Uganda to introduce taxation education at its universities

Uganda:

URA Courts Varsities On Teaching Taxation

East African Business Week (Kampala)
March 5, 2007
Posted to the web March 14, 2007
Phillip Nabyama
Kampala
The Uganda Revenue Authority (URA) is racing to create a knowledgeable youth tax base through lobbying universities to embrace tax education. Universities, a top management source at URA told Business Week, were best placed to pass on information and knowledge in a non threatening environment to the future taxpayers. The URA, under pressure from government to collect more revenue as it moves away from donor dependency is keen on incorporating tax education at the beginning of the 2007/08 university academic year. World over, the new modern approach to tax administration is through promotion of dialogue and voluntary compliance. Not to be left out, the URA under went comprehensive changes from November 2004 through to early February 2005 aimed at total transformation of the organisation in order
to substantially improve performance and cope with the dynamic nature of the business environment. Since then, it has on most occasions surpassed tax revenue collection targets. Voluntary compliance through tax education is anticipated by URA's commissioner general, Ms. Allen Kagina to dawn on the primitive era of tax road blocks, chasing and shooting at smugglers and locking up of businesses for non compliance. URA has already drafted a proposed taxation course syllabus whose ultimate objective
will be to instil the value of tax compliance in the citizenry. If and when the teaching is embraced either at programme or section level, the initiative will be the first of its kind on the continent. While Makerere University Business School in Kampala has been tipped to introduce the element of taxation through out all its programmes in the 2007/08 academic year, Nkumba University about 25 kilometres on the Kampala- Entebbe highway is in high gear to start the taxation programme at both under and post graduate levels. Australia and Canada are among the few countries in the world that teach taxation as a programme at select institutions of higher learning. Late last month, URA organised a well attended workshop for top university managers at Kampala's Hotel Africana on the development of a taxation curriculum. "Today we are participating in a workshop that will guarantee better quipped graduates from our universities and in the long run better informed and more tax complaint taxpayers," Kagina told workshop participants. How ever, some managers from the private universities were sceptical about the success of the initiative developed in 2005 because as private entities, they are more enchanted by courses that pulled in students by the droves. Saying that many of the universities were already loaded with various programmes with some containing elements of taxation, these managers also queried what criteria would be used to for example introduce taxation to students studying medicine and other core science courses at the university. "This project should be brought back to the table after five years because it is not practical. Who will pay the lecturers and provide the text books?" a senior manager at one of the leading universities told this reporter on condition of anonymity. Reacting to an inquiry from Business Week on the issue of resource material and persons for the project, URA's assistant commissioner for public and corporate affairs, Mr. Patrick Mukiibi said, "We have a resource data bank and where we are called upon, we shall come in." URA is also in talks with the National Curriculum Development Centre (NCDC) which is finalising on a new curriculum for secondary schools to introduce taxation for the O' and A' levels through commerce and general paper subjects respectively.

Kenyan Justice minister censors rich nations for safeguarding looted cash

Tuesday, March 06, 2007
NEWS

Rich nations censured for safe-guarding looted cash

Story by JUMA NAMLOLA
Publication Date: 3/6/2007
The West has been blamed for promoting corruption in developing countries by creating a safe haven money. The same nations blaming Kenya for failing to control corruption, had come up with proper legislation to combat the vice, Justice and Constitutional Affairs minister Martha Karua said yesterday. As a result, the Government was facing hurdles in its bid to have the more Sh140 billion stashed in foreign accounts abroad recovered, she said. The minister was addressing the official opening of a regional workshop specialised anti-corruption training for policy makers in Eastern Africa Whitesands Hotel in Mombasa. The training, which targets investigators, prosecutors, judicial officers policy makers, is organised by the United Nations Office on Drugs and (UNODC) and the Canadian government. “The international community, especially the developed countries, have shown the sense of urgency and commitment in fighting corruption as done against terrorism. In fact, corruption is economic terrorism, which fought by all,” she said. Ms Karua said some multinationals in the developed countries, were serving safe haven for corrupt individuals from Africa and other developing countries, but their governments had done much to punish them. “Let developing nations bring up legislation ensuring that multinationals colluding with corrupt individuals, punished,” she said.
Corrupt deals The minister said despite the formation of various agencies to fight corruption, politicisation of the process major drawback. Constitutional Affairs minister Martha Karua with Liberia’s solicitor-general Tiawan Gongloe during a regional workshop on anti-corruption at Whitesands Hotel in Mombasa. She claimed that some people, who ought to answer queries on corrupt deals, had turned into saints cartels, which were fighting the Government’s efforts to expose and prosecute them. UNODC regional representative Carsten Hyttel challenged the UN to adapt their legislation and regulations take various initiatives regarding bribery of public organisations. Canadian high commissioner to Kenya Ross Hynes said corruption undermined democracy, imposed economic penalties on society and posed threats to public security.

