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@observer Mon, 25 Nov 2024 09:12:23

Why MTN is at loggerheads with URA in Shs 1.5 trillion tax stalemate

For the past five months or so, Uganda Revenue Authority (URA) has been at loggerheads with Uganda’s biggest telecommunications company, MTN. This follows an audit carried out by SafariTech - a Kenyan company that specializes in taxation audits – that revealed a total tax liability of Shs 1.5 trillion which the revenue body now demands from MTN. The comprehensive audit followed concerns raised by President Museveni in 2023 when he warned telecoms on tax evasion. According to the President, as of 2016, Uganda was losing approximately Shs 1.2 trillion per year, a figure that has could have doubled ever since then. The President accused telecoms of understating the number of calls made per day by half. Speaking to The Observer, a top Finance ministry official who preferred anonymity noted that whereas the President’s concerns were justified for several reasons, the audit findings are likely to have overstated MTN’s tax liability. “Assessing Shs 1.5 trillion on one company is not reflective of the current economic standing in Uganda, even when MTN was listed amongthe biggest taxpayers for the financial year that ended in July, 2024,” said the official. CONTEXT Ordinarily, telecom companies in Uganda normally obtain their sales from airtime, mobile money, internet provision and SMS, among others. They operate in a highly-competitive environment and, with the over five telecommunication companies operating in the country, there is a shared access to the Ugandan market that comprises approximately 18 million people. In 2020, telecom companies jointly contributed a total of Shs 1.1 trillion in taxes, according to the ministry of ICT and National Guidance, with MTN leading as the highest taxpayer. The taxes normally collected from telecom companies include 30 per cent corporation tax, 12 per cent excise duty, 18 per cent Value Added Tax on airtime, internet data and $0.09 on international calls. According to the management letter issued by URA to MTN on May 23, 2024, following the comprehensive audit, it was indicated that MTN allegedly did not declare local excise duty of Shs 330.7bn, VAT of Shs 554.5bn and corporate tax of Shs 651.3bn. WHAT NEXT?In an event of failure to pay the taxes, insiders have intimated to The Observer that URA is likely to seize MTN’s assets in order to obtain the unpaid taxes, if no instalment payment plan is reached.“The implications of this audit are not only diverse but also distractive to the economy in the long run,” said a top-level official from a rival telecom who preferred anonymity due to conflict of interest. To put it into perspective, in 2021, for example, Game Discount, a prominent supermarket chain operating in Kampala, closed shop owing to huge taxes that had been imposed by the revenue body. Between 2015 and 2020, a number of telecom companies closed operations or merged due to what they called an unfair and unconducive operating investment environment characterized by horrendous taxes. “The audit findings are, therefore, likely to open a Pandora’s box. The question is; can this lead to an untimely departure of a highly influential company, especially where it becomes impossible for it to pay the outstanding tax liabilities or reach a consensus for installment payments?” wondered the official. However, some insiders argue that the audit of telecom companies was long overdue. This is based on the fact that internet penetration in Uganda has risen and increased data usage on internet connectivity. This means that sales made by companies like MTN, on which taxes are charged, have risen over the years. With a significant increase in the number of smartphones in the country, it is possible that MTN could have underdeclared its sales over the audit period of 2019-2022. URA noted in its management letter that from MTN’s self-declarations, there was a variance of undeclared tax of Shs 58 billion in 2019, Shs 860.4 billion in 2020, Shs 1.1 trillion in 2021 and Shs 984.3 billion in 2022. “Tax evasion among telecommunication companies had been rampant over the last years. This is because of significant developments in the digital economy that facilitates for easy and untraceable banking, mobile money services, instant cash payments, telephone communications, internet services, all of which are paid for but not declared to URA as sales to the company,” said the Finance ministry official. “Further, it is difficult to trace the movements of money while using mobile money services to determine how much of it goes to the telecom company or the individuals using the services. This leaves a gap that is exploited by the companies to cheat the revenue body with undisclosed sales.” As it stands, MTN is aggrieved with the audit findings and, according to reliable sources, has petitioned State House to have the matter resolved. WAY FORWARD According to Fred Muhumuza, an economist, the MTN-URA issue is straightforward. “These are not trivial issues. MTN should engage URA and give necessary responses. MTN can also go the Tax Appeals Tribunal or even court to address the matter. I think arguing about the competence of the SafariTech is immaterial unless there is proven conflict of interest or incompetence,” he said. A senior tax expert, who preferred anonymity due to the sensitivity of the matter, said the process, as laid out in tax laws, is for MTN to object to the assessments within 45 days. “The objection is done with an understanding that another team under URA will review the audit findings, hold objection meetings with MTN and issue a decision either allowing the objection by setting aside the assessments or disallowing the objection and upholding the assessments,” said the expert. “Followingly, if URA is hellbent on its position and disallows MTN’s assessment, MTN has a right to apply for Alternative Dispute Resolution at URA or file an application in the Tax Appeals Tribunal to challenge URA’s decision. With the huge amounts of money involved, there are high chances that the dispute could go on up to the last stage of tax litigation in the Supreme court.” It remains to be seen how the matter will be solved but in general, these audit findings are likely to influence further comprehensive audits of other telecommunication companies like Airtel, Lyca Mobile, among others, in order to unearth underdeclared taxes. {loadposition inarticle}

