Tax and Legal

Letter to Commissioner General-URA

Letter to Commissioner General (CG) URA

Tax collection measures gone wild:

Spending 1 million Shs to recover 1 Shs!


Dear Madam CG,

I do acknowledge that in a bid to enforce compliance and recover government taxes, Uganda Revenue Authority through various tax laws has powers to impose certain measures with a view of collecting unpaid tax.

From a Customs point of view for example, Section 130(2) of the East African Customs Management Act (EACCMA) provides for recovery of duty by distress as follows;

 130(2) Goods under Customs control which belong to any person from whom duty is due, and any goods afterwards imported or entered for export by that person, shall be subject to a lien for such debt and may be detained by the Partner State until such duty is paid and the claim of  the  relevant  Partner  State  shall  have  priority  over  the  claims  of whatever nature of any other person upon the goods and the goods may be sold to meet the duty due if the duty is not paid within two months after the goods are detained. 

 Under the Income Tax Act CAP 340 of the Laws of Uganda, Section 106 provides for recovery of Tax from Person owing Money to the Taxpayer as follows;

(1) Where a taxpayer fails to pay income tax on the date on which it becomes due and payable, and the tax payable is not the subject of a dispute, the Commissioner may, by notice in writing, require any person

(a) owing or who may owe money to the taxpayer;

(b) holding or who may subsequently hold money for, or on account of, the taxpayer;

(c) holding or who may subsequently hold money on account of some other person for payment to the taxpayer; or

(d) having authority from some other person to pay money to the taxpayer,

to pay the money to the Commissioner on the date set out in the notice, up to the amount of tax due.

The above enforcement measure is also provided under Section 40 of the VAT Act which provides for Recovery of Tax from third parties.

 Spending 1 million to recover 1 Shilling

Madam CG, having been in the tax practice for more than a decade, I fully recognize that any tax or duty when it becomes due and payable, is a debt to the Government of Uganda and is payable to the Commissioner in the manner and at the place prescribed. I also recognize that as mentioned above,you do have powers to enforce collection using different measures as provided for under the various tax laws and regulations of the land.


However, what caught my attention in January 2016 is whenyou invoked Section 130(2) of EACCMA to collect an outstanding duty of Ushs 1 Shilling. I repeat, ONE Uganda Shilling! But in the process of recovering that one shilling owed to Customs, I noted that youcould have actually lost 1 million shillings in domestic taxes. But how did this happen?

 In January 2016, an importer tried to clear his consignment which had arrived at Malababorder post. When his clearing agent tried to declare the consignment to customs, he received an auto response on ASYCUDAWORLD that “Company is suspended”. Not knowing the cause of suspension, the clearing agent called the importer and delivered the sad news. The importer not knowing what was wrong dropped an email to his tax agent in Kampala. A consignment worth millions of Shillings is stuck at the border post. Malaba customs officers unfortunately have no answer. At this point, not only the Importer is losing market BUT he has started incurring “delay” charges too.

 Back in Kampala, his tax agent rushes to URA at Crested Towers to find out why the company/importer has been suspended. Unfortunately Crested Towers refers the tax agent to Nakawa ASYCUDA offices for answers. Almost beaten at his own game, the tax agent notifies the importer to be more patient as the issue is sorted out. At ASYCUDA offices, the URA officer gently taps on his desktop and BEHOLD, the company has been suspended due to an outstanding duty of Ushs 1 Shilling (One Shilling) relating to an earlier entry of April 2014.Blood of Jesus, on cross checking the entry, we noted that the importer had paid Ushs 731,500 instead of Ushs 731,501. Why was the issue not raised before the consignment was released in 2014?  But the tax agent realized this wasn’t the time for asking questions. The officer confidently told the tax agent to arrange and pay One shilling to a designated bank before the consignment can be released. Indeed, the accountant wrote a chequeof Ushs 1 shilling and looked for the signatory for signature. Finally, after all the ups and downs, the amount was paid to Diamond Trust Bank on 23 January 2016. On that same day, the consignment worth millions of shillings was finally released.

 How then did URA lose the 1million?

Madam CG, throughout the entire process of recovering the One shilling, what URA forgot was that the importer/taxpayer was incurring heavy expenses which are tax deductible. By running up and down trying to look for answers, the tax agent had to bill the importer consultancy fees. On the other hand, the more days the truck delayed at Malaba, the more delay charges the importer paid to the transporter.  Below are some of the expenses incurred by the importer in resolving the issue of One shilling;

Nature of expense

Amount ‘Ushs

Tax Consultancy services


Truck delay charges at Malaba (USD 150 per day X 4 days)


Extra Drivers allowances




 The Ushs 3,540,000 above will be reflected in the taxpayer’s income tax return as an allowable deduction. This means it will reduce the taxpayers profit by Ushs 3,540,000. At this point, the domestic taxes department has directly lost 30% income tax on the above figure which is Ushs1,062,000. I know another school of thought will argue that the Ushs 3,540,000 will be reflected in another person’s return as income but knowing the Uganda we live in, we wouldn’t want to go that route.