Africa Confidential's Analysis on the Role of Tax Havens in promoting corruption in Africa

AFRICA CONFIDENTIAL
www.africa-confidential.com 16 March 2007 - Vol 48 - N° 6

ANALYSIS: TAX HAVENS

Financial secrecy – profits from the laundry.
Campaigning magistrate Eva Joly wants to open a new chapter of the global war on African corruption and highlight the Western financial systems that share its profits.So begins a campaign to stem the flow of dirty money from Africa to Western banks.


THE OUTFLOW OF UNTAXED CAPITAL

Eva Joly, the Norwegian-born French magistrate who broke open the Elf Aquitaine affair in Paris – which involved oil-fired corruption in Gabon, Congo-Brazzaville and Angola (AC Vol 42 No 3) – is stirring the pot again. Her article on corruption, published in Norway’s Development Today on 6 March, is matched by a separate interview with Norway’s Development Minister, Erik Solheim, and was prompted by a report from a relatively new non-governmental organisation (NGO), the Tax Justice Network (TJN). Joly’s basic point is that the most widely accepted marker of corruption around the world, the Corruption Perceptions Index compiled by Berlin-based Transparency International(TI), should be revised or replaced to include the activities of the global tax havens that, she says, are ‘one of the biggest problems the world faces today’. Those questioned by TI ranked countries such as Switzerland and Luxembourg among the world’s ‘least corrupt’ (its Bribe-Payers’ Index ranks Switzerland as the world’s ‘cleanest’ country).Yet through the financial systems of these and other countries – mostly small, and several, like the Isle of Man, Jersey and the Cayman Islands, British dependencies – flow hundreds of billions of dollars that rightly belong in the treasuries of poor nations. Joly calls confronting tax havens and the financial secrecy that operates in them ‘Phase Two’ in the global corruption debate.In the 1990s, TI led the fight to put corruption on the development agenda.
Its campaign was welcomed by, among others, the World Bank, whose then President, James Wolfensohn, said in 1996 that the time had come at last to deal with the ‘cancer of corruption’ as a fundamental reason for poverty. New academic research and publications by NGOs, e.g. Global Witness (which reported on Angola’s oil industry, AC Vol 48 No 4), attracted wide audiences in the West. The spotlight fell on the countries where the flow of money starts and on the obvious thieves, villains and political bosses who set the flow going. Many of these were African (although vastly greater sums oozed out of relatively prosperous Latin America). Little attention was paid to the countries and rich-world institutions that receive and manage the proceeds of corruption and theft. Well-informed Africans have been shouting about this for years, if only to shift the blame on to others’ shoulders. On 6 March Kenya’s Constitutional Affairs Minister, Martha Karua, complained of the hurdles her country faces in trying to recover more than US$2 bn. of looted funds from Western banks. No one can put a precise figure on the dirty money sluicing through the world’s financial systems but in 1998, the International Monetary Fund Managing Director, Michel Camdessus, said that ‘estimates of the present scale of money laundering transactions are almost beyond imagination: ‘2% to 5% of global GDP would probably be a consensual range. 'Applied to global gross domestic product of $32 trillion a year, that indicates a range of $640 bn. to $1.6 bn. a year. This figure is just part of the dirty money equation. Laundered money is money That breaks money-laundering laws. It does not cover the billions of dollars of tax evading funds, the revenues from commercial crime on transactions that are deliberately mispriced to move money – mainly out of developing countries – to offshore tax havens Powerful interests in Western countries, including Britain and the United States, oppose more fiscal regulation and surveillance. This is because their economies, not to mention their banks and other financial institutions, make big money by keeping transactions secret. It is also because billions of dubious money from Third World sources are trivial beside the trillions involved in, for example, legitimate (or at least lawful) tax avoidance by multinational corporations, whose activities would be much curtailed without it.


