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By Mulengera Reporters

A confidential Government of Uganda (GoU) report has exposed glaring loopholes in tax collection by URA resulting into the NRM government’s revenue collection targets aimed at growing tax to GDP ratio to 16-18% by 2024 (as elaborated in both the NDP III & the Domestic Revenue Mobilization Strategy). Authored by auditors and monitors from the Margaret Kakande-led Budget Monitoring & Accountability Unit (BMAU), the 21 page report was aimed at identifying interventions the GoU (through the Finance Ministry) can undertake to improve revenue collection in order to boost budget performance and generally service delivery in the country.

Gen Museveni has always written strongly-worded letters expressing his fury at URA which he says collects less taxes than it should ideally be collecting largely because of lack patriotism, corruption, criminal collusion and inefficiencies among its officials. And the inquiry by BMAU (the first of its kind into URA) was also partly aimed establishing the extent to which Gen Museveni’s claims are true. The findings are shocking whereby it’s confirmed that a combination of corruption, inefficiencies and institutional weaknesses at URA is responsible for wide spread “leakages” in tax administration which annually cost the GoU hundreds of billions.

In operation since the FY2008/19, BMAU has always concentrated on assessing budget performance basing on the expenditure side without doing a thing about the equally very important revenue collection side. And Mulengera News understands that this apparent omission had always resulted from the fact that powerful technocrats in the Finance Ministry, desiring to protect URA inefficiencies, always intervened while objecting to the same. But with Gen Museveni and donors consistently insisting having the rot unmasked, those fermenting corruption and inefficiencies at URA will have nowhere to hide anymore. A torch of scrutiny will annually have to be shone onto them so that their cobwebs get to be seen by all as the fearless and incorruptible BMAU monitors keep going after them.

The BMAU auditors and monitors reviewed literature on URA and UNBS websites to obtain some of the relevant information. They also visited URA, other MDAs and several big tax payers (largely manufacturers) from whose officials they obtained relevant information regarding taxes paid every FY. Focus was on the FY2019/2020 (which ended on 30th June 2020). The BMAU investigators obtained records from each of the more than 100 large taxpayers covered under the survey and compared the same to what URA has been disclosing in its records. In many cases, the manufacturers/big taxpayers claimed parting with much more than what is eventually or actually disclosed in URA records.

The investigators concentrated on local excise duty (LED payable on the sale of goods and services), VAT and Pay as You Earn (PAYE) which were chosen because they are considered to be indirect (for LED & VAT) and easy taxes to verify. They all fall under the domestic taxes category which in the FY under review accounted for Shs10.3trn (or 62%) of the total Shs16.8trn that was actually collected out of the Shs20.3trn which had been set as the target. The Shs16.8trn (which is 82.34% of the Shs20.3trn target) comprised of both domestic and international trade taxes (off imports) which brought in mere Shs6.4trn (or 38%). Whereas PAYE, which is the 30% of every employees monthly pay, is a direct tax, the other two (VAT & LED) are indirect only realizable through the sale of goods and services. The BMAU report indicates that it was important to concentrate the inquiry on domestic taxes (VAT, PAYE & LED) because they form the larger proportion of the URA tax collection mandate.

Because of time and resource constraints, the BMAU investigators concentrated on just a few players in the manufacturing of beers (5), soft drinks (17), sugar (12) and bottled water (42 companies). These were considered appropriate because some of the recent URA reforms aimed at harnessing tax collection are being piloted on them including the Digital Tax Stamp (DTS) and Electronic Fiscal Receipting & Invoicing Systems (EFRIS/e-invoicing). The overall idea was to check on their tax compliance by looking at URA records in comparison to the data these very taxpayers provided as evidence of the taxes they have been paying.

The report observes that many of them are curiously undertaxed because URA no longer carries our regular physical inspection of the premises and licensing of manufacturers premises to be able to track actual production volumes. The tax body ends up relying on the declarations those tax payers make on their own which are always grossly under reported or under declared leading to under taxation. URA, whose management blames the whole thing on understaffing and underfunding, also has no control of the manufacturing facilities depriving the tax body of unfetted access to the relevant records. The report shows that without doing all these things, URA ends up under collecting when it comes to excise duty and VAT hence compromising performance, which the President has been quarreling about. “Yes some manufacturers pay taxes but have no contact information at URA [including 4 giant soft drinks and 6 bottled water manufacturers],” the BMAU reports reads in part.

