Civil Aviation Authority (CAA), the statutory body responsible for licensing, monitoring, and regulating civil aviation matters, is at the centre of allegations of evading taxes.
Being in charge of Uganda’s main gateway, Entebbe airport, CAA controls and rents out prime space to a number of companies; government ministries, departments and agencies; and foreign missions.
Out of the billions realised in rental income, CAA is supposed to pay rental income tax to Uganda Revenue Authority (URA). But an insider at CAA has petitioned URA and other bodies accusing CAA of not remitting rental income tax to URA amounting to Shs11.3b for the last four years, since 2014.
Taxation is an emotive subject in the country at the moment following the government’s recent drive to push up its revenues through introduction of new taxes. Rental income is one of the areas that is being emphasised as a possible booster for tax income.
CAA, in response to an inquiry by Sunday Monitor, insists that it is tax-compliant and is up-to-date with its debt obligation. But CAA makes no direct reference to claims that it has not remitted rental income tax to URA between 2014 up to 2016.
It only cites having paid all its taxes, including rental income tax, in the financial year that ended June 30, 2018, saying it paid a total of more than Shs66b in taxes.
The complainants have accused the tax body, URA, of inaction having petitioned them early this year on the matter, forcing them to petition other bodies. URA told this newspaper that it is investigating the matter.
Insiders working with the tax collector and the aviation regulator, speaking on condition of anonymity because they are not allowed to speak on behalf of both entities, told Sunday Monitor that the “allegations have been around for a long time” and the four years since 2014 are just a tip of the iceberg.
The latest alert about the alleged tax evasion scheme at CAA was made to URA on June 8 through the institution’s online portal. A written report was also made to URA’s assistant commissioner for Corporate Affairs on June 11, according to a copy this newspaper has seen.
A month later, having received no response, the whistleblower wrote a letter to the URA Commissioner General, Ms Doris Akol, notifying her about the same allegations against the aviation body. The whistleblower claims they have since been frustrated by URA’s inaction.
The latest door the whistleblowers have been knocking on is that of the Inspectorate of Government, which was petitioned on July 16 according to the documents seen by this newspaper. The letter was received by the IGG’s Central Registry on the same day.
In August last year, URA and CAA were locked in a rent dispute after URA declined to pay a debt amounting to Shs5.3b owed to the aviation regulator for the services the tax body consumes at the airport such as electricity, water and rent.
URA has since December 2000 occupied space at the airport. It is one of the government ministries, departments and agencies that were directed by the parliamentary Committee on Commissions, Statutory Authorities and State Enterprises (Cosase) to pay CAA more than Shs30 billion that accumulated for more than 10 years.
The other bodies were the ministries of Defence, Finance, Agriculture, Foreign Affairs and the Uganda Wildlife Education Centre.
URA has since petitioned the East African Court of Justice challenging the payment of rent charged by CAA.
Whereas URA acknowledges CAA’s mandate to establish, maintain, develop, operate and own aerodromes, and also to charge fees for rent and concession fees for services and facilities provided, it argues that CAA’s power does not extend to the letting out to government entities such as the URA for monetary gain.
