Members of the Parliamentary Committee on Finance have raised concerns over the criteria and transparency used by the Uganda Revenue Authority (URA) in granting tax waivers to various companies and individuals.

The scrutiny came during a committee session on Tuesday, 20 August 2024, where State Minister for Finance (General Duties) Henry Musasizi defended the decision to extend tax waivers to eight organizations, including academic institutions and business entities.

One of the companies under review is M/S J2E Investment Corporation Limited, which is seeking a tax waiver of Shs2.718 billion due to interest accumulated as of 01 December 2023. The company has been involved in construction works at Kaweweta Military Training Barracks but faced delays after the Ministry of Defence halted payments and work following investigations by the Inspector General of Government.

Minister Musasizi explained that the Ministry of Defence requested the tax waiver in December 2019, citing the financial penalties incurred during the suspension of the project.

“This is because, during the implementation of the works, the contractor faced investigations from the Inspector General of Government and suspended all works and payments from the Ministry of Defence. This resulted in penalties and interest,” Musasizi said.

However, legislators expressed scepticism over the lack of audited accounts and other crucial documentation for the company, questioning its eligibility for the waiver.

Apac Municipality MP Patrick Ocan criticized the presentation of companies that lack transparency, demanding that the minister provide evidence of the company’s existence and credibility.

“Today, the minister has presented to us non-existent companies. If they are existent, I am sure the minister can provide the necessary documents for this company. How can we process a waiver for a company that is not known? How do we ascertain reputation and credibility?” Ocan asked.

Kira Municipality MP Ibrahim Ssemujju and West Budama County North MP Maximus Ochai also pressed the minister and URA officials on the procedures used to select the companies for tax waivers.

Pakwach District Woman MP Jane Pacuto questioned why some companies received a 100 percent tax waiver, asking for clarification on whether full compliance with the waiver criteria was required for such a decision.

“I need a clarification on whether or not, an entity or individual must meet all the criteria or part of the criteria, to qualify for a waiver. The minister also chose to waive 100 per cent and I want to know why they chose to go that direction,” Pacuto noted.

Sarah Chelangat, Commissioner of Domestic Taxes at URA, defended the process, stating that each application for a tax waiver is assessed individually, with consideration given to the broader economic impact of the business on its community.

“We also look at the big picture in terms of the impact of this business on the community it serves. Businesses like universities employ families, so we consider that if this company gets relief, it can continue paying more tax shortly,” Chelangat said. She also clarified the matter of audited accounts.

She emphasized that businesses like universities, which provide significant employment, are considered for relief to ensure their continued operation and future tax contributions.

Chelangat also addressed concerns about the absence of audited accounts, explaining that URA sometimes uses third-party information, such as data from ministries, to assess tax returns.

“When a taxpayer is doing a self-assessment return, they normally summarise all their account information in their tax returns. Sometimes, assess based on third-party information whereby if you work with a ministry, we can get the information from that ministry,” Chelangat added.

The Committee Chairperson, Amos Kankunda, requested the minister and URA to provide comprehensive documentation on M/S J2E Investment Corporation Limited before the committee delivered its final report on the tax waiver.

Other individuals and entities seeking tax waivers include Donati Kananura, who requested relief on rental income tax amounting to Shs1.69 billion and Value Added Tax of Shs2.08 billion.

However, legislators questioned the justifications given, such as health and advanced age, as insufficient grounds for the waivers.

Minister Musasizi eventually withdrew Kananura’s case from consideration, stating the need to find an alternative solution.

“I want to withdraw Donati Kananura from my list so that we limit debate on the matter. We will find another way of rescuing him,” Musasizi responded.

Additional organizations presented for tax waivers included M/S Nicontra Limited, Busoga University, Nkumba University, Makerere Business Institute, Kisiizi Hospital Power Limited, and Mr. Peter Lokwang, a limestone miner in Moroto District.