There are also many giant manufacturers, who are supposed to pay billions in taxes but are not because they aren’t captured on the URA register of tax payers. Without having them profiled onto the URA register, there is no way their tax obligations can be assessed and enforced. The BMAU investigators were appalled to realized that, as URA officials continue sleeping on the job, many such big manufacturers are in the field operating, producing and exporting stuff as all their records and profiles are well captured on the UNBS register (for standards certification purposes). So glaring is the URA gap relating to this loophole that in one category the, BMAU investigators were astonished to find that UNBS register had 108 certified manufacturers of whom only 48 were captured on URA register which is the starting point when making tax collection projections. This simply means that under this alone, a total of 55 giant manufacturers (and potential large tax payers) remain outside the URA tax enforcement net!

“Three companies [namely] Janenoh, MBS Fruit Agencies and Banange Brewing Company although registered and licensed by Uganda National Bureau of Standards (UNBS) were not in the URA data base. This signifies a possible none declaration of production by the manufacturers in FY2019/20. Relatedly, some of the products on the market that could not be traced to any company for tax returns included Romis African Beer, and Malga.” The report authors suggest that NITA-Uganda (which URA’s head Johnson Rujoki Musinguzi actually chairs) should be prompted to leverage on its mandate and help to facilitate an interface between URA and UNBS databases to harness information sharing and collaboration.

Such deliberate ineptness by the tax collector explains why when it comes to manufacturers and potential taxpayers under the bottled water sub sector, URA only managed to collect Shs19bn (59%) against a target of Shs33bn regarding excise duty. Regarding VAT, under bottled water during the period under review (2019/20), Shs17bn (88%) was collected against a Shs19bn target. The BMAU investigators were appalled to realize that 12.5% of the companies reflected on the URA register as eligible to pay the relevant taxes under the bottled water category couldn’t have their physical addresses located for purposes of tax collection by URA.

This was largely because the contact information they disclosed to be their addresses for purposes of URA registration was deliberately fake and untrue. And for 90% of the companies interviewed, it turned out the information relating to how much VAT and excise duty had been paid in the period under review differed from what URA gave to BMAU which is under the Finance Ministry which politically and technically supervises the tax body. In most cases the companies claimed to have paid much higher taxes than what was captured and recorded in the URA records/database (as we shall show later in this investigative weekend news featured). The report indicates that there is a huge potential for the GoU to realize much more revenue through excise duty and VAT once the URA management becomes serious and overcomes leakages resulting from institutional corruption and inefficiency.

Yet the problem of the leakages and deliberate under collection isn’t only limited to VAT and excise duty. The report indicates it’s even worse when it comes to Pay as You Earn (PAYE). “Many of the bottled water companies reported paying more PAYE than what actually was recorded in the URA data,” the report notes adding that “5 water companies claimed to have paid more excise duty than was reported or captured in the URA records” and the same applies to sugar sub sector where one manufacturer claimed to have paid more excise duty and more VAT than what eventually was reported in the URA records. Some manufacturers, the report adds, are “misclassified” to diminish their tax obligations figure, something that deprives the GoU of a lot of revenue. This is how the report explains misclassification: “Some operators in spirits and beer were listed under soft drinks meaning they were undertaxed.”

The report discloses yet another way through which the unpatriotic actors at URA enable some would-be tax payers get away with nontax payment. That the deliberate refusal by URA to “update its register” regarding location, contacts, range of products and brands of manufacturers further erodes tax yields.” That this is applicable three of the 5 beer companies covered in the survey; 2 sugar companies and 23 bottled water makers.

“Some beer brands couldn’t be traced to any manufacturer for tax returns [and the examples given in the BMAU report include] Romis Africa Beer and Malga,” the investigators write in one of the sections of the 4 chapter report. That this negatively impacts on “URA’s ability to track, for example, the validity of tax invoices for VAT claims.”

The BMAU report also raises a red flag as to why URA isn’t very enthusiastic about licensing manufacturers’ premises, having physical control of their manufacturing facilities and records to the levels that can strengthen the collection of excise duty and VAT. This is something the report authors suggest should be inquired into more deeply. In fact, sources say that on reading the BMAU report, some development partners are demanding for a forensic audit into recent transactions at URA.


The report highlights some of the instances where the GoU is potentially losing billions of shillings resulting from tax-paying giant manufacturers paying more taxes under VAT, excise duty and PAYE than what is eventually captured or reported in the URA records. That under sugar manufacturing, the total VAT the 14 firms surveyed claim to have paid (Shs165bn) is less than was captured and reported (Shs163bn) under the URA records. “This suggests poor tracking and control of manufacturers’ records by URA resulting in under tax collection,” the report says. This variance simply means that at least Shs2bn disappeared through the tax collection leakages at URA. Still under sugar, the report salutes URA for collecting Shs40.10bn as opposed to the Shs36.78bn target that the GoU had set for them. This reflects a surplus collection of Shs3.31bn (9%).

