A URA employee on duty. For reporting a non-compliant taxpayer and leading to recovery of unassessed tax, a whistle-blower will be paid Shs100m. PHOTO | FILE
Uganda’s domestic tax crime risks remain high despite various government efforts to address tax fraud and other related tax crimes.
The 2024 Money Laundering and Terrorism Financing Risk Assessment Report indicates that between 2017 and 2021, a total of 230,379 cases were detected from different sources with 979 criminal investigations done, 379 prosecuted and convicted.
A total of Shs600.8b was confiscated, with Shs8b recovered through incoming money laundering requests within the same period.
Data from the report, which was launched yesterday, show that in 2017, a total of 1,165 cases were detected with 180 investigations done and 96 convictions made but with no money recovered.
In 2018, 15,548 cases were detected, 134 investigated, 55 prosecuted and 55 culprits convicted, and Shs5.8b confiscated.
The number of cases in 2019 stood at 193,167, with 218 cases investigated, 110 prosecuted and 28 convicted.
A total of Shs47.4b was recovered with Shs8b coming from incoming requests and Shs19b from outgoing requests.
In 2020, the number of detected cases reduced to 12,656 with 137 investigations and 28 convictions and Shs218.3b confiscated, rising to Shs329.4b the following year.
The report says tax crimes rank second highest as proceeds-generating crimes for money laundering in Uganda. Between 2017 and 2020, a total of 31,689 tax-related cases were investigated, with 233 cases prosecuted, and 168 leading to conviction of 176 persons.
“Approximately Shs255b (about $70.8m) of evaded tax was recovered by Uganda Revenue Authority (URA). During the same period, FIA [the Financial Intelligence Authority (FIA) disseminated 41 intelligence reports involving tax crimes to URA for investigation,” it added.
The report says tax evaders in Uganda employs various schemes with the most common involving the use of multi-jurisdiction structuring, falsification of income records, declaration of false income earnings, and concealment of beneficial ownership information and use of Trade-Based Money Laundering.
Currently, Uganda has double-taxation treaties with nine countries aimed at eliminating double taxation and facilitating the allocation of taxing rights.
Uganda is estimated to lose $115.3m of which $96.5m is by corporate tax dodging and $18.7m by high-net-worth individuals. However, there is limited official data or study on tax lost through such schemes.
Hopeful
Mr Samuel Wandera, the executive director of FIA, yesterday said the report marks a significant step in strengthening the fight against tax crimes and the related issue of money laundering and terrorism financing.
“These activities undermine our tax system and damage our economy. To address these issues, we must increase our capacity to investigate tax-related money laundering and work closely across agencies and borders,” he said.
Ms Sharon Lesa Nyambe, the head of office for the United Nations Office on Drugs and Crime in Uganda, said tax crimes continue to undermine the country's fiscal health and deplete resources, depriving the government of the much-needed revenue that could be invested in infrastructure, healthcare and education, the very foundations of sustainable development.
“The consequences are felt throughout the economy and the already highlighted fiscal deficit, which recently grew from seven percent to nine percent of GDP, which is a stark reminder of the importance of tackling tax crimes head-on. The stakes are high, if left unchecked, tax crimes fuel inequality, weaken public trust in governance and perpetuate economic instability,” she said.
Ms Nyambe said tax crimes are closely linked to the broader issue of illicit financial flows, which encompass a range of financial movements that are illegal including tax evasion, trade mispricing, and the laundering of proceeds from illegal activities and that they erode the tax base and make it increasingly difficult for the government to meet its revenue targets, which are crucial for funding essential services.
Mr Henry Musasizi, the minister of State for Finance, Planning and Economic Development, said several studies have shown that tax crimes and tax and money laundering, if widespread, are costly to the economy.
“These crimes deter growth of tax revenues that are used to finance essential expenditure programmes by governments such as education, security, health, and public infrastructure development, among others,” he said.
Mr Musasizi said there is urgent need to pursue money-laundering investigations alongside tax crime investigations to trace related proceeds, enforce recoveries, and strengthen tax enforcement actions.
“Let me remind you that tax crime and money laundering techniques are changing as criminals employ new technology tools, with cross-border offences becoming more widespread. As cases become more complex, setting up joint task forces and intelligence sharing groups, both in the domestic and international arena, becomes increasingly important,” he said.
URA reacts
Ms Catherine Kyokunda Donovan, the URA head of legal department, said while the authority has established a strong legal framework, operational challenges remain, particularly in linking tax crimes to money laundering. She said the findings of the assessment provide a crucial foundation for ongoing efforts to combat these issues.
“The analysis shows that prosecutions for tax crimes have risen, yet our tax to GDP ratio has stagnated at about 13 percent. This calls for urgent targeted actions to combat tax crimes and money laundering,” he said.
Ms Kyokunda said with Uganda getting into critical areas like petroleum and gold, comes with significant financial risk at a global level for money laundering.
“We face significant threats, especially with Value-Added tax, Corporate Income Tax and Payee tax. These challenges are exacerbated by trade-based money laundering and porous borders, the sophistication of companies that are of a global nature,” she said.
