Tax compliance review

Abstract

Ssekyali & Associates is a small sized local audit firm established in January 2019. It provides audit, management consultancy and accountancy services to small sized businesses. The Firm engaged services of a tax expert to assess its overall tax compliance status in line with the existing tax laws and legislation of Uganda. The tax review assessed compliance with Pay As 7 You Earn (PAYE), Withholding Tax (WHT), Income Tax, Value Added Tax (VAT) administered by the Uganda Revenue Authority (―URA‖) and Local Service Tax (LST) administered by local authorities for the period January 2019 to June 2023. The tax consultant was tasked with undertaking a tax compliance review of the Firm’s past transactions to evaluate the extent to which it fulfills its tax obligations in compliance with the laws governing tax and other statutory compliance administration requirements in Uganda. The tax compliance review analyzed the level of accuracy, timeliness, and completeness in tax compliance of the past business transaction to assess whether the taxes due were accounted for in full and in a timely manner for the period January 2019 to June 2023. The consultant reviewed the Firm’s internal periodic tax calculations, tax declarations and corresponding payments, the cash inflow and outflow transactions, contracts, invoices, payment vouchers, observed the tax compliance environment to assess and identify potential tax risks, opportunities and exposures arising. The data collection tools used to execute the assignment included document review checklists and/or guides, review of the URA website declarations, and key informants’ interview guides. The Firm duly is registered with the URA for tax purposes. However, WHT, PAYE and LST were not accounted for during the review period in contravention of the tax legislation. The noncompliance is mainly attributed to the limited tax knowledge and awareness at the Firm. In addition, sales transactions were under declared for Valued Added Tax and Income Tax purposes leading to a variance in sales declared to the URA versus the company records. The non-compliance has resulted into outstanding principal tax and interest exposures totaling to UGX 39,194,144. Management is encouraged to sensitize its staff through tax trainings to develop tax awareness to ensure accurate and timely declaration of taxes to the URA.