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@observer Sun, 24 Nov 2024 08:36:18

27-year-old soldier jailed for 52 years for losing gun in bar

An army court sitting in Gulu has sentenced a 27-year-old Uganda People’s Defence Forces (UPDF) soldier Pte Owen Okumu to 52 years in jail for losing his firearm and ammunition last year. He was convicted at the Fourth Infantry Division headquarters in Gulu city between Thursday and Friday after pleading guilty to charges of failure to protect war materials contrary to UPDF Act Chapter 330.Prosecution led by Cpt Augustine Tumwebaze, informed the court that on December 30, 2023, Okumu armed with SMG number 56-48000707 loaded with 120 rounds of ammunition while on foot patrol in Gulu city, broke from his squad and entered into Buganda Pub night club.Tumwebaze told that court that Okumu got drunk and slept off in the pub until around 3 am when he was traced and found sleeping with neither the gun nor ammunition. He prayed to the court to hand a stringent and deterrent sentence to the convict.  “We pray for a stringent and deterrent sentence for the convict due to the gravity of the case. Since December 2023 to date the gun and the 120 bullets have never been recovered,” Augustine told the court.While delivering his judgement on Friday, Col Innocent Tukashaba, the fourth Infantry Division Court Martial chairperson said that based on the aggravated factors adduced in court, it remains unclear what the loss of the gun and ammunition could have caused in the community.“We are yet to know the atrocities this gun has caused and whether it was intentional. Court has decided to sentence you RA/270603 Pte Okumu Owen to 52 years in government prison.” he ruled.In the same court, RA/269610 Pte Dauglas Asio, 29, was sentenced to dismissal with disgrace as per UPDF Act Cap 330. The prosecution told the court that in January 2023, Asio while at 409 Brigade headquarters at Bondo in Arua district, obtained compassionate leave of two weeks but did not report back to his duty station. Asio was declared AWOL (Absent Without Official Leave) in October 2023. The prosecution however noted that when he heard about salary enhancement to soldiers, he reported back on 23 June 2024. Col Tukashaba, in his verdict, warned soldiers that UPDF as an institution is not a free entry and exit but delights in sacrifice, adherence to discipline and patriotism.The convict was later matched out of the Fourth Infantry Division Quarter Guard by hundreds of soldiers to symbolize dismissal with disgrace. {loadposition inarticle}

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@observer Sun, 24 Nov 2024 07:24:04