CORRUPTION- SUPPLY AND DEMAND
The issues are extremely complex and few NGOs have the resources or expertise to tackle them. Ideology gets in the way, too. When the Cold War ended, it might have seemed that flows of secret money were neither a left-wing nor a right-wing problem. They are, though, a central issue in the debate about how ‘free’ markets should operate. A 15-page survey of ‘offshore financial centres’ in The Economist (24 February) puts the freemarket case that tax havens are generally a good thing. Yet, since Africa’s problems are too small to matter much to the tax-haven operators, the survey almost entirely ignored Africa (although it did look benignly on a would-be offshore centre for Khartoum). It barely touched on corruption. NGOs that focus on poverty – TJN, Oxfam, Christian Aid and War on Want – are entering Joly’s Phase Two. TJN argues that corruption has a demand side (money-launderers, tax evaders, kleptocrats, etc.) and a supply side (those that offer financial secrecy and sell the services that exploit it). The mood may be changing in the USA too, as defenders of tax-havens in the right-wing think-tanks see their influence wane. The US Internal Revenue Service has for some years been pursuing companies thatexcessively reduce their American tax payments by exploiting the secrecy of havens.
Presidential candidate Barack Obama, with fellow-senators Norm Coleman and Carl Levin, has introduced the Stop Tax Haven Abuse Act; they calculate the loss to the US Treasury from offshore tax evasion at $100 bn. a year. They declare that ‘tax havens have declared war on honest US taxpayers’. They have been involved in probing bank accounts held by (among others)Presidents Teodoro Obiang Nguema Mbasogo of Equatorial Guinea and Omar Bongo Ondimba of Gabon. TJN estimates that at least $255 bn. is lost in global tax revenue each year to tax havens from assets held offshore by wealthy individuals. That is more than twice the sum spent on foreign aid by rich countries each year. Far larger sums are lost through legitimate tax avoidance by multinational companies, through skilful ‘transfer pricing’ – they take their taxable profits in jurisdictions where the tax on profit is low. Recent academic studies suggest that Africa’s external assets (including capital moved out of Africa to London, Switzerland and other offshore financial centres) are greater than its external debts. The assets are held, often secretly, in private hands, while the liabilities are open and belong to the African public sector. Since most of the business is by definition secret, information is scarce and unreliable, but many experts believe that more than half of the cash and listed securities belonging to rich individuals in Africa is held offshore. Joly, who is working with the Norwegian Agency for Development Cooperation on its anti-corruption project, recently discussed the subject with the World Bank’s current President, Paul Wolfowitz; in late March, she will visit Washington with Development Minister Solheim in an attempt to persuade the USA government and congressional leaders to tackle the issue. Solheim says the US has shown more commitment so far than European Union (EU). Joly notes the large share taken by Britain in responsibility for tax haven activities. London’s role as a financial centre and owner of several tax havens has given British companies huge privileges. Joly saw similar links between France and French-speaking African countries when probing the Elf affair.
TI’s Corruption Index is not an objective measure of a country’s performance but is based on its informants’ perceptions. Joly argues that TI is mistaken to define corruption as ‘the abuse of entrusted power for private gain’. This focuses the debate too heavily on bribery of public officials in favour of multinational companies that want to reduce the cost of bribery.
She wants to tackle the ‘supply side’ of international corruption, including activities such as trade mispricing by multinational corporations, and tax evasion and avoidance by rich individuals and companies. TI says its Index cannot be changed to accommodate tax haven issues.Accepted definitions of corruption cover only activities that are formally illegal. Joly wants to widen the target, by including individuals and governments whose lawful services contribute to corruption: the accountants, lawyers, bankers and rich-world regulators that are involved in the trade.American writer Raymond Baker argues in ‘Capitalism’s Achilles’ Heel’ (John Wiley, 2005) that there are three main forms of dirty money: criminal money (for example, from drug dealing, terrorism etc.); looted money (e.g. the oil billions hidden overseas by the late Sani Abacha of Nigeria); and commercial money (e.g. cash hidden by big, respectable firms from tax authorities). All three use the mechanisms and subterfuges of financial secrecy. Current rich-world efforts, such as the anti-money-laundering regulations devised by the Organisation for Economic Cooperation and Development, focus on only a small proportion of this money, so fail to achieve their goals. It might be better to tackle the secrecy at the heart of offshore finance, as governments try to do in order to weaken perceived international terror networks. Any such move would confront the obstacles that the EU encounters when its officials talk of harmonising tax rules within the community. They are promptly told to back off.