 The above implies that if URA followed up 100 such cases, they will recover Ushs 100 in customs duties and lose Ushs 106,200,000 in income tax. Great effort. Well done. Every penny collected.  Meanwhile, from the banking point of view, people are lining up to pay 1 Shilling plus Ushs 2,500 bank charges. Some banks also don’t accept cash and therefore some taxpayers are writing cheques of 1 shilling payable to URA. The same cheque will go through the normal banking procedures and someone is still not seeing the inconveniences of trying to recover 1 shilling.

 My humble proposals

Once again I reiterate my earlier position that any tax or duty when it becomes due and payable, is a debt to the Government of Uganda. However, in my opinion it does not make any economic sense for URA to run after taxpayers who have not paid 1shilling while a “LIST OF SHAME” for taxpayers with tax arrears of billions of Shillings is displayed on URA’s website and nothing has been done to recover the taxes. The last time I checked, the taxpayers were persons that are well known and URA has not done much to unleash their enforcement measures. If any serious measures were unleashed on these “list of shame” persons, then we wouldn’t see the same names appearing year in year out.

 Madam CG, in light of the above, I wish to make only 2 humble suggestions as follows;

1.      That URA puts a threshold below which enforcement measures should not be instituted; or,

2.      For importers, the 1 Shilling in duty arrears can be added on the new consignment rather than putting a lien on it. I am sure no sane importer would argue or even recognize an additional duty of 1 shilling being added on a fresh consignment.

While URA is doing everything possible to recover every single penny, this must be done without causing unnecessary inconveniences to taxpayers, transporters, banks and URA collectors themselves. Madam CG, while I may have so many other issues of concern regarding processes at URA, it is my humble hope and prayer that you look into this one issue as we “develop Uganda together”.

 By Albert Beine

Tax Director – PKF Uganda






An undomestic VAT

An undomestic VAT
Analysis of the partial judgment of the High Court in the case of Margaret Akiiki Rwaheru and 13,945 others

Like most developing countries, Uganda struggles to collect tax from the informal sector, which is one of the biggest sectors of the economy. The legislators and the Uganda Revenue Authority (URA) have made several attempts to bring the informal traders within the tax net in a manner that is administratively efficient. One such effort is the URA’s imposition and collection of “domestic VAT” at the point of importation of goods.
Though the imposition and collection of domestic VAT has long been considered controversial, it was not legally challenged until the class action case of Margaret Akiiki Rwaheru and 13,945 others vs. URA (Civil Suit No. 117 of 2013). In that case, Ms Akiiki and others (the plaintiffs) sought a declaration that there is no legal basis for the URA to charge domestic VAT on imported goods. The plaintiffs also asked the Court to order the URA repay those taxes illegally collected, together with interest.
On 10 January 2014, the Commercial Division of the High Court of Uganda delivered its partial judgment covering the points of law raised in the case. The High Court was scheduled to deliver its judgment separately on the merits of the facts of the case as proven by the plaintiffs, particularly for the purposes of awarding costs. However, the proceedings in the High Court were stayed by the fact that there is a pending appeal on the decision on the point of law (Court of Appeal Civil Appeal No. 98 of 2015). As such, the final judgment in respect of the High Court case has not been delivered to date.
Article 152 (1) of Uganda’s Constitution of 1995 prohibits the imposition of tax unless authorized by an Act of Parliament. There is no specific Act of Parliament authorizing the imposition of domestic VAT on non VAT registered importers. As a result, the general public and tax community were surprised when the URA included a note in its VAT guidelines (the ‘URA Guidelines’) that stated that “Domestic VAT for Non VAT registered importers” had come into effect on 1 March 2002. In the guidelines, the URA defined domestic VAT as VAT charged on goods whose value is UGX 4,000,000 or more. According to the guidelines, importers who meet the following are required to pay domestic VAT:

    The importer is not VAT registered.
    The Cost, Insurance, Freight (CIF) value (as determined by Customs) of the goods is UGX 4,000,000 or more.
    The goods are subject to the standard VAT rate of 18%.
    The goods are not personal effects or motor vehicles.

