UGANDA – Lawmakers in Uganda have raised concern over the failure of the Uganda Revenue Authority to collect Shs240.628Bn (US$64M) in Value Added Tax (VAT) on imported rice from other East African Community (EAC) countries.

The concerns were highlighted in the report by Parliament’s Committee on Commissions, Statutory Authorities and State Enterprises (COSASE) following the 2021/2022 Auditor General’s report on the financial statement of the Uganda Revenue Authority (URA).

When asked to explain delays in collecting these taxes, the URA Commissioner General, John Musinguzi informed the Committee that the delay was due to prolonged legal battles playing out in courts of law.

According to him, the matter went to court and the Court of Appeal, on 16th September 2022 agreed with URA, and demand notices were promptly issued.

However, an appeal was lodged (Civil Appeal No. 27 of 2022) and the importers obtained an interim injunction effective 14th November, which was still subsisting and URA could not levy taxes.

However, the Auditor General reported that whereas the importation of rice grown amongst EAC partner states attracts VAT, some companies are importing rice from a partner state free of VAT.

The Auditor general intimated that the said companies are capitalizing on a 2016 Court Injunction where URA was temporarily stopped from the collection of VAT on rice imported from the partner states by some companies, while other importers were being charged VAT.

The Auditor General observed that, during the financial year 2021/22, a total of 1,267 companies applied for the court injunction and avoided VAT of UGX.240.628Bn

He added that, whereas the temporary injunction was made in 2016, to date, there has been no ruling that has caused importers to utilize the injunction to avoid VAT leading to loss of revenue to the Government of Uganda and unfair competition with the ones denied the VAT exemption.

The complexity follows that Last year, Uganda’s President Yoweri Museveni appealed to all the seven East African Community (EAC) member states to remove all non-tariff barriers, saying they were hampering economic integration and development in the region.

Later, the Assistant Commissioner for Trade at Uganda Revenue Authority, Mr Alexander Rubanda, declared all rice originating from Tanzania to be exempted from tax duty.

The Parliamentary Committee on Tourism, Trade, and Industry also recommended in their report that the Rice and Agribusiness Development Foundation (RADFO) stop collecting money from rice traders at various border points.

However, the move resulted in mixed reactions among private traders and rice growers who claimed that the decision disadvantages the local production putting growers at risk of limited markets.

Rice growers and other stakeholders appealed to the government to reinstate import TAX as per the directive following the recent Common External Tariff (CET) tariff band of 35% that was adopted by the EAC partner states.

In response, the government defended the move as a measure to address the rice shortage in the country.