Uganda orders airlines to reject uncustomed gold

Summary:

  • Gold exporters and refiners termed the rates untenable, with both URA and the Uganda Free Zones Authority agreeing, warning they could lose business to neighbouring countries that do not impose such a levy.

Uganda Revenue Authority (URA) has written to airlines operating in Uganda to reject gold shipments from the country if the exporters do not show proof of clearance of all payments warning that transporting uncustomed gold will be contrary to the East African Community Customs Management.

The interventions come after a damning December 2022 report to parliament by Auditor-General John Muwanga faulting the taxman for failing to collect taxes from gold exports worth Ush340 billion ($89.3 million). Gold dealers earned millions of dollars from trading in the precious mineral.

“A total of Ush340 billion in taxes had not been collected from gold exports valued at Ush6.92 trillion ($1.8 billion) for the year under review. Management attributed non-collection to the minister’s statutory guidance staying the implementation of the one percent export levy,” Mr Muwanga wrote.

In its defence, URA’s management blamed the meagre collections on a tax dispute with gold exporters. The dispute started in April 2022 after enactment of a law imposing a levy of five per cent on every kilogramme of refined gold and 10 percent on unprocessed gold for export. The tax had proposed a charge of $200 for every kilogramme.
Smugglers’ delight

Gold exporters and refiners termed the rates untenable, with both URA and the Uganda Free Zones Authority agreeing, warning they could lose business to neighbouring countries that do not impose such a levy.

The exporters in turn refused to make covert sales, resorting to smuggling.

To ensure resumption of gold exports, the URA followed a statutory guidance of staying the implementation of the one percent by the Minister for Energy and Mineral Development Ruth Nankabirwa and suspended the export levy.

In August 2022, the country then exported gold worth $171 million after recording zero exports of the mineral in the intervening 13 months.

At the end of the 2020/21 financial year, gold had emerged as the country’s leading foreign exchange earner and fetched Uganda at least $2.2 billion.

Uganda exports most of its gold to the Middle East, mostly to the UAE.

Three gold refineries and exporters, Bullion Refinery Ltd, Aurnish Trading Ltd, and Metal Testing Ltd, had challenged the URA in court and asked it to hold URA liable for contempt of earlier court orders issued on April 4.

The trio argued that URA, despite the earlier court orders, continued to issue assessments to them, compelling them to pay the export levy.

Following the High Court ruling in Kampala that URA was not in contempt of its earlier orders regarding the enforcement of tax levied against three companies, their representatives on Wednesday met with URA management to discuss a payment plan and agree on more time to do so.

“Now that the court of law has ruled in URA’s favour, we want to look for a way forward on payment of your arrears and on how we can best facilitate you to do so,” said Simon Esunget, acting Customs manager at Entebbe Airport.

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