The URA guidelines further provide that domestic VAT is payable at the customs entry point together with “other customs taxes” and that the value for domestic tax purposes is computed by applying a 15% mark-up on the value on which VAT at Customs is computed, which is the sum total of CIF plus import duty and excise duty (the so-called Customs VAT value). The mark-up is the expected value added between the stage of importation and sale.
Based on the URA’s guidelines, the total combined VAT suffered by the importers is 33%, which is neither provided for by the Value Added Tax Act (Cap 349) nor the East African Community Customs Management Act, 2004.

In the Margaret Akiiki Rwaheru case, the URA explained its justification for imposition of domestic VAT on imports of goods. According to the URA, given the fact that many of taxpayers that fall into the informal sector intend to circumvent compulsory VAT registration, since they do not keep proper records, have no fixed places of abode, have multiple registrations, or are simply not registered for VAT at all, the URA faces administrative challenges in ascertaining output VAT. As a result, the URA feels it is important to collect input VAT at importation and output VAT (domestic VAT at 15%) at the point of importation. Furthermore, the URA claims that it has authority to do so under Section 32 (1) (c) of Cap 349, which empowers the URA Commissioner General to make an assessment of the amount of tax payable by a person where the Commissioner General has reasonable grounds to believe that a person will become liable to pay tax but is unlikely to pay the amount due.

The URA further explained that the domestic VAT did not amount to a different tax with a different rate because the calculation was based on an estimated mark-up (15%), derived through a research/market survey, that was meant to represent the expected value added on imports between the stage of importation and sale in the domestic market, taking into account costs incurred as well as the profit margin. The URA also noted that aggrieved taxpayers had a legal right to file a VAT return and could seek a refund for the overpaid tax under Section 42 (3) of Cap 349. According to the URA, the plaintiffs’ action was in essence an omnibus objection to VAT assessments at importation which was not provided for under Cap 349.

As the plaintiffs’ Counsel in the case pointed out, by imposing domestic VAT on imports, the URA made several assumptions that contravened the provisions of Cap 349. First, the URA assumed that all imports of goods worth over UGX 4,000,000 are for sale in the domestic market at a profit and that from such a sale, output tax would always exceed input tax and, as a result, an importer is always in a VAT payable position rather than a VAT refundable position. The plaintiffs argued that by assuming that all importers of goods worth over UGX 4,000,000 are eligible for VAT registration, the URA was effectively rendering the annual VAT registration threshold of UGX 50m (prior to the July 1, 2015 amendment to Cap 349 which raised the VAT registration threshold to UGX 150m) set out in Cap 349, meaningless.

And finally, the plaintiffs argued that to require unregistered persons to pay VAT without establishing whether they are taxable persons under the Act is contrary to the provisions of Cap 349.

In concluding that imposition of domestic VAT is not illegal per se, the judge pointed out that it is was irregular for the URA to assess taxes on taxable supplies before the supply takes place. The judge added that the URA’s conclusion that all importers are unlikely to pay VAT on future taxable supplies of goods should be determined on a case-by-case basis, rather than on a blanket basis for administrative convenience. The judge concluded that it was unnecessary for the URA to resort to relying on estimated VAT assessments on speculative future supplies and, instead, the URA should use the various penal provisions specified by Cap 349, such as penalties for failure to apply for registration, failure to lodge returns, and failure to maintain proper records.

The judge also noted that it cannot be assumed that the taxable person shall not lodge taxable returns which are accurate for the URA to invoke the provisions of Section 32 (1) (c) of Cap 349 or even to come to a conclusion that there are reasonable grounds to believe that the person will become liable to pay tax but is unlikely to pay the amount due.
Furthermore, he explained that a strict interpretation of Section 32 (1) (c) of Cap 349 confines the belief of the URA to reasonable grounds that a particular person will become liable to pay tax but is unlikely to pay the amount due. This by necessary implication refers to the circumstances of a particular person in each case. Consequently, Section 32 (1) (c) of Cap 349 can only be invoked on one taxpayer at a time and cannot cover a general category of taxpayers.

The judge concluded that the plaintiffs had only established generally that it would be irregular to charge VAT on taxable supplies which have not occurred and without giving the reasons why an importer who has paid VAT on the import ought also to pay VAT on a taxable supply before making the supply, on the basis of an estimate made under section 32 (1) (c) of Cap 349. He was of the view that while the charging of VAT on a person who would never supply the goods as a taxable supply would be illegal as submitted by the plaintiffs, VAT charged on an importer whose goods are subsequently supplied in the domestic market is an irregularity and not an illegality as tax on taxable supplies is prescribed by Cap 349. In other words it is a curable defect.

