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Study: Uganda Losing Money to Double Taxation Treaties

Flag_of_Uganda..pngUganda_-_View_on_KampalaMultinational companies could be robbing Uganda of billions of shillings through double taxation treaties (DTTs), a new survey has revealed.

The study, DTTs in Uganda: Impact and Policy Implications, by Seatini Uganda and ActionAid, shows that many companies are extracting resources and selling their goods and services in Uganda, but not paying taxes. The DTTs often facilitate tax avoidance instead of protecting taxes that companies and individuals should pay in Uganda. The report says there is no clear policy to deal with DTTs in Uganda.

“Lack of a formal policy framework under which government manages and monitors the DTTs is a hindrance for the government to properly negotiate with a clear mandate of strengthening Uganda’s economy,” the study says.

It proposes that Uganda needs to urgently put in place a formal DTT policy framework that “will be used to guide the country in the development, negotiation and signing of new DTTs.”

DTTs determine which country has the right to tax corporate profit, especially when a company has subsidiaries in two or more countries. Uganda Revenue Authority is already fighting a case where it says Zain Telecom should have paid tax when it sold its Uganda operations to India’s Bharti Airtel telecom. URA says it should have received a capital gains tax worth $85 million (about Shs 218 billion), but Zain refused, saying the transaction did not take place in Uganda.

The United Nations estimates that countries across Africa lose $50 billion to $60 billion every year to illicit financial flows. Speaking at the launch of the report last week, Finance Minister Maria Kiwanuka said government was developing a negotiating model based on the best practices elsewhere, especially in the least developing countries (LDCs).

“Double taxation is one of the issues my ministry is grappling with; we need a model based on the greatest good for greatest number. That’s what guides any taxation policy and measures,” said Kiwanuka.

Read more at observer.ug

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