New Vision (Kampala)
September 9, 2003
Posted to the web September 9, 2003
Felix Osike
Kampala
The Auditor General has unearthed a loss of billions of shillings in tax evasion and fraudulent dealings involving Uganda Revenue Authority (URA) staff.
In a special audit report dated November 29, 2002, the Auditor General (AG), John Muwanga, discovered massive fraud at customs entry points in Entebbe, Busia, Arua, Malaba and the URA headquarters in Nakawa, Kampala.
The AG also detected ghost policemen in the URA payroll. "A sum of sh50.4m on policemen's weekly guard allowances was fraudulently paid to ghost Police constables (sh36.7m) or was never received by the intended policemen in question (sh13.6m)," says the 12-page report.
URA commissioner for tax education and public relations Christopher Kawesa declined to comment on the matter.
In one of the cases, URA paid US$54,000 (sh108m) to a consultant to develop an information technology strategy and another US$15,000 (sh30m) to update it but the project never took off.
The AG queried sh42.8m URA paid to renovate the former Coffee Marketing Board premises in Bugolobi, which it does not own. The building was allocated to Tristar Apparel Ltd, a company exporting garments to the United States.
He said he had neither been provided with copies of the cabinet minutes allocating the premises to URA nor letters from the finance ministry allowing URA to carry out the renovations before finalising the legal ownership. Besides, no accountability for the funds was submitted for audit.
The report said the former URA board secretary, James Byamukama, caused financial loss of sh137m to URA in 2001.
Byamukama confiscated $63,500 (sh112m) from a local company at Entebbe Customs point. The money later disappeared and the company (Fair Construction Ltd.) sued URA.
Muwanga said the board secretary acted contrary to the Customs Management Act, which requires seized items to be held in customs bonded warehouses or other secure places.
"I have advised management to strengthen the systems and to have the officers responsible for the loss held accountable and funds recovered," Muwanga said. Byamukama's whereabouts are unknown although he was initially reported to have fled the country.
URA also paid sh471m to two firms for the supply of 10 double cabin pick-ups without the Board's approval and contrary to the regulations on competitive bidding.
The AG unearthed tax evasion and under-valuation of goods. Goods worth sh222m were not traced to the bonded warehouses registers. Stations involved were Bond 196 Shumuk Investments Ltd (sh80m) and Jinja customs (sh103m). Some of the goods were diverted for home use without payment of taxes.
At Port Bell station, there was under-valuation of goods to the tune of sh72m leading to undercollection of revenue amounting to sh76m.
In Malaba, sh80m was paid out as a settlement of judgement for a suit which arose as a result of URA staff fraudulently allowing a local company to use another company's register to clear a consignment of cigarettes destined to the Democratic Republic of Congo.
The officer implicated in the case has been re-instated after his services were initially terminated. At the same station (Malaba), there is reported tax evasion of sh800m dating back to 2000.
Tax arrears amounting to sh5.5b including sh4.1b owed by government institutions remained outstanding at the close of the 2001/02 financial year. Examination of accounts also revealed that sh966m was not collected from a construction and engineering company.
At least sh235m collected from Nakawa Inland port as non-tax revenue and sh54m realised from the sale of auctioned items to recover taxes due to customs and excise departments was not remitted to the Consolidated Fund Account contrary to regulations and is feared embezzled.
Another sh497m advanced to URA's staff has not been recovered. It was also noted that money was advanced to non-URA staff. There were no files and contracts entered between URA and the sundry debtors.
Imprest worth sh657m also remained unaccounted for at the time of audit. Included in this figure is sh35m classified under SRPS. The AG said from July 2001 to February 2002, sh1.9b was spent on the Special Revenue Protection Services (SRPS) to facilitate its operations.
Muwanga questioned the legal and operational framework of SRPS. He said the funds were not budgeted for and the sh1.9b was reportedly paid on verbal instructions from the finance ministry, leading to over-expenditure.
It says SRPS appears to have its own rates of subsistence and other allowances and the accounting system they use is poor.
URA also lost Value Added Tax of sh393m, which was not deducted from the sh2.3b paid to Spencon Services Ltd, the firm that constructed the Ministry of Health headquarters building in Kampala. The payment was not reflected in the subsequent returns to URA.
A further sh277m relating to payments made to a firm for construction of valley dams was not recovered.
In addition, recoveries of withholding tax amounting to sh64m which were retained by the ministry, could not be confirmed since the receipts had disappeared.
The AG queried an expenditure of sh858m paid for servicing URA vehicles in the last financial year alone. No registers were availed to show the location, ownership and condition of the vehicles.
There were also doubtful cash payments of sh257m purportedly for casual labourers for the period July 2001 to June 2002.
Records examined also showed that from April 1999, URA lost cases worth sh2.9b. The AG was not shown evidence that the sh3.1b due from cases won had been collected.
Quarterly internal audit reports also revealed missing receipts, outstanding VAT on donor funded projects (sh366m), other VAT arrears of sh2.1m and income tax of sh5.1m at Arua customs and internal revenue office.
Similar weaknesses were also reported in the internal revenue department, Mbale, where a company had income tax arrears of sh4.7b while other taxpayers owed sh126m.