Whilst the point about the definition of what was domestic about the VAT collected by the URA at 15% was somewhat lost in the nomenclature of other legislation, it was a touch dispiriting to see that the exposition on the purpose of Section 32 (1) (c) of Cap 349 dealing with assessments was somewhat missed. The URA seems to stretch the use of Section 32 (1) (c) by applying it in instances where, as is widely accepted is a basic premise of VAT internationally, no supply has actually taken place.  There also appears to be distortive possibilities in the imposition of domestic VAT if a particular importer does indeed intend to make onward supplies of those goods, but for a consideration below the registration threshold. In such an instance, the URA would have raised tax illegally since it can safely be assumed that Parliament intended to exclude traders making supplies below the threshold from the clutches of VAT. Since the VAT registration threshold was revised upwards to UGX 150m on 1 July 2015, more tax payers are likely to be captured by the low domestic VAT threshold of UGX 4m thus circumventing the overall purpose of the amendment.

Through the imposition of domestic VAT, the URA also seems to amend the penalty regime of Cap 349 by interchanging circumstances authorizing it to impose penalties with circumstances where it is authorized to raise an assessment. Through the domestic VAT mechanism, the URA utilizes Section 32 (1) (c) of Cap 349 which covers assessments and not penalties to covertly impose an omnibus penalty for anticipated infringements of Cap 349, for failure to apply for registration, failure to lodge returns, and failure to maintain proper records that are covered elsewhere in Cap 349.

Also of interest is the fact that the URA guidelines note that domestic VAT came into effect on 1 March 2002 notwithstanding that Section 32(1) (c) of Cap 349 which is the suggested enabling provision of the law has not been amended since the inception of Cap 349 on 1 July 1996.

If sustained in the appellate courts of law, the plaintiffs’ arguments in this case have wide-ranging ramifications for the URA and taxpayers alike. Subject to factual evidence and, of course, verification by a URA audit, some taxpayers may seek refunds of overpaid VAT in accordance with the provisions of Cap 349.
Given the URA’s practice of instigating wide-ranging audits into taxpayer’s affairs to verify refunds claimed, the URA may be overwhelmed by the large number of pre-refund verification audits and possible legal challenges that may result. Importers who have erroneously paid domestic VAT face the dilemma of deciding whether to pursue the VAT refund or to forfeit it in order to avoid the intrusive URA audits.
Very undomestic!

Random news


“Anybody can succeed if they discover their talent and purpose for living, go ahead to develop it and take a step to deploy it. The 3 Ds (Discover, Develop and Deploy) have shaped my life and, it is a personal success model that can positively affect other people’s lives”. 

Who is Moses Kasakya?

Moses Kasakya was born in Budaka district in Eastern Uganda. It is also here in Budaka that he got his Primary and O-Level education. He later moved to Masaba senior secondary school for his A-level where he undertook Mathematics, Economics and Geography. From there, Moses went to Makerere University for a Bachelor of Commerce Degree where he graduated in January 1994. Moses is also a member of the Institute of Certified Public Accountants of Uganda. Moses has a Post Graduate Diploma in Financial Management and Post Graduate Diploma in Revenue & Tax Administration. Moses has over the years undertaken specialised trainings in Leadership, Fraud Risk Management, Corporate Integrity and Internal Audit. He is also a member of the Institute of Internal Auditors, USA.

With such education background (which he terms simple education), Moses is so much more than what the eyes see. Within him lays a wealth of knowledge and determination, within him a clear conscience exits, and when you chat with him, his words scintillate with a lot of remarkable brilliance.

Professional Journey

Moses’ professional journey has been a steady and progressive affair. In his own words, Moses says that “God has blessed him where he has been able to move from glory to glory as far as his professional career is concerned”.

Moses started working when he was still a student at Makerere University as a Research Assistant at Uganda Bus Company.  As a Research Assistant, his role was to collect relevant information that would enable the management of the bus company devise means of competing in the transport market. At that time tax commuter vans (matatu) were posing a direct competition especially for shorter around-town trips like Gayaza, Lugazi and Kayunga. Moses also taught Economics in Butebo S.S, Palisa District.

Immediately after completing his studies at Makerere University, Moses joined Kyagalanyi Coffee Limited as an Accounts Clerk. In 1996 he joined J. Lutta Coffee Limited (defunct) as an Accountant. In September 1997 he joined Uganda Revenue Authority (URA) where he began as Assistant Revenue Officer in Customs for 3 months. In 1998, Moses was posted to Jinja as Head of VAT Audit for two years. In 2000, he was posted to Tororo as the District Revenue Officer for two years. In 2002 he was posted back to Kampala to work in the Commissioner’s Office as a Tax Inspector where he was tasked with responsibility of advising the commissioner on Compliance matters at districts.

In 2004, he was appointed as Senior Revenue Officer, Internal Audit. Towards the end of 2004, URA commenced a restructuring program following results of the commission of inquiry. Following the restructuring exercise, Moses was appointed as a Supervisor, Tax Investigations in May 2005.

