20 January 2013

Uganda: URA Defaulters 'Shame List'

URA publishes 314 tax payers who face possible prosecution for defaulting on their tax obligations

In a rare show of frustration, the Uganda Revenue Authority (URA) is now turning to publishing tax defaulters in the press with further threats of prosecution and further enforcement measures in an effort to force them to settle their tax obligations.

On January 11, the tax body published a long list of 314 tax payers - both individuals and companies - from whom it wants to recover more than Shs 30 billion.

The defaulters were instructed to settle their outstanding tax arrears within seven days. "Whoever will not have cleared and or entered into an agreeable repayment plan with URA by Jan.17 will be prosecuted and/or enforced upon without further notice at their own peril and associated costs," the notice read.

Normally, further enforcement entails the issuing of agency notices - instructions to commercial banks where the taxpayers have accounts to recover the money directly from their accounts. In extreme cases, prosecution ensues at the Commercial Court of the High Court Division, which could also include payment of associated legal costs and interest.

Shame list

Some of the companies listed include Prina Industries Ltd (about Shs 5 billion), Tunakopesha Ltd (Shs 1.4 billion), Savannah General Contractors (Shs 846m), Ken Investments (Shs 550m), Payless Supermarket (Shs 627 million), Victoria Flowers (Shs 301m) and Raj Stationers & General Traders (Shs 496 million). Nakivubo Stadium (Shs 388 million) is also listed, as well as Midland High School (Shs 195m), Mityana Town Council (Shs 318m), Oyam District Local Govt (Shs 501m) and Kamuli Town Council (Shs 29m), The individuals listed include businessman Mulyowa Michael Ezra (Shs 2.5b), Mundua Crispus (Shs 1.25 billion) and Edward Olowo (Shs 239 m). But even those with as little as Shs 1 million did not escape the embarrassment of being published as defaulters - a clear indication that the tax body will leave no stone unturned in its quest to collect all its debts however small.

Sarah Banage, the URA assistant commissioner for public and corporate affairs, told The Independent that the measure to publish the "shame list" was the "last resort" after all other efforts to get the attention of the defaulters had been tried to no avail.

"It is a well-known policy of URA to try to handle the affairs of our tax payers in confidentiality but we tried all other means to get them to pay but failed," she said. Asked why the tax body was now taking on this hard line stance to collect taxes, Banage said; "New challenges require new strategies." "We cannot keep on wasting time and more resources running after tax defaulters who are not responsible enough to fulfill their tax obligations. What we are now going to do as a last resort is to use the name and shame strategy, which is already bearing fruits."

Apparently, many of the tax payers never imagined that the tax body could take the drastic action to publish them in the press. But the strategy appears to have worked for the tax body. From the very day the list was published, dozens of the shamed tax payers have flocked the Debt Collection Centre at Crested Towers to sort out their tax issues. Banage said they have been reluctant to take the action because it is detrimental to credibility, which is a key asset in business. This is because financial institutions, suppliers, employees and other potential business associates take credibility into consideration before they transact business with individuals and corporate organizations. Even tax payers that were not on the "shame list" have reportedly exhibited more enthusiasm to pay up.

New challenges

Faced with incessant monthly shortfalls on its target for most of the financial year, URA is desperate to collect more money. The situation has been made even worse by the decision by key donors to withhold aid money amounting to more than Shs 200 billion because of concerns about corruption in government. In December, top URA management told journalists told journalists at a press briefing that the government had handed the tax body a new revenue target - an additional Shs 34 billion on top of the record Shs 7.2 trillion for the 2012/2013 financial year. The tax body is also reportedly under pressure from the Finance ministry to beat its target for the second half of the year, which ends in June by Shs 100 billion. This effectively means that defaulting and non-compliance would meet a very angry response from the tax man in the next few months. Like the economy generally, revenue collection is yet to recover from the economic setbacks of 2011/2012, which saw economic growth slowing to 3.2% amid challenges of lower productivity, a lower uptake of exports due to the Euro crisis, high fuel prices on the international market, imported inflation and a volatile exchange rate. However, the tax body has worked to improve its operations through the application of technology - use of online service delivery and 24-hour operations at major customs stations, which has reduced customer turnaround time from five days to 48 hours. With this commitment to make life better for taxpayers, the tax body feels it should be getting back more goodwill and compliance from the taxpayers, which will force it to take it more serious enforcement measures.

Top 15 defaulters on shame list

Institution Ammount (Shs)

1. Prina Industries Ltd 4.9 billion

2. Mulyoowa Michael Ezra 2.5 billion

3. Tunakopesha U Ltd 1.46 billion

4. Mundua A. Crispus 1.25 billion

5. Savannah Contractors 846 million

6. Payless Supermarkets 627.3 million

7. Hannington Dev't Co 597.6 million

8. Instrument Support Co 594.7 million

9. Ken Investments Ltd 557.7 million

10. Raj Stationers 496 million

11. Mugisha Jude Ltd 422 million

12. Kaba Contractors Ltd 412 million

13. Balumya Ent. Ltd 389 million

14. Nakivubo Stadium 388 million

15. Rudra Computer 373million

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