Inside Shs340 billion gold tax dispute
Officials from Uganda Revenue Authority and the Finance ministry find themselves in a spot after it emerged that they failed to collect more than Shs300 billion from unspecified gold export deals.
The Auditor General’s latest report illuminates the Shs340 billion loss “from gold exports valued at Shs6.962 trillion for [Financial Year 2021/2022].”
“I noted that a total of Shs340b in taxes had not been collected from gold exports valued at Shs6.962 trillion for the year under review. I noted that the exportation of gold was being processed manually, with only two entries captured during the year under review,” Mr John Muwanga, the Auditor General, noted in the report.
The report also indicated that “[the taxman] attributed non-collection to the [Finance] minister’s statutory guidance of staying the implementation of the five percent export levy.”
In July 2021, the government imposed a levy of five percent on every kilogramme of refined gold and 10 percent on unprocessed gold for export.
When Parliament passed the Mining and Minerals Bill, 2021, last February, a new taxing regime that inter alia imposes a levy of $100 (Shs360,000) for each kilogramme of refined gold exports was supposed to kick in. The five percent levy was, however, stayed by URA at the behest of the Finance minister.
Efforts to reach Mr Matia Kasaija, the Finance minister, were futile. Mr Jim Mugunga, the ministry’s spokesperson, however, told this newspaper that there was no directive to the taxman to exempt anyone from taxes.
“The minister did not say, ‘don’t collect.’ If the letter to URA said ‘stay’ that doesn’t mean exempt. I think that they meant to hold off the collection of taxes for a certain period of time,” he said, adding that the taxman has to carry its own cross in “explain[ing] why they haven’t collected the taxes to date.”
Mr James Kamara, the URA’s acting spokesperson, attributed the Shs340 billion blackhole to non-compliance before adding that investigations into the matter are still ongoing.“I have had an interaction with the technical people and, from the feedback given to me, we as an institution are still studying the highlights of the non-compliance indicated in the report,” he said, adding, “If at all we confirm that there was indeed non-compliance on the side of the different taxpayers, URA will come in and enforce recovery measures necessary.”
Mr Kamara was also noncommittal about the implications of Mr Kasaija’s decision to stay the five percent levy. He said the taxman would be in a better “position to comment on the matter” after “study[ing] the [Auditor General’s] report.”
Ms Sarah Chelangat, the commissioner of Domestic Taxes at URA, declined to comment or pronounce herself on the matter.
The Auditor General advised that the Finance minister’s statutory guidance is reviewed and the tax collection processes enhanced to mitigate the loss of revenue.
“I advised the accounting officer to streamline documentation of mineral imports and exports and engage the minister responsible to enforce the Mining (Amendment) Act 2021. In addition, the Authority should initiate to recover the taxes due up to the date when the new law became effective,” the report stated.
The taxman was also advised to put in place stepwise processes on how the importation and exportation of precious minerals should be handled by the customs officials.
Uganda Extractive Industries Transparency Initiative (UGEITI) Report for the Year 2019/2020 released in May 2022 indicated that the value of gold exported accounted for Shs4.17 trillion as per URA’s records. This indicates that gold exports have grown from Shs4 trillion in the FY 2019/2020 to Shs7 trillion as reported by URA in FY 2021/2022.
Despite reports submitted by URA to the Auditor General, the Central Bank’s statistics for the year 2022 indicate that Uganda did not register any gold exports between July 2021 and April 2022. This was majorly due to disagreements between the exporters and the government following the implementation of the five percent tax levy.
By last June gold was Uganda’s largest export, contributing at least 44 percent of the country’s export volume. Coffee placed second. Uganda has five top gold exporters, including Africa Gold Refinery, Gold Refinery Uganda, Simba Gold Refinery, Metal Testing and Smelting, and Bullion Refinery Limited.