Gold exporters’ plot to skip taxes foiled

URA directs city landlords to issue e-receipts
The URA Commissioner General John Musinguzi Rujoki

Kampala, Uganda | By Edward Ronald Sekyewa | Efforts by three gold refining and exporting companies to dodge taxes have been thwarted by the court, granting the taxman leeway to collect all pending taxes from the petitioners since July 2021 to June 2023.

The three companies, Bullion Refinery, Aurnish Trading Limited, and Metal Testing and Smelting Company Limited, ran to court seeking an injunction to stop the Uganda Revenue Authority (URA) from collecting the 5 per cent tax levied on gold exports.

While all other gold-exporting companies in the country have complied with the requirement, the three have not paid the taxes, which have accumulated into billions of shillings in arrears owed to the government.

The suit where the three companies took URA and the Attorney General to court arose from the publication of the Mining and Mineral Regulations 2023 by the Minister of Energy and Mineral Development in the gazette on 1st March 2023, imposing an export levy of 200 US Dollars per kilogram on processed gold with a retrospective effective date of 1st July 2021.

In their Civil Suit No. 092 of 2023, the three companies argued that the tax levied on their gold exports was contrary to the East African Community Customs Management Act. In a ruling made on 12th January 2024 dismissing the temporary injunction, the Registrar of the Civil Division of the High Court in Uganda, His Worship Simon Kintu Zirintusa, refused to grant the petitioners’ application, arguing that other companies are fully complying with their tax obligations, so should the three.

He further noted that granting an injunction against the collection of the tax would cause grave inconveniences to URA, especially when other companies in the same business are fully compliant.

Before this matter, the three companies lost a case last year when they sued the URA Commissioner General John Rujoki Musinguzi, URA Customs Commissioner Abel Kagumire, and the URA Customs Manager at Entebbe Airport Simon Esunget for continuing the enforcement of the requirements of gold exporters.

In this particular case, the companies were seeking the court to declare the three URA officials to be acting in contempt of court and to declare them unfit to hold public office. They also sought an order committing the three officials to civil prison on top of each of the officials paying 200 million shillings as compensatory damage to the companies.

Lawyers representing the URA officials in this matter said that URA was acting within its mandate and that the court order the companies were talking about did not imply that URA was to abdicate its responsibility of regulating gold exports from Uganda.

The lawyers also disclosed that other gold exporting companies in the country that complied with the new Regulations were threatening legal action against the taxman for discriminatory treatment, and that the three petitioners were only buying time for them to continue not paying the accrued arrears of levies on gold exports.

In his ruling in that case on 20th October 2023, Justice Boniface Wamala dismissed the case with costs to the URA officials because the three companies failed to convince the court that the officials were acting in contempt of court.

URA is now duty-bound to collect the funds from the defaulters. By 30th June 2023, the arrears had risen to 15 billion shillings on Bullion Refinery’s bill, 11.8 billion shillings for Metal Testing and Smelting Company Limited, and 5.3 billion shillings owed by Aurnish Trading Limited, making up a total of 32.1 billion shillings before interest.

In a statement made by the Kampala Associated Advocates (KAA), it was stated that “despite there being a suit challenging the legality of the Mining and Mineral Regulations 2023 (Export levy on Refined Gold), the previous interim order that was entered with the consent of the suit parties lapsed with the delivery of the temporary injunction ruling.

This implies that there is no order barring URA from enforcing the Regulations and can now go ahead and collect the taxes on gold exported from July 2021 to June 2023.” KAA was representing the interests of other gold exporters who have been compliant with the Regulations in this matter.

Bullion Refinery is not new to controversy, especially on issues concerning taxation. In September 2023, the Director of this company, Mr. Richard Karumuna, appeared before the Tax Tribunal chaired by Dr. Asa Mugenyi and was ordered to pay Value Added Tax (VAT) of 211,863,360 shillings and Income tax of 353,106,000 shillings to URA.

This matter arose after URA conducted an audit of the company for the period between February 2018 and June 2019 and found out that Bullion Refinery had under-declared its refinery charges leading to undeclared sales. It was discovered that the company had declared refining charges of between 10-20 US Dollars which were below the industry average of 50 US Dollars per kilogram of gold.

On top of that, the URA audit discovered that the company’s financial statement indicated a loan of 1.1 billion shillings which had no supporting documentation as of 30th June 2019, forcing URA to re-characterize that as income for which the company had to pay income tax.

In his defense, Mr. Karumuna provided documents of a loan agreement that had been translated from Arabic to English with his name as the Director who had signed the agreement on behalf of the borrower written as “Caromona,” an issue that triggered the Tax Tribunal to suspect forgery.

On the other hand, there were no bank documents to show how the money was channeled from Dubai to Uganda to which Mr. Karumuna responded that he used to bring in the loan money in cash whenever he traveled to Dubai, an answer that did not satisfy the Tax Tribunal.

In the end, the Tribunal agreed with URA, consenting with the re-characterization of that alleged loan as undeclared income, and the loan agreement was declared null and void.

Allegedly buoyed by a very powerful lady who is not a government employee, Bullion Refinery has on many occasions turned down appeals by URA to find a lasting solution to the standoff emanating from the tax arrears and has instead unsuccessfully tried to find shortcuts to beat the taxman. On realizing that URA was unrelenting in its demand for tax arrears, Bullion formed a new outfit called Aurafino through which they tried to export 120 kilograms of gold out of the country, but the alert URA officials at Entebbe Airport nipped that attempt in the bud because the new outfit did not have the requisite documentation to export gold.

In October 2023, the company also lost gold worth 2.5 billion shillings when robbers waylaid a vehicle carrying the gold from Arua in a midnight heist which was suspected to have been an insider job. Police Spokesperson Fred Enanga said the Police and military agencies mounted a search for the robbers, but no reports of recovery of the gold were made thereafter.

Also Read: Former Kenyan minister arrested in Uganda over suspected gold smuggling

Bullion Refinery, which also deals in diamonds, silver, platinum, and palladium plus many more precious metals, is a subsidiary of Bullion Group, which offers other services like forwarding services, sea and air freight services, private jets, security and protection services.

Falling revenue collection in Uganda

In December 2023, the Ministry of Finance and Economic Development released a report indicating that domestic revenue performance had hit a shortfall of 120 billion shillings and that URA had collected 2.131 trillion shillings in November 2023 against the expected revenue collection of 2.251 trillion for that month.

Yet for the month of October 2023, there was also a shortfall of 600 billion shillings in collected revenue, an issue that forced the Ministry of Finance Permanent Secretary Ramathan Ggoobi to summon the URA leadership for explanations. Ggoobi demanded administrative interventions from the taxman to fill the gaps in revenue collection.

To make matters worse, December 2023 also ended with a domestic revenue shortfall of 394 billion shillings where 3.453 trillion shillings was targeted, but the tax body only managed to collect 3.059 trillion, a situation that has led to the exertion of pressure on URA to endeavor more in hitting its targets.

Although it posted some growth by 16.4 per cent in the last financial year, the deficits that dogged URA in the last months of 2023 require more efforts to maximize tax collection. That is why the decision by the court to allow the taxman to collect the taxes from the defaulting gold exporters could not have been any better beginning into the new year.