Committee of Finance have questioned the manner and criteria the Uganda Revenue Authority (URA)is using to extend tax waivers to companies and individuals.

While appearing before the committee, the State Minister for Finance (General Duties), Henry Musasizi said the tax waivers will be extended to eight organisations which include academic institutions and business entities.

Musasizi was appearing before the committee on Tuesday, 20 August 2024.

Among the companies under review by the committee is M/S J2E Investment Corporation Limited which is seeking a tax waiver worth Shs2.718 billion as at 01 December 2023, accounting for interest accumulated.

M/S J2E Investment Corporation is carrying out works at Kawewe6a Military Training Barracks.

The minister revealed that in December 2019, the Defence Ministry requesting for the waiver.

“This is because during the implementation of the works, the contractor faced investigations from the Inspector General of Government and suspended all works and payments from Ministry of Defence. This resulted in penalties and interest,” Musasizi said.

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, Ibrahim Ssemujju and 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.

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, 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.

The other entities presented before the committee for tax waivers included M/S Nicontra Limited, Busoga University, Nkumba University, Makerere Business Institute, Kisiizi Hospital Power Limited, and Mr. Peter Lokwang, a dealer in limestone mining in Moroto District.