The report also wonders why even when the sugar manufacturing sub sector has many players all of whom have large production capabilities, its only three companies carrying much of the tax burden. “Kakira Sugar Limited, Kinyara Sugar Limited and Sugar Corporation of Uganda Limited were the biggest contributors to both VAT (74%) and LED/excise duty (84%) of the total returns for the sugar sector. The remaining nine sugar companies combined raised less than 30% for VAT and LED for the sector. Moreover, their capacities are not so varied from those of the leading three producers.”

It adds: “Variances were noted between URA records for excise duty for five companies out of the twelve. Although, the recordings under URA were higher and there was a risk of poor performance of excise duty because of failure to have proper disaggregated data by the manufacturers resulting in under declared production levels. The DTS [digital tax stamp] had not yet been implemented for sugar manufacturers. The leading manufacturers in the sector hope DTS will reduce the untaxed sugar on the market that creates unfair competition. Uganda Farmers Crop Industry Ltd (Sezibwa Sugar) did not avail data although granted the monitoring team access to their premises. The ban on importation of sugar from Uganda into Kenya and earlier on by Tanzania affected the sales revenue for sugar.”

The 12 sugar manufacturers covered in the survey were Kamuli Sugar Limited, Sugar and Allied Industries Limited, Sugar Corporation of Uganda Limited (SCOUL), G.M. Sugar Limited, Kinyara Sugar Limited, Kakira Sugar Limited, Hoima Sugar Limited, Mayuge Sugar Industries Limited, Bwendero Dairy Farm Limited, Kyenjojo Sugar Industries Limited, Victoria Sugar, and Uganda Farmers Crop Industries Limited. And in total, they paid Shs31.581bn in PAYE for their employees during the period under review. Still the report exposes some URA ineptness on this thus: “Waganda Sugar Ltd and Horyal Investment Holding Company Ltd were licensed and active sugar manufacturing companies as per the UNBS registered yet URA doesn’t have them in its register” and this is attributed to URA inefficiency, corruption and inadequate field enforcement operations resulting from lack of funds to recruit adequate numbers of staff.

That failure to uniformly and equally tax all players in the sugar manufacturing sub sector often leads to complaints of unfair competition as players who adequately pay their taxes are disadvantaged in favour of those who beat the system and end up paying very little (if at all). The report raises a red flag regarding the billions the GoU must be losing as a result of the fact that “a lot of the sugar [produced under the sub sector] gets onto the market untaxed.”

Leaving some lucrative productive activities untaxed can be the highest form of treachery URA can commit at a time when the GoU is so desperate for money to deliver services for its citizens. And to understand this, one simply has to reflect on a few things including the fact in the FY2019/20, which is the period under review, the GoU had set for URA a target of Shs20.3trn but only Shs16.8trn was collected representing 82%. Of this Shs16.8trn, excise duty and VAT which the BMAU report faults URA for sleeping on the job about (combined) contributed Shs4.9trn (or 38%).

Clearly a major source of domestic taxes, these are indirect taxes levied on goods and services which the URA teams need a lot of hard work, commitment and patriotism to be able to maximally collect to bolster service delivery by the GoU. Due to resource constraints, the BMAU report excluded the mess around the manufacturing of cosmetics, spirits, wines, cooking oil, cement and the multi-billion transactions relating to phone talk time, telecommunications, mobile money transfers, bank charges, motor cycles and OTT.

And besides seeking to validate URA tax collection data, the BMAU investigators also reflected on the close to 200 tax clinics URA conducted in the whole country under the heavily-funded component of “taxpayer education and sensitization campaigns.” The shocking BMAU finding is that this (going into tax clinics) hasn’t been money well spent because these “were not effective at all” to the extent that majority manufacturers and business community leaders interviewed confessed never to have heard of key tax administration reforms, like EFRIS/e-invoicing and DTC, which URA claims to have been popularizing in all regions of Uganda while expending public funds.


When it comes to URA tax collection performance about beer as one of the products that were surveyed, the BMAU report shows that much as collecting Shs160bn (81%) under VAT wasn’t bad performance during the COVID period (target was Shs198bn), its possible much more would have been realized if it weren’t for the glaring leakages in the URA tax administration processes.  Still under beer, the excise duty target was Shs374bn and URA collected Shs298bn (or 79%). The collection from PAYE (30% of staff salaries) was Shs23.3bn majorly from NBL’s 708 employees and UBL’s 266 employees. The report also reflects on how much (Shs95.3bn from NBL and UBL’s Shs57.4bn) was collected from the beer production in just the last 6 months of 2020 (inspite of the COVID19 constraints) which the report says is proof the tax administration reforms like EFRIS and DTS had significant impact.

