URA Cracks Whip On Notorious VAT Fraudsters

URA Cracks Whip On Notorious VAT Fraudsters

By Our Reporter

For a person whose core role should be to keep and interpret financial records of a company, Micheal Williams Bwengye has a different definition of the accounting role, he trades fabricated invoices for input VAT purposes to benefit other registered taxpayers.

However, with URA’s improved intelligence network, Bwengye’s time saving approach has been cut short. The investigations launched in April 2022 discovered that financial records belonging to 87 businesses obtained from Bwengye showed false purchases of Ugx57.8b and loss of input VAT of more than Ugx10.4b.

The records further revealed that out of the 87 entities, 26 were registered with URA and out of these only 9 were registered for VAT and identified as risky because of non-existent suppliers. These were also found out not to have filed any income tax returns as stated by the suspect.

The fictitiously registered companies involved in this scheme were; En-Core Suppliers Uganda Limited, Musiime Procurement Co. Limited, Tendum Investment (U) Ltd, and Weyembo Enterprises Limited.

Bwengye is currently facing charges in court of making false statements contrary to section 58(1) (a) of the Tax Procedure Code Act, 2014. Once confirmed guilty, Bwengye faces imprisonment of between 3-6 years, deregistration from the VAT register, disallowance of the Input VAT claimed and penal tax on unpaid tax at a rate of 2%, compounded.

According to Denis Kateeba, the Commissioner Tax Investigations Department, Tax fraud happens when a business or an individual willfully and intentionally falsifies information of the tax return in order to reduce tax liability. He also notes that some of the most abused tax scams URA is dealing with is Invoice trading also known as missing trader.

Here, companies are formed without any business but they only issue invoices to reduce the tax liability of VAT so that they can increase the claim of input VAT and reduce their liability.

The other scam is in customs, for those who falsify invoices on imports and present to customs for valuation this causes revenue loss. And the sectors prone to these trickeries are mainly; media, advertising transport, wholesale trade and construction.

Meanwhile, for a taxpayer to register for VAT, they must have a fixed place of abode and keep proper accounting records related to all the business activity. Also, if they have made taxable supplies during the past 3 calendar months with a gross value of Ugx37.5m (exclusive of VAT), they have to register for VAT immediately.

Currently, all VAT registered taxpayers are required to issue invoices and receipts online by enrolling for the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) to enjoy the benefits that come along with the system.

The Authority further encourages taxpayers to get involved in their businesses and avoid delegating completely to consultants or accountants. For example sharing of Taxpayer Identification Numbers (TINs), these can be manipulated and the tax liability goes to the owner, and to minimise cash transactions and transact through banks for clear verification.

 

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