Tough times as URA stops gold exports

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Tough times as URA stops gold exports
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Tax body, Uganda Revenue Authority has directed all airlines not to accept any gold shipments from Uganda until the exporters have cleared all the outstanding arrears or made arrangements to do so.

In a January, 28, 2024 email to some of the airlines the tax body said the directive stands until the areas are cleared.

"I am writing to inform you that customs management has guided that no gold export will be processed today 28th/01/2024 until the exporters have cleared their outstanding tax arrears or made arrangements to do so with commissioner customs. Accordingly, do not accept any gold shipments in your flight today as doing so will constitute conveying unaccustomed goods contrary to section 199 of EACCMA, 2004 as amended,” the email from one of the URA customs office reads in part.

In 2021, the  Ministry of Finance, Planning and Economic Development  introduced to Parliament the Mining (Amendment) Bill, 2021 proposing an export levy of $200 per kilogram on processed Gold and 1% of the value of unprocessed minerals.

However, in a heated debated over the same bill, Parliament ended up increasing the export levy on processed gold to 5% of the value as opposed to the $200 proposed by the Ministry of Finance

Industry players protested the levy arguing that most of the gold exported from Uganda did not originate from Uganda but is simply imported into the country for processing and re-export.

They argued that imposing an export levy on such Gold was in violation of Section 172 (2) of the EACCMA, 2004 under which most of the gold refining and export companies operated.

They sought clarity on if the said Export levy only applied to gold mined in Uganda or applied on all gold exported from Uganda including the Gold refined by companies operating on “Manufacture Under Bond License”.

Uganda Revenue Authority and Uganda Free Zones Authority also expressed concern that the rates were too high and would be counterproductive by shifting processing and refining of gold to neighbouring countries that do not impose the levy.

Amidst the confusion gold traders from the region who favoured Uganda as the nearest refining hub for their Gold started to divert their gold to neighbouring countries such as Tanzania and Rwanda spiking their gold export values for the year 2021.

The biggest beneficiaries was Tanzania which recorded an all-time high of 59,638 kilograms since 1990. Rwanda also reached an all-time high of 2,900 kilograms whereas Uganda’s exports dropped by 80% from $1 billion exported in 2021 to a paltry $201 million exported in 2022.

According to Bank of Uganda’s records, the value of merchandise exports dropped by 20.7% in the first seven months of 2022 worsening Uganda’s trade deficit.

To redeem the situation URA allowed gold refineries to resume exportation of gold without paying the export levy on condition that they signed indemnity and guarantee agreements and also issued posted-dated cheques to the effect that when the confusion over which rates to apply was resolved they would apply retrospectively as if having started in 2021.

Uganda’s trade position improved and posted a 59.5% increase in merchandise exports in the first seven months of 2022.

In 2023 the Minister of Energy and Mineral Development issued Mining and Minerals (Export Levy on Refined Gold) Regulation, 2023, Statutory Instrument No. 22 of 2023 imposing an import levy of $200 per kilogram.

In total disregard of its earlier position that the levy was too high, URA issued demand notes to gold exporting companies demanding arrears computed at 5% amounting to shs538 billion.

The exporters protested this again, this time petitioning court to issue a permanent injunction against URA from collecting the said arrears. Sensing conflicting positions the Minister of Energy and Mineral Development wrote to Commissioner General URA directing him to halt the enforcement of the same Regulation.

The Attorney General, noting that the matter had been considered by Cabinet in April 2022 and the president directed the Minister of Finance not to levy a tax on the processing and export of gold, wrote to the Minister of Energy advising her to revoke S.I. No. 22 of 2023.

In court, URA argued that the gold exporting companies had signed indemnity agreements and issued post-dated cheques and thus ought to make good on the promise to enable URA balance its books.

The exporters argued that they could not collect a levy on gold brought to their refineries from other countries since it was contrary to the EACCMA, 2004 as amended and URA itself had been halted from enforcing the same, as it was untenable.

In a dramatic turn of events on January, 24, 2024, URA wrote to bankers of the gold exporter directing them to remit the sums indicated by the taxman as export levy arrears accrued by the said companies.

As if that was not enough, URA deactivated the TIN numbers of the gold exporters and directed airlines not to ship their Gold until they paid the said arrears summarily bring the Gold export business to a halt.

It remains to be seen how this high-handed action of URA would affect the economy

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