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Indian nationals in fake URA invoice scam released after paying sh20 fine

The cartel according to our findings has amassed a lot of money from the network by involving new clients whom they sell fake invoices and earn huge commissions in return.

Three directors of Wellex General hardware Ltd have been released (PHOTO/Courtesy).

KAMPALA, UGANDA: A group of Indian businessmen who were last week remanded to Luzira prison for engaging in a massive tax crime syndicate have in a fresh twist of events been released after paying a meagre sh 20 million.

Jigar Chandarana,44, and Mr Jitendra Sorathiya, 41, the Directors of Wellex General Hardware in Nansana together with their accountant Mr Ronak Moradiya Ghanshyambhai, 25, last week appeared before the Anti-Corruption Court in Kololo and were charged with five counts of generating and selling fictitious invoices which caused a huge financial loss to the Ugandan government.

The trio pleaded guilty to five charges including that of making false statements to a tax officer contrary to section 58 of the Tax Procedures Code Act, 2014. They also paid Shs102 million in taxes.

According to DailyExpress investigations, it has been established that the fraudsters have amassed a lot of money from the network by involving new clients with whom they sell fake invoices and earn huge commissions in return.

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 and is ranked among the Fortune Global 500 as well as being listed on the Shanghai and Hong Kong stock exchanges.

Findings reveal that Jigar and his accomplices who are directors of Wellex General Hardware in Nansana had declared these fake invoices as output VAT between 2018-2023.

However, their luck ran out when URA enforcers stormed their shop and arrested them following a probe into the tax affairs which began in 2022 after the tax body received information about an Indian businessman suspected of trading tax invoices among companies registered for VAT purposes.

The group was found guilty of generating and selling fictitious invoices by the Anti-Corruption Court in Kololo and was convicted on five counts of making false statements to a tax officer, an offence 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.

URA officials who talked to this website about the matter said, they had succeeded in arresting and also recovering money in the form of taxes from the culprits.

They said they were able to secure UGX. 102,878,055 in taxes, which Wellex Hardware Limited agreed to pay in full as assessed.

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The Big Question: To Deport or Not?

But should these foreign criminals be let off the hook for paying a fine of shs 20 million, such as 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.

“Once a thief, always a thief,” goes an old African adage which demystifies how complicated it is to abandon a certain character or behaviour by an individual.

This explains why Courts of Judicature most times downplay narratives by culprits arraigned before judges as “first-time offenders” and therefore should be exonerated. They are either sentenced or given a lenient punishment. The aim is to teach them a lesson while in prison.

The disadvantage of a lenient sentence is it misleads. Often, the offender tends to repeat the crime.
In other words, from lenient sentences, culprits are groomed into hardcore criminals.

Tax gaps 

Uganda loses between 30 and 39 per cent 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.

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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 per cent.

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 per cent 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.

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