Towards the end of 2007, Moses took leave to go ponder and pray about his stay in URA as a “tax collector”. Being a Christian, the phrases like “tax collectors will not go to heaven” had started to affect him. During this break he learnt that tax collection is biblical and that those that won’t go to heaven are those that either cheat the taxpayers or cheat the government as advised by John the Baptist when tax collectors sought him out (Luke 3:12-13). Further appreciating that tax was to enable government administrators provide public services where individuals cannot afford on their own like construction of roads and other infrastructures; and that everybody must pay their debts including tax as biblically advised by Paul (Romans 13:5-7). Most satisfying was when he affirmed that even Jesus paid tax (Mathew 17:27). Moses’ conclusion was that if the process of tax collection that ends with tax payment was evil, Jesus would not have accepted to participate in it.

While still on leave where he had gone to ponder on his stay in URA, where he made interesting discoveries, Moses was recalled by his Commissioner and asked to manage a new project, the Compliance & Integrity Enhancement Project. As Manager, Compliance & Integrity Enhancement, Moses was to advise management on best practices in Compliance and Corporate Integrity and also coordinate implementation of Integrity Enhancement Initiatives.

The objective was to develop integrity driven workforce to enable the Authority accomplish majorly four outcomes i.e. Increased revenue yield, Reduction in costs of fraud, Improvement in Client satisfaction and attain Positive Reputation for the organisation and individual staff. To Moses, this was an exciting opportunity to positively impact the values of his fellow workmates. “This was and is an engagement I am so proud of” he said, with his eyes glowing with contentment. In light of the integrity enhancement program, and with support and involvement of the URA top management, the URA Integrity Perception index made a drastic gain from 51% at the time to about 80% in five years.

After 5 years in that position, Moses felt it was time for a move. He got an opportunity, Umeme Ltd as Integrity Manager responsible for forensic auditing, internal policy compliance, corporate integrity and physical security. This move to Umeme Ltd helped him to advance his exposure to a publicly listed organisation.

In November 2015, Moses got another opportunity with the Uganda National Roads Authority (UNRA) as the Director Internal Audit. He is part of the top management team tasked with the responsibility of transforming UNRA’s performance following the public scandals around its operations.

Also worthy noting is that in between all his assignments in the different organizations Moses continued teaching on professional accountancy courses, particularly Advanced Financial Accounting, Taxation and Audit. He believes teaching is one of his purposes for living. He contemplates progressing this calling through publishing articles or books that will be relevant even to people in places he can’t reach or long after he is gone.

On how he achieves objectives

As a Director, my role is to identify the “end in mind” in line with the company strategy. Then sell that “end in mind” to key stakeholders while accommodating prudent adjustments. In my case the key stakeholders are the Board Audit committee, Audit clients/ management and my staff.

With clear sight of the “end in mind”, I put my controls on majorly two things. One is the plan plus resources to achieve the “end in mind” and the other is to ensure quality of the final product of our services. In this case the quality of findings in the report and advise therein. I normally do not entertain results of “excited” auditors. I entertain results with sufficient evidence and those that address risks which make a boss lose sleep. In between the plan and final product I let employees deploy their creativity as this boosts their morale and interest in their work.

Both by law and company policy, UNRA employs CPAs i.e. Members of ICPAU across the various directorates and specifically in Finance and Audit. In internal audit department we also have other major professionals such as engineers and IT professionals.

On Staff training and knowledge enhancement

“The management team at UNRA led by Mrs. Allen C. Kagina believes that the foundation of success of any institution lies in the quality of the employees. At UNRA we assess quality of staff on four fronts; we review whichever staff are competent, productive, motivated and are of integrity” Explained Moses. To this end we dedicate sufficient resources to improving the quality of our staff including training.

On the role of ICPAU in promoting the accountancy profession in Uganda and beyond

I remember when ICPAU came in as the national accountancy body. It came in with a massive and aggressive program of encouraging people to study accountancy and it continues to do so. Secondly, it developed the curriculum to guide trainers of the profession. It also enforces the quality of the final products (we accountants) to be released to the public through administering examinations

The Institute enforces quality of the accountants through mandatory continuous development programs or else some would become stale and an embarrassment to the profession. It further maintains up-to-date articles via the website. It also registers and publishes a list of members on the website to make it easy for interested parties to confirm who is a CPA and who is not.

The lobbying for the Accountants Act, 2013 was a milestone for the accountancy profession as a whole. Unlike before, masquerading as an accountant has become a crime. The institute also lobbied government to sponsor candidates especially those working with government entities and this boosted the numbers of accountants in Uganda.

