KAMPALA —In a fresh twist of events, Indian businessmen convicted of engaging in massive tax crime sydnicate have been released.
The Anti corruption Court sitting in Kololo convicted directors of Wellex Hardware Ltd, Jigar Chandarana and two others for generating and selling fictitious invoices and in the process inflicting huge financial losses to Ugandan government.
“JIGAR CHANDARANA and others, being a Director of Wellex Hardware Limited during the periods March, August, September, October 2021 and May 2022 in Kampala District, knowingly filed false VAT returns to a Tax Officer at Uganda Revenue Authority purporting to have made supplies to China Railway No.3 Engineering Company Limited amounting to UGX 1,177,051,439 which they knew to be false,” a summary of the case/agreed facts between prosecutions and the defense indicates.
One of the beneficiaries of the syndicate is a renowned global engineering company China Railway No.3 Engineering Group Limited.
Information obtained reveals that China Railway No.3 Engineering Group Ltd claimed input VAT of UGX. 211,869,259 from fictitious purchases of UGX. 1,117,051,439, causing revenue loss to the government of Uganda.
China Railway is a wholly owned subsidiary of China Railway Group Limited, one of the biggest construction enterprises in the world.
The company is also ranked among the Fortune Global 500 and is listed on the Shanghai and Hong Kong stock exchanges.
Jigar and his accomplices had declared these fake invoices as output VAT between 2018-2023.
They ran out of luck recently when security raided their business Wellex Hardware Limited and arrested them following a probe into the tax affairs of Wellex Hardware Limited which began in 2022 after URA received information about an Indian businessman suspected of trading tax invoices among companies registered for VAT purposes.
The data also revealed that the directors of Wellex Hardware Limited were at the top of this syndicate, where they made sales to their clients but generated and sold several tax invoices to beneficiaries for a commission.
They were found guilty of generating and selling fictitious invoices by the Anti-Corruption Court in Kololo.
They were convicted on five counts of making false statements to a tax officer, an offense contrary to Section 58(1)(a) of the Tax Procedures Code Act, 2014.
Each defendant was ordered to pay a fine of UGX 20,000,000 or face five years imprisonment in default.
According to the accused’s plea, freely and voluntarily pleaded Guilty to a number of charges relating to tax crimes agreed to government sanctions.
“COUNT 1. To a fine of 200 currency points (UGX 4,000,000) or in default to a term of 5 years imprisonment.
COUNT 2. To a fine of 200 currency points (UGX 4,000,000) or in default to a term of 5 years imprisonment.
COUNT 3. To a fine of 200 currency points (UGX 4,000,000) or in default to a term of 5 years imprisonment.
COUNT 4. To a fine of 200 currency points (UGX 4,000,000) or in default to a term of 5 years imprisonment.
COUNT 5. To a fine of 200 currency points (UGX 4,000,000) or in default to a term of 5 years imprisonment.”
URA’s lawyers were able to secure UGX. 102,878,055 in taxes, which Wellex Hardware Limited agreed to pay in full as assessed.
But should these criminals be let off the hook for paying a fine of shs 20 million, such peanuts compared to the money the cartel has made from the illegal business? Or they should be deported as a precautionary measure since there is no guarantee that they will not repeat the offence.
URA officials this website talked about the matter said, they had succeeded in arresting and also recovering money in form of taxes from the culprits.
Tax gaps
Uganda loses between 30 and 39 percent of revenues that should be collected through Value Added Tax (VAT). This is contained in a research paper titled “The Value Added Tax Gap Analysis for Uganda” authored by Economic Policy Research Centre (EPRC) researchers Corti Paul Lakuma and Brian Sserunjogi.
The study shows that the compliance gap, that is the difference between actual revenues collected and the potential revenues that could have been collected given the policy framework that was in place during that year, is in the range of between 30 and 39 percent.
The estimated gap is higher than the typically observed levels in Sub Saharan countries and near the levels in Latin American countries.
According to the researchers, the estimated compliance gap increased to 64 percent of potential revenue in previous years.
Manufacturers were found to have large compliance gaps. Potential VAT revenues in the manufacturing, construction, wholesale and retail trade, water supply, other social services, and arts, entertainment and recreation sectors are estimated to be greater than actual collections.