Tenant Rent (Shs)
Aero Link Uganda Ltd 84,000,000
Africell Uganda Limited 29,000,000
Ags Frasers International Removals 12,000,000
Air Serv Limited 35,000,000
All Port Frieght Ltd 12,000,000
Ataco Frieght Services Ltd 12,000,000
Atc Uganda Ltd 29,000,000
Bemuga Forwarders Ltd 23,000,000
Bgr Evo-Trans(U) Limited 12,000,000
Bollore Transport & Logistics 35,000,000
Care Frieght Services (U) Limited 19,000,000
Cargoland International Ltd 9,000,000
Central Inn Ltd 12,000,000
Chapman Freeborn Airchatering 38,000,000
Conbert Ltd 12,000,000
Dhl Global Forwarding 12,000,000
Diamond Shipping Services Ltd 12,000,000
Ecobank Uganda Limited 10,000,000
Elegance Investments Ltd 29,000,000
Entebbe Airways Ltd 20,000,000
Entebbe Handling Services Ltd 250,000,000
Express Air Services Ltd 30,000,000
Flemingo International Ltd 12,000,000
Flitlinks International Ltd 12,000,000
Freight Concept(U) Limited 12,000,000
Freight Reach Services Limited 12,000,000
Guardian Services Limited 12,000,000
Inchcape Shipping Services 12,000,000
Intercargo Agencies (U) Ltd 12,000,000
International Airline Partners Ltd 22,000,000
J.M.Freight Services Limited 9,000,000
Jamani Investments Limited 75,000,000
Jit Duty Free Ltd 12,000,000
Kan Sky International Ltd 21,600,000
Kargo International Ltd 12,000,000
Kenfrieght Uganda Ltd 12,000,000
Kenllyod Logistics (U) Ltd 12,000,000
Kk Fresh Produce Exporters 16,800,000
Lets Go Travel Limited 30,000,000
Master International Limited 12,000,000
Mtn Uganda Limited 12,000,000
Mtoto Wa Jua 12,000,000
Multi Bulk Forwarders Limited 12,000,000
Multilines International Limited 12,000,000
Multiple Forwarders (U) Ltd 12,000,000
New Africa Cargo Freighters 12,000,000
Newrest Uganda Inflight Services 1,200,000,000
Norfrax Forex Bureau Limited 28,000,000
Pan Afrique Forwarders 6,000,000
Parth International Ltd 9,000,000
Perishable Movements 18,000,000
Pmts Limited 9,000,000
Royal Agencies Limited 9,000,000
Seacon Masters Limited 9,000,000
Seawing Cargo (U) Limited 10,000,000
Sky Logistics Limited 9,000,000
Sunshine Aerolink East Africa 14,000,000
Transit Windows Ltd 9,000,000
Travel Essential Limited 14,000,000
Treasures And Crafts (U) Ltd 40,000,000
Tropical Bank Limited ‘ 9,000,000
Tropical Clearing & Forwarding Co. 9,000,000
Uganda Duty Free Sales Ltd 1,400,000,000
Uni Movers And Logistics Ltd 9,000,000
Union Logistics (U) Ltd 9,000,000
Un Mission 5,500,000,000
Total Rental Income 9,446,400,000
Tax compliance. “It is not possible that a tax-compliant government agency like CAA can opt to evade taxes. Rental income is derived from tenants occupying and using facilities at Entebbe International Airport. It is part of the business income annually accounted for to Uganda Revenue Authority under the provisions of the Income Tax Act.”
“CAA religiously accounts for VAT returns to URA on invoice basis, implying that whichever tenant is invoiced, the accruing tax is duly paid whether the tenant honours their rental obligations in time or not. In spite of having many government entities and foreign missions that do not honour their rental obligations in time, we still declare the tax component and clear our tax obligations with URA.
On the allegations. “The allegations are unfounded because VAT is self-policing. It is hard, if not impossible, for the landlord (CAA) to conceal the invoiced tax when the client (tenant) is supposed to claim it from the taxing authority. There is no way the client will refrain from claiming input VAT from URA. As a compliant organisation, CAA strictly adheres to the provisions of the VAT regulations.
In the Financial Year 2017/2018, CAA projected and paid a provisional rental tax of Shs2,862,842,550 by June 30. In the 2016/2017 financial year, total rental income of Shs7,526,877,882 was filed on monthly VAT returns and corresponding output VAT of Shs1,354,838,019 paid.
We have a vibrant tax compliance team whose work is complemented with external tax checks from the concerned government departments.
Other taxes. “Besides rental tax, other taxes that CAA paid to URA in only Financial Year 2017/18 were as follows: Withholding tax – Shs7,040,887,274; VAT – Shs16,222,695,489; PAYE – Shs20,063,151,863; and Corporation tax of Shs19,883,287,148. By June 30, CAA had paid a total of Shs66,072,864,324 to URA. Payment of more than 66b in taxes in a year is a clear sign of commitment.”
Vianney M. Luggya, manager, public affairs Civil Aviation Authority