However, I believe that the Institute should do a little more on fighting fraud in the country. He therefore calls upon ICPAU to be more proactive take initiatives to investigate into media reports; The Institute will not only enforce its public interest but also save the country’s resources for the benefit of all of us and for generations to come.

OnRole of Government in promoting accountability

I believe Government always means well. It has put in place infrastructures that enable accountability and ensure standards are followed. Some of these include the enactment of the relevant laws like the Accountants Act, 2013, Public Finance Management Act, 2015, Leadership code administered by IGG, Anti-Corruption Act and setting up the Anti-corruption court.

The Government also put in place services of Auditor General to check and advise on compliance, effectiveness of controls and value for money. It also set up respective Committees of Parliament to review accountabilities of Government votes. The Government has also invested in automated information management system (IFMS) that boosts efficiency in accountability and continuously institutes commissions of inquiry where things go wrong.

To that end it is objective and fair to say that government means well on matters of accountability. However, it still comes back to us the professionals in our respective industries to ensure that we live up to our codes of conduct.

A word to Accountants

First and foremost, it’s a privilege to qualify and enroll as an accountant. It is only accountants that are most likely to be found in every entity including spiritual entities given that all entities have money matters.

Accountants should position themselves as strategic business advisors and not gain comfort in being book keepers or just producing financial reports. In addition to analyzing the financial data and hopefully its implications, the accountants should go ahead and advise on viable business opportunities or better still use the accounting knowledge and skill to start business ventures to boost the economy.

I also encourage accountants to explore the political platform in Uganda, specifically the Parliament of Uganda to help law makers on matters of finance.

I call upon all accountants to uphold integrity; acting with integrity minimizes some risks and illnesses associated with stress. People whose wealth is through fraudulent means never gain complete joy in life as the fraud element always comes back to haunt them, say when a child or friend inquires into how they made money even when the inquest is innocent. People would rather develop the potential of someone with integrity and let go of a competent product that is fraudulent.

Small and Medium Practices (SMP) still a long way to the top of the class

Small and Medium Practices (SMP) still a long way to the top of the class

The commercial banks will soon start publishing their abridged audited accounts for the year ended 31 December 2015; in the New Vision and Daily Monitor. What will be evident is that the external auditors will be one of the Top 5 firms (PwC, KPMG, EY, Deloitte and PKF). For purposes of this article, the author has restricted himself to just 2014 and 2015 but a more expensive research will be extended to 20 years back.

In December 2013, the Bank of Uganda (BOU) published a list of 56  auditing firms that had passed the test and were thus considered suitable to audit the financial statements of commercial banks, credit institutions and microfinance deposit taking institutions (Tier 1,2 and 3). The list was compiled by BOU after the auditing firms have submitted their pre-qualifications documents by the due date. The author had not yet established the total number of auditing firms that had submitted their pre-qualifications documents to BOU.

Suffice to know that those 56 firms were all duly authorised firms approved by the Institute of Certified Public Accountants of Uganda (ICPAU). By that time, the total number of auditing firms approved by ICPAU was close to 190, meaning that about one-third had been pre-qualified by BOU.

However, the number of Tier 1-2 financial institutions is limited and not all the firms will get an audit. The table below shows that out of 27 Tier 1-3 financial institutions, only five of the 56 firms got an audit for the year ended 31 December 2014. The top three of PwC, KPMG and EY had the lion’s share auditing 22 of those financial institutions which constituted 97% of the total assets of that population – which stood at UGX 18 trillion (US$ 5,300 million). Compare this to assets of about 90 members of the Association of Microfinance Institutions of Uganda (AMFIU) which added up to between US$300-400million.

Source: Author’s own compilation from published accounts in newspapers
The story of dominance by the top firms may not be very different come 2015.

Of particular interest are the following statistics:

•    Out of the 56 auditing firms that were on the pre-qualification list in 2014, a total of 18 were unsuccessful in their bids for 2015. The author will attempt to find out why that was the case. It could be that the audit firm did not pass the BOU requirements or they did not meet the deadline or did not submit a bid altogether; these facts will be established;

•    For the year 2015, BOU pre-qualified a total of 64  audit firms. Notably, a total of 26 new audit firms were added onto the list which was a welcome boost to those firms. The author will in due course engage the BOU to find out the criteria for inclusion or exclusion of an audit firm from the pre-qualification list; and

•    Out of the 64 audit firms pre-qualified for 2015, a total of 22 of them were sole proprietorships. Originally, there was a view that only audit firms with at least two partners would be eligible for BOU pre-qualification, but that assertion has now been proven incorrect.

Is the situation in Kenya, Tanzania and Rwanda any different?  

