Stanbic Bank Uganda is suffering a devastating reputational loss after the Uganda Revenue Authority (URA), recently moved to withdraw all its accounts from the bank, effectively stripping it of a lucrative tax collections business worth more than UGX 11 trillion a year.
The decision means that the very institution accused of owing URA billions of shillings in a bitter tax dispute will no longer be trusted to handle the taxman’s money.
In a recent notice signed by Commissioner General John Musinguzi, URA informed the bank that all accounts currently held by the authority will be transferred to other commercial banks, citing concerns over tax compliance, transparency and the need to deal only with institutions that demonstrate full compliance with tax obligations.
The move piles pressure on Stanbic, which is already battling a UGX 117.8 billion transfer pricing assessment before the Tax Appeals Tribunal (TAT).
For years, Stanbic has enjoyed the privilege of being one of government’s most important banking partners, processing trillions of shillings in tax payments and portraying itself as a champion of compliance and corporate governance. But that image now risks unravelling.
URA’s decision is particularly damaging because it comes before the tribunal has even determined whether Stanbic’s tax position is correct. Yet URA has already concluded that continuing the relationship is no longer in its strategic interests.
URA acknowledged that the accounts had delivered significant financial and strategic benefits to Stanbic over the years. However, the tax collecting authority argued that those benefits had not been matched by satisfactory levels of tax compliance and transparency. That statement alone is likely to raise eyebrows across Uganda’s business community.
At the centre of the dispute is URA’s claim that Stanbic bank used various intra-group charges, management fees, technology costs and other transactions that may have reduced taxable profits in Uganda.
The tax authority has questioned whether some of the charges were excessive, duplicated or improperly allocated, resulting in lower tax liabilities than should have been declared.
Stanbic has since denied wrongdoing and insists the matter is simply a technical disagreement involving international transfer pricing rules. The bank maintains that it remains fully tax compliant and has repeatedly defended its record as one of Uganda’s largest taxpayers.
However, URA’s actions suggest that confidence between the two institutions has broken down significantly.
The loss of the URA accounts is not merely symbolic. Beyond the prestige attached to handling government revenue collections, the arrangement generated enormous transaction volumes and strengthened Stanbic’s position among major corporate customers seeking efficient tax payment services.
The withdrawal could weaken one of Bank’s most valuable institutional relationships and raise uncomfortable questions among clients, investors and regulators.
For Chief Executive Mumba Kalifungwa, who inherited the dispute from previous management, the challenge is becoming increasingly difficult. What started as a tax audit has now evolved into a public confidence crisis involving one of the country’s most influential financial institutions.
The bigger concern for Stanbic is that while the UGX 117.8 billion tax case remains unresolved, the consequences are already being felt. URA has effectively sent a message that a bank fighting a massive tax assessment can’t simultaneously enjoy the privileges of being the government’s most trusted financial partner.