Oil: tackling ecological risks in Uganda’s Albertine Graben

As Uganda gears up for its first oil production in 2025, balancing economic development with environmental preservation remains the biggest challenge. Since 2017, environmental activists have consistently opposed the East African Crude Oil Pipeline (EACOP) project, citing grave ecological concerns. Demonstrations targeting the Parliament of Uganda, TotalEnergies, and CNOOC offices in Kampala have been staged to raise awareness about the environmental risks posed by the oil project. With ongoing innovation in waste management and conservation practices, Uganda aims to achieve sustainable oil production while safeguarding the Albertine Graben’s unique biodiversity for future generations. The Albertine Graben region, home to Uganda’s vast oil reserves, has 6.5 billion barrels of oil, of which 1.4 billion are technically recoverable, according to the Petroleum Authority of Uganda (PAU). Despite the discovery of oil in 2006, the government insists on sustainable utilization of these resources to benefit Ugandans, guided by the 2008 National Oil and Gas Policy. Ecological risks Like other infrastructure developments, oil exploration disrupts animal habitats and migratory pathways. Risks such as oil spills during drilling and pipeline failures pose significant threats to ecosystems and communities reliant on them. The EACOP area was once home to diverse wildlife, including snakes and antelopes, while the Tilenga project within Murchison Falls National Park is habitat to elephants, chimpanzees, and other species. Conservation efforts and environmental safeguards Derick Katussiime from the Petroleum Authority of Uganda (PAU), said in a bid to conserve the environment they could not drill every location of the well; they drill vertically, and when they reach down, they drill horizontally to connect other wells around to one well pad. He ruled out any spilling on the ground, noting that all the mud cuttings are brought through a riser tube. They are taken through a separation process before liquid waste is packed in the vacuum containers while the solids are packed in skips and transported to a waste management facility.  As of September 2024, 76 wells of the 98 wells targeted for this year have so far been drilled at the Tilenga project. The Tilenga project has 426 wells, which will be drilled across 31 well pads, of which 10 are in Murchison Falls National Park. Anita Kemigisha, a junior engineer at the Kingfisher project, noted that Lake Albert is sixty meters deep, they start horizontal drilling after 300 meters, and they don’t encounter or interfere with the waters of the lake. The move is aimed at conversing with the lake. “We have well-serviced equipment to ensure that it is up-to-date and maintained. There is a blowout preventer system to ensure that there is no flow to the surface,” she said. Oil rig The Kingfisher project comprises 31 wells, which will be drilled on four well pads. So far, six wells have been drilled at the project. Uganda has undertaken significant measures to mitigate environmental risks. Tools like the Strategic Environmental Assessment (SEA) for the Albertine Graben and new laws addressing petroleum waste management, climate change, and oil spills were introduced to minimize harm. Key efforts include: Wildlife Translocation: Wildlife encountered during project activities is relocated to safe reserves, such as Kabwoya Wildlife Reserve, to prevent harm to both animals and communities. Minimized Disruption: Contractors perform environmental surveys before deploying, ensuring minimal impact on biodiversity. For instance, habitats critical for breeding or hatching are avoided until animals mature or relocate. Waste Management: Reusable materials are prioritized, and waste is tracked from project sites to approved disposal facilities in Luwero and Bugolobi. Monitoring noise and light pollution: Generators and equipment are soundproofed to reduce stress on wildlife and surrounding communities. Low-impact lighting is used near water bodies to minimize disruption to aquatic life. Katusiime said they have guidelines and mechanics to reduce noise pollution, and all the equipment, like generators at the various well pads, is soundproof. “The maximum noise you can hear is about 60 decibels, which is less than the traffic in Kampala. The community is not even affected by the noise that is coming from the operations. We also monitor noise daily, and when the equipment is found exceeding the limit, the mechanics are always on the ground to fix it,” he said. Kemigisha said the Kingfisher project being at the shores of the lake, they installed six silent generators to power the rig, and the yellow lights don’t scare away the fish or affect the eyes of fishermen. Oil spill contingency plan: A National Oil Spill Contingency Plan (NOSCP) was launched in 2022 to ensure preparedness and response mechanisms to protect ecosystems in case of spills. Innovations in oil drilling Established to manage waste arising from the oil drilling process, the $12 million (Shs 44 billion) HBP Waste Management Facility operated by National Enterprise Corporation (NEC) receives four kinds of waste, which include oil-contaminated liquid waste, oil-contaminated solid waste, oil-free liquid waste, and oil-free solid waste. Due to the terrain in the area, control of weight, and managing the environment, the solid waste is transported in skips while the liquid waste is transported in vacuum tracks. According to Andrew Miwanda, a landfill engineer, each waste is a weight for management; in the case of an accident, the facility may have a quantity of material that it can easily safeguard and collect before it affects the environment.  Upon taking measurements at the weighbridge, solid waste contaminated with oil is taken through a thermodesorption unit, which uses heat to raise the temperature of the waste. Once the temperature reaches around 600 degrees Celsius, all the oil and the water are separated from the solids. Miwanga said the oil and water are collected in the tanks while the solids are packed and dumped in an engineering landfill, and water is recycled, treated, and used in the cooling process of the machinery. The oil is sent back for reuse in the drilling processes. The facility comprises an engineered landfill whose construction was guided by the NEMA regulations. It consists of a liner that goes all right around it, five layers from the top, a compacted marrum, high-density plastic, clay, sand, and another compacted marrum. Designed to take 52,000 metric tonnes of waste, the landfill is aimed at ensuring that the disposed waste material is kept for 100 years without risking the contamination of groundwater or escaping to affect the surrounding areas. Restricted to handle drilling mud cuttings, the landfill has handled 22,000 metric tonnes of solid waste and 530 cubic meters of liquid waste and slurries since its commissioning in May 2023. “Even if the landfill is filled up, we have a decommissioning plan whereby we close the top and continue monitoring it for 30 years to ensure that their status does not change over time, which will create the environmental and health risks,” he said. “We are exploring ways to repurpose the treated waste. We are partnering with higher institutions of learning and researchers to make sure that we can safely transform into valuable materials rather than digging more landfills,” he said. “The synthetic-based mud cutting can’t be turned into manure because they are burnt up to 600 degrees Celsius. They become inert, and all the nutrients are completely removed because, at that temperature, we want to make sure that all the oil is out.” Bashir Hangi, head of communication at the Uganda Wildlife Authority (UWA), emphasized the measures taken to regulate oil activities in protected areas. For example, noise-reduction technologies and flaring-free operations were adopted to reduce stress on wildlife. {loadposition inarticle}

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