Kenya has over 500 auditing firms registered with the Institute of Certified Public Accountants of Kenya, but with 56  commercial banks, mortgage financial institutions and microfinance banks. On the other hand, Tanzania has close to 150 auditing firms registered with the National Board for Accountants and Auditors of Tanzania, but with 44  commercial banks, finance leasing companies and other financial institutions. Last but not least, Rwanda has close to 35 auditing firms registered with the Institute of Certified Public Accountants of Rwanda, but with 17  commercial banks.

In Q2 2016, the author will have established whether the financial institutions in Tanzania, Kenya and Rwanda primarily also use appoint the top firms of PwC, KPMG, EY and Deloitte as their external auditors or is it a good mixture of the top firms and SMPs.

Do SMP have a chance on the Tier 1-3 cake?

The author thinks the SMPs have a good chance but one would need to dig deep into the critical success factors why the Tier 1-3 financial institutions continue to prefer PwC, KPMG, EY and Deloitte as their external auditors. In the meantime, the SMP have to be contented with auditing forex bureau which number over 200; non-deposit taking microfinance and SACCOs which could be approaching 2000 in number across Uganda. Should BOU consider regulating these Tier 4 institutions in the future, then the auditor’s pre-qualification list will end up being the same as the ICPAU list in its entirety.

Managing Successful SMEs


Like David Richards says, it is not an easy time to be a “small or medium sized enterprise (SME)” owner since the cost of living is high, people are spending cautiously and investors are becoming increasingly conservative. Being an entrepreneur requires worrying about cash flow management among other things to compete effectively.
SME is a business segment term used differently in different countries, sometimes differently in different industries in the same country. In the US, any firm from a small-office home - office (SOHO) to a large corporation may be called a SME.
The European definition of SME follows: "The category of micro, small and medium-sized enterprises (SMEs) is made up of enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding 50 million euro, and/or an annual balance sheet total not exceeding 43 million euro."
In 2008, the Uganda Investment Authority (UIA) introduced the first Small and Medium Enterprises Business Guide. This guide provides information and contacts on business licensing, access to finance, entrepreneurship skills training, business development services, and taxation/incentives.