MEASURING THE DIRTY MONEY
International institutions such as the World Bank and United Nations are belatedly looking in detail at the effects of mispricing, tax avoidance schemes and other forms of capital flight on developing economies. Until recently Bank officials argued that better macroeconomic management would solve the problem of capital flight. Now they are less convinced. The Bank is hosting a conference of experts on capital flight in May. There are no precise statistics on the volume of capital flight from poor to rich countries, but most economists agree that losses from capital flight outweigh the volume of foreign aid many times
Transparency International estimates that Africa’s political elites and their foreign business allies hold US$700-800 billion in offshore accounts – outside Africa. These transactions are facilitated by a pinstripe army of mainly Western bankers, lawyers and accountants using a network of tax havens in wealthy jurisdictions.The most important ways of shifting capital from Africa are the mispricing schemes, identified by Raymond Baker and others. The revenue companies’ gain from mispricing dwarves the cash generated by kickbacks on contracts or drug smuggling schemes, says Baker. Transnational companies can avoid tax by mispricing transactions between different jurisdictions and subsidiaries, allowing their profits to be moved offshore, without paying tax. Transfer pricing schemes have become increasingly sophisticated to counter new fiscal regulations. Tax agencies in many African states lack the staff to stop such schemes. Capital flight from Africa due to transfer mispricing exceeds $10 bn. a year, according to Baker, and is rising. A United States’ Commerce Department study found that capital outflows from Africa to the USA in 1996-2005 grew from $1.9 bn. to $4.9 bn, through the use of excessively low invoices for exports (e.g. a tonne of cocoa for $2) and excessively high invoices for imports (a portable generator for $10,000). The pattern is repeated between Africa and Europe, which is still the continent’s biggest trading partner.

regulating tax practitioners in South Africa

South Africa: Regulation On Way for Tax Advisers
Business Day (Johannesburg)
March 9, 2007
Posted to the web March 9, 2007
Sanchia Temkin
Johannesburg

TAX practitioners who uncover fraud and other tax irregularities related to their clients will be compelled to report them to a new independent regulatory board to be set up by government, according to draft legislation recently released by the South African Revenue Service (SARS).Under the Regulation of Tax Practitioners Bill, the tax practitioner and the client have 30 days within which to take steps to remedy the situation. Where the reportable irregularity is not rectified by the client, the tax adviser is compelled to send a written report to the regulatory board of tax practitioners, setting out details of the irregularity and forwarding a copy of the report to the client. Beric Croome, a tax director at Edward Nathan Sonnenbergs, said yesterday that it was unclear what the practitioner was required to do where clients approached an adviser with a view to regularising their tax affairs with SARS because of some prior violation of the tax laws, such as the non-submission of a particular return, or to correct a return. The bill creates an independent regulatory board for tax practitioners which will deal with the registration of tax advisers, and institute disciplinary proceedings against practitioners who do not comply with standards set by the board.
There are about 17000 tax practitioners registered with SARS. Ten members of the board will be appointed by the finance minister from people nominated by the general public. Only half of those members may be tax practitioners. The minister may also appoint officials from the treasury and an official from SARS as additional members of the board. The board will prescribe the standards of qualification and experience of tax practitioners and implement a code of conduct. As far back as 2002, Finance Minister Trevor Manuel indicated that tax practitioners would be regulated. There are no overall requirements, such as a code of conduct, that stop people from being tax practitioners. "It is in the interests of the public that tax advisers are subject to rules governing their conduct," said Croome.

