There is no evidence of any selection criteria guiding the decision to offer tax exemptions to some investors and denying others within the same investment sector, Auditor General’s report for 2017 has revealed.
“…it was noted that there was no properly documented policy indicating the procedures for applying and guidance on selection of successful applicant investors for tax exemption,” the report reads in part.
It adds: “Besides, there were no follow-up reports to assess and establish the promised value of the investments, envisaged employment creation, and economic benefits arising out of the tax holiday.”
In the circumstance, the report adds that unfair business competition is likely to be created among investors within the same sector as was seen in the cement, steel and palm oil industries.
“This may lead to industrial distortions or even encourage unscrupulous business practices where benefiting companies could close shop at the expiry of the tax holiday and register new investments for consideration for fresh tax exemption,” the report says.
Treasury (Ministry of Finance which is headed by Secretary to Treasury Keith Muhakanizi) receives applications from investors for consideration for tax exemption.
“In response, Management stated that the cases in which Government has intervened to pay taxes are few and based on strategic considerations like the level of investment, job creation, industrialization, foreign exchange earnings and import substitution, although this criteria has not been documented,” John F.S. Muwanga, the Auditor General says in the report, adding: “I advised the Treasury to put in place a properly documented tax exemption policy to guide the process of awarding tax exemptions including evaluations of the effects on revenue performance and actual benefits envisaged.”