Challenges of running SMEs
Sometimes in most employees life one gets frustrated at the hustle and bustle and mind-numbing regularity of paid employment. You just want to take initiatives and responsibilities that would bring about a successful enterprise – “your enterprise”. The dream is to be your own boss. But then, it’s one thing to dream, and another to see such dreams materialize to reality.
One of the biggest challenges is the fear of failing. It’s important to appreciate the regularity of salaries/wages and consider scenarios if “your enterprise” doesn’t make it quick or in the intended direction.
Truth be told, being a business owner comes with challenges unique to the size and function of the business. The small business owner, for example, has to handle all the challenges of selling, delivering, financing, managing and growing the business with little or no staff, while trying to make it a success at the same time. This can often prove to be intimidating but not altogether unachievable. No one ever said it would be easy running a successful small business. But then, when you get it right, the rewards can be hugely amazing and remarkable. It should interest you to know that most big, successful and legendary businesses today started off as small businesses.
It is important to retain the interest of all stakeholders like customers, partners, vendors, your best staff and team to build momentum in a short span of time. This takes vision. It also takes courage and belief – belief in your ability to steer your ship to success.
Here are some of the secrets to run a small business that can make these challenges easier to handle and make a successful business venture.
Secrets for SME Success
Secret1: Have a clear vision of what you intend to do and the business you wish to run.
Vision is a key hallmark of success principles in business and other aspect of life. Vision gives you a vivid picture of what you want to accomplish. It makes you see the end from the beginning. This picture will illuminate and motivate your mind throughout the course of your business journey. By having a clear vision for your business, the mission takes shape and business objectives and goals emerge.
Secret2: Define clearly what you sell and also to whom you sell or render service
Defining what your business does from the word GO, as you set out into the business world, is always one of (if not) the most important step to running a successful business. This makes it a whole lot easier to manage your company going forward. In addition, this enables you to explain your business clearly, without ambiguity, to investors or partners when the need arises.
Secret3: Source for funds security and sustainability
Running a small business requires financial backbone, prudence and efficiency. Explore all available financial options open to you, such as family, friends, business associates, investors, banks, etc. However, the choice of the right financial option for your business' financial plan and support is vital. Also, bank with the right financial institution that will give you the best deals, helps you stretch every shilling and provide for financial prudence in management of the business.
Secret 4: Get business information and technical guidance/advice from Small Business Development Consultant(s)
Today, a number of businesses and professionals give expert business advice and services at a token fee for individuals and groups wanting to go into new businesses or diversify their existing businesses into new areas or line of products and/or services. These professionals provide help and sound business support and solutions services during all stages of the business life cycle.
These include legal advice and consultation, business development and strategies, recruitment and management of staff from business psychologists, and so on. Their business support and development services help business to mature by making the right business calls that won’t only serve in the immediate and short term, but would strategically assist in positioning the business for long term success.
Secret 5: Create a workable business and marketing plan for your SME
One of the keys to running a small business enterprise is having a detailed and workable business plan that outlines the objectives, goals, target market and projected growth. In addition to having a concrete business plan, ensure that you work out a detailed business marketing plan to go with it. Without this, it’s necessary to rethink why you are in business in the first place.
Secret 6: Go ahead and start a business
Once you have established the vision and mission of the company, defined clearly what type of products and services your business wants to offer, contacted your financial sources for funding and secured your business funds, consulted business professionals for necessary legal and business strategy building aspects such as registration, documentation, business structure processes building, then finally built a creative and detailed business and business marketing plan, to drive and carry the business, it is now the time to start! Don’t waste another moment idling and wishing. Just start!
Secret 7: Build a strong brand identity that will stand the test of time
Actually, branding the business should start the very moment you articulate and conceptualize the business idea. This involves creatively building a business identity that would appeal to the target market in a continuous manner. It includes but is not limited to the choice of business name, type of business engaged in; and the personality you want the business to have. Be very creative and innovative with graphic designs, business colours, taglines, business logos and other communications. Everything must be organized and attractive to the targeted customer to bring about more sales and continued business patronage.
Secret 8: Prioritize on making profit
It’s amazing how many times people start up business enterprises and then forget how to make profit. It is a known rule in economics that the chief aim in business is to make profit. When that is no longer the case, it becomes difficult to sustain or grow business. Therefore, the moment a business is set out to be successful, it’s important to understand the golden rule of money - “make sure more comes in than goes out”. Once this is achieved, there will be enough to re-invest in the business and to make you feel it is all worth it going into business.
In addition, prioritizing profit making also involves optimising cost management to minimise waste, maximise productivity and profitability. Where you can’t seem to get it right yourself, hire or consult an accounting professional to help you keep your books in order, manage your finances properly and professionally to ensure your business remains profitable!
Secret 9: Network and connect with other businesses and business minded individuals as much as possible
To grow business for a wider reach and approachability, ensure you network with other local small businesses and small business owners on overall business vision, shared business strategies and opportunities. Attend regular business events; they present great opportunities and avenues for small businesses to come together, rub minds, share business ideas and experiences. Also, join small business associations and participate in local events to raise awareness, promote your business and its brand.
Secret 10: Never leave a single customer dissatisfied
It may be very difficult to keep every one of your customers happy. That is a business fact. But you must try to keep every one of your customers satisfied. That should be your business reality. Having a pro-customer orientation – whether you run a small business alone or have employees working for you – is as vital a decision as the decision to go into running a business in the first place. There can be no business without customers. The more customers patronize your business, the more the chances of making a profit, and actually building something successful and wonderful. Therefore, businesses must emphasise customer satisfaction through effective customer service and relation. Make use of positive and negative feedback from customers to improve the quality and desirability of your products and/or services.
Secret 11: Be Passionate about your business and commit to continuous improvement
Never settle for less. Always go for more. Renounce average. Beware of comfort. Avoid complacency. Live by belief. Every day you should desire your business to be in a better position than it was yesterday. This mindset should permeate through you to your staff. Even when hiring, ensure focus on those who can do more, bring more, create more, live more, give more, sacrifice more, believe more, support more, relate more and accomplish more. Emphasis should be on more, more and more - constant improvement, no room for stagnation and redundancy. Remember, most of the iconic businesses you see today like Coca Cola, Apple, etc. didn’t start big. In fact, most of the Fortune 500 companies started small. But they made it to the top because they keep going and keep improving and wanting to be better. They still do today, and some of them are over a century old. You too can do it, if you try and believe you can!
Secret 12: Feel the winds of change in the air
To be a successful business, you need to be able to change and adapt your products and services as situations dictate. What was successful last year may not work for you this year.
Be ready to try new ideas, expand your business and bring in new people. In order to fuel such radical changes, you may well need to consider exploring new avenues of funding in order to enable your growth. A measured risk often pays off in business growth.
Secret 13: Taste the exotic fruit of unexplored markets
If you are looking to grow and expand your business, you may not find enough clients with money to spare in the existing markets.
This could be the year in which you reach out to new markets, bringing in eager new clients and taking your goods and services into territories you’d never considered before. Consider expanding geographically as well as into new niche areas of business.
Remember, running a successful small business may be tasking and at times just plain frustrating, but the eventual rewards of running a business successfully are too numerous to mention. The benefits you reap ultimately will be boundless. And the financial rewards? Well, you may just turn out to be the next Aliko Dangote or Bill Gates!

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