That weaknesses in URA field operations are being exploited in a multiplicity of ways including the fact that beer companies like Nutricom Ltd Kasese-based Yuti Breweries have for years been lying about their addresses and physical locations without the same being discovered and sanctioned by URA whose deployments are very thin on the ground where such transgressions occur. BMAU wonders how URA can collect all the appropriate taxes from registered companies and firms whose physical locations they have never visited since the same can’t be traced.

That without licensing premises, having physical control and control over the records, URA can simply not enforce tax obligations among many such eligible tax payers. Indeed, 15% of the 17 manufacturers appearing on the URA register couldn’t be physically located for their tax data to be reviewed and BMAU says this inability to physically contact such players “erodes tax yields.” Before licensing manufacturers for taxation purposes, URA is supposed to inspect their premises first but the same seldom happens these days due to staffing constraints.

The BMAU report notes that having been able to consistently beat the system through collusion by some rogue-minded URA staffers “manufacturers of sugar, soft drinks and bottled water [often] operate under the impression that since few of them comply with payment of taxes, they reserve the right to declare what is convenient rather than what they should actually pay based on production. They view this as an option and not duty bound to GoU.”

There are many other shocking revelations in the report including the extent to which GoU revenue gets lost as a result of the variance between what manufacturers/tax payers claim to have paid and what actually gets to be captured or registered in the URA records. For example, of the Shs1.4bn Kaliro-based Sugar & Allied Industries Ltd declared to have paid as excise duty, Shs40.4m never reached the GoU coffers. Whereas Kyenjojo Sugar Industries Ltd claims to have paid Shs137m in excise duty, the URA record captured only Shs83m and thereby another leakage through which the GoU incrementally loses revenue! On page 13, the BMAU report reflects on variances under the VAT component and equally exposes a lot of discrepancies to the total humiliation of the URA top management.

In another instance, Sugar & Allied Industries Ltd claimed to have parted with more than Shs1bn in PAYE but just Shs210m reached URA coffers; creating a variance of Shs832m! Yet that isn’t all. On page 18, Harris International Ltd is quoted as claiming to BMAU auditors to have paid Shs46bn in VAT yet the URA records show only Shs21.7bn was paid creating a variance of more than Shs24bn! On page 22 is AQUA Coolers Ltd claiming to have paid Shs153m in excise duty yet the URA record shows only Shs140m!

Elgon Bottling Company Ltd paid Shs66m yet only Shs54m reached URA coffers. GBK Water Processing Ltd paid their taxes and what finally reached URA was less by Shs3.5m. On the same page, there is a variance of Shs214m in the taxes Harris International claims to have paid under excise duty and the same stands at Shs78m regarding the Shs594m Hema Water claims to have paid in 2020. Shs11m went missing off the excise duty Hill Water paid; its Shs12m regarding Ngemeraku (Emera Water) and Nile Deliverables claims to have paid Shs544m in excise duty but the BMAU report shows that only Shs248m ultimately reached the GoU coffers.

Another glaring case of variance relates to Yaket International Ltd which claims to have parted with Shs1.8bn as payment for excise duty yet the BMAU report shows only Shs1.4bn reached the GoU coffers creating a variance of Shs370m! Ahmed Raza Foods paid more than Shs1bn yet only Shs972m reached the GoU coffers creating a variance of Shs98m. When it comes to VAT, Hema Water Ltd claims to have paid Shs1.3bn yet the BMAU report shows only Shs770m reached the GoU coffers creating a variance of Shs458m! The report doesn’t show who exactly is behind this very costly mess costing the GoU a fortune.


On page 26, the BMAU report shows that Ice Love Company Ltd paid Shs583m in VAT yet only Shs479m reached the GoU coffers creating a variance of Shs53m. Jubilee Ltd paid Shs26m yet only Shs23m reached the GoU. In another scandalous disclosure, the BMAU report refers to bottled water maker Semiliki Dairy Beverages Ltd paying Shs424m yet only Shs10.5m reached the GoU coffers creating a variance of Shs414m! Wavah Water paid Shs422m and only Shs220m reached the GoU coffers creating a variance of Shs202m. Yaket International Ltd paid VAT of Shs1.4bn yet the URA coffers reflect only Shs548m creating a variance of Shs827m. Other variances relate to VAT taxes paid by Elgon Bottling Company, Highland Water (NC Beverages), Hill Water, Jibu Corporate Uganda Ltd and Wavah Water (again creating a variance of Shs68m).

One of the many angry letters President Museveni has been writing over the years showing his fury at URA inefficiencies.

Museveni’s latest letter showing disgust with Kasaija & Doris Akol’s ineptness in tax administration



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