The Uganda Revenue Authority (URA) has achieved a major legal victory in its ongoing battle against tax evasion. The High Court ruled in favor of URA in a landmark case involving Crane Autos Ltd., exposing complex schemes used by the company to avoid paying taxes.
On July 16, 2024, Honorable Justice Stephen Mubiru delivered the ruling that has significant implications for tackling tax evasion, base erosion, and profit shifting. The court’s decision highlights the extensive efforts made by Crane Autos Ltd. and its affiliates to evade taxes through unlawful means.
The case revealed that Crane Autos Ltd. employed various tax avoidance strategies, including transfer pricing and manipulation of tax havens. The company established a branch in Dubai, which operated between 2002 and 2020. This branch facilitated the purchase of Ural armored trucks from M/s Ural Automobile Works JSC, which were then sold at inflated prices to East African Motor Supplies Ltd., a company under the same management and ownership.
The court found that the Dubai branch played no substantial role in the transactions except to enable aggressive transfer pricing and profit shifting to an offshore tax haven. Justice Mubiru noted that there were compelling public interest reasons for delaying the dissolution of Crane Autos Ltd. The court aimed to address and potentially reverse the suspected unlawful tax avoidance schemes.
Crane Autos Ltd. had originally declared taxes amounting to UGX 603,852,927. However, further investigations by URA uncovered additional liabilities totaling UGX 20,129,287,806, bringing the total tax evaded to UGX 20,733,140,733.
URA is now awaiting the outcome of a related case that seeks to lift the corporate veils of Crane Autos Ltd. and its affiliates, aiming to hold the directors and related companies accountable for the outstanding taxes.
According to the Taxman Portal, the ruling not only underscores the critical nature of preventing tax evasion but also prevents Uganda from losing UGX 20.1 billion in potential tax revenue.
