By Denis K. Kateeba
Despite the tight intelligence network to uncover VAT fraudsters, they continue to play tricks to evade tax as a way of reducing their tax liability. These taxpayers intentionally falsify their financial declarations to the Uganda Revenue Authority.
However, URA is on alert to detect and deter all forms of tax fraud by deploying a number of strategies to penalize all culpable. Some of these strategies include; intensive investigations, intelligence collection and analysis, forensics, and Exchange of Information with other stakeholders among others.
During the interviews with some of the perpetrators, it was revealed that some VAT fraud schemes tend to happen with and sometimes without the knowledge of the company owners.
However, further investigations also revealed that the company accountants are at the center stage of most of these fraud schemes since they handle financial records. As a result, they take advantage of this trust to introduce fictitious transactions into the company’s records for personal gain, thus leading to revenue loss.
Some notable accountants include; James Ssekamwa Kulubya, the proprietor of JSK Consultancy whom we arrested alongside three other suspects and presented him to the Anti-Corruption Division of the High Court in April this year. He was charged on 8 counts to which he pleaded guilty to making false statements to a Tax Officer contrary to Section 58(1)(a) of the Tax Procedure Code Act, 2014 as amended.
Important to note is that criminal activities in the Value Added Tax framework manifest largely among traders who file tax returns with suppressed profits or taxes. But then there are also those who file tax returns declaring Nil transactions despite other taxpayers indicating purchases from them.
However, the VAT fraud scheme cannot be complete without the support of Tax Agents. They are entrusted to conduct business on behalf of their clients by using company TINs. Many a times, they do this without the consent and approval of the business owners. As a result, they inflate amounts on invoices given to them to file, including purchases and sales that are non-existent to business declarations. They also swap input among related companies, and the most common is the registration of multiple non-existent companies for purposes of trading fictitious sales and Purchases.
In this Financial Year 2022-23, the amended Tax Procedure Code (TPC) Act 2022, under Section 62H(c), prescribes that ataxpayer who makes a false or misleading statement in an information return shall be fined an amount not exceeding UGX. 50 million for each day of default or shall be sentenced to imprisonment for a term not exceeding ten years or both.
The Uganda Revenue Authority, therefore, encourages all taxpayers who engage in such criminal activities to desist from them to avoid penalties and imprisonment. The law is clear under Section 50 (a) of the Tax Procedures Code Act, 2014, which prescribes a penal tax for making false or misleading statements to an officer of URA in a material particular.
Under Section 50(b) of the same act (TPC, 2014), a taxpayer further commits an offence if he omits from a statement made to a URA officer any matter or thing without which the statement is misleading in a material particular. In the same spirit, if the tax properly payable exceeds the tax that was assessed as payable based on a false or misleading statement or omission, then that person is liable to pay a penal tax equal to double the amount of the excess.
As interpreted from the law, the consequences of non-compliance with one ‘s tax obligations are not in any way healthy for a suspected tax fraudster. Ugandans should comply and pay to fulfil their tax obligations in the right amounts and on time.
The author is the Commissioner Tax Investigations in URA.