Vodafone's unknown Partner

UK's fraud office to
probe Vodafone
Source: Business Daily, March 9. 2007
Written by Mutiga Muriithi

Detectives from the UK’s Serious Fraud Office are in Nairobi to probethe shareholding structure of Kenya’s largest and most profitable company, Safaricom.The visit comes four months after it emerged that the mobile phone operator has a mysterious shareholder, MobiteleaVentures Ltd, with a five per cent stake in one of Safaricom’s parent companies, Vodafone Kenya. The circumstances surrounding this shareholding have raised questions, and triggered a parliamentary enquiry into the ownership changes.Mobitelea had not previously been disclosed as a shareholder in the deal, which officially ascribed 60 per cent of Safaricom to Telkom Kenya and 40 per cent to Vodafone UK, through its local and wholly owned subsidiary Vodafone Kenya. When the shareholding structure was agreed, both Kenyan parties held pre-emptive rights. It was agreed that should Vodafone UK or Telkom Kenya ever wish to sell any part of their stake, an offer would first be made to the other partner.However, in Vodafone UK’s accounts in 2003, it was revealed that Vodafone Plc had bought back 5 per cent of the shares in Vodafone Kenya from Mobitelea. It has not yet come to light how Mobitelea came to own this stake, or who it paid for it. The Public Investments Committee (PIC) has been leading an effort to establish whether there was any fraud in Mobitelea’s acquisition of the shares.
Until now, such investigations have been carried out only in Kenya, with a focus on questioning Safaricom and Kenyan government officials. The arrival of the UK Serious Fraud Officers in Nairobi marks a move by the British authorities to investigate the probity of Vodafone itself in the arrangement. Vodafone UK has declined to answer queries as to who the principals of Mobitelea Ltd are or how the company came to own its $20 million (Sh1.4 billion) stake, citing confidentiality. However, a report in the UK’s Guardian newspaper said the company’s owners are shielded behind two nominee firms, Guernsey-registered Mercator Nominees Ltd and Mercator Trustees Ltd. Directors of the company are named as Anson Ltd and Cabot Ltd, based in Anguilla and Antigua. A British High Commission spokesperson yesterday confirmed that officials from the Serious Fraud Office are in town. She would not disclose their mission citing a longstanding government policy not to discuss specific cases. The Serious Fraud Office is a UK government department which falls under the country’s Criminal Justice System.It generally takes the lead in investigating corruption involving UK companies overseas. The unit was recently in the news for leading a high-profile investigation into arms deals between Britain’s giant BAE systems company and Saudi Arabia, which threatened to strain diplomatic ties between the two countries. The team of detectives in Nairobi is expected to probe a number of cases involving British companies, including the saga revolving around the Anglo Leasing and Finance Company -- the shell firm at the centre of a number of securityrelated procurement scandals in Kenya. The UK is a signatory to the OECD convention on combating corruption by multinational companies.The convention outlaws the offering of bribes by UK firms to foreign companies or to government officials.The deal between Vodafone UK and Mobitelea has drawn the interest of authorities in Britain because it could represent a breach of such commitments. The convention came into force in 1999 and is “aimed at reducing corruption in developing countries by sanctioning bribery in international business transactions carried out by companies based in the convention member countries.”Britain subsequently put in place legislation operationalising the act in the UK. These include the Proceeds of Crime Act 2002, the Extradition Act and the Judicial Cooperation Act 2003, and the Financial Services Authorities Act 2003. An OECD report into its implementation of the convention last year praised the UK for its “exemplary transparency, professionalism and co-operation”. The Mobitelea saga came into the open when our sister paper, The East African, published a report in November pointing out the mystery firm had acquired a stake in Safaricom through Vodafone UK. The revelations appeared to surprise even Kenya government officials who up until then had not known details surrounding Vodafone’s Safaricom deal which was clinched under the Kanu regime between 1999 and 2000.The Guardian subsequently reported that Mobitelea was registered on June 18, 1999 – several months after Vodafone had struck a preliminary deal with the Kenyan government. The company was paid US$ 5 million (Sh360 million) in cash and given a five per cent stake.Safaricom is one of Kenya’s best run and most profitable companies. Following Vodafone’s acquisition of a stake in the company, it swiftly established itself as a market leader in the country through a combination of clever market positioning and aggressive branding. Last year, the company recorded a Sh12 billion profit – a Kenyan record. However, the saga surrounding its ownership structure threatens to cast a long shadow on an eagerly anticipated Initial Public Offer (IPO). The Cabinet has approved government plans to reduce its 60 per cent stake in the company. The IPO is expected later this year.