Petronas subsidiary Engen Uganda may be subjected to investigation by the Ugandan Tax Authority (URA) for allegedly defaulting on its tax obligations since 2004, a move which has resulted in about 10 billion Uganda Shillings ($4 million) tax invasion, Uganda news portal Chimpreports said.
According to confidential documents received by the URA, the tax evasion began a year after Engen Petroleum Ltd (South Africa), a Fortune 500 national oil company subsidiary, established Engen Uganda.
“Engen Uganda Ltd has been paying management fees to Engen Petroleum Ltd (South Africa) on a quarterly basis and sometimes on a monthly basis, but not paying withholding tax on the payments,” a whistleblower said in a petition sent to the Uganda Revenue Authority (URA).
Engen Uganda has also been accused of fallen short on remitting social security contributions from employees as well as PAYE (Pay As You Earn) to the Uganda National Social Security Fund.
“Engen Uganda Ltd has been paying management fees to Engen Petroleum Ltd (South Africa) on a quarterly basis and sometimes on a monthly basis, but not paying withholding tax on the payments,” the petition sent to URA read.
Aside this, Engen Uganda is also blamed for evading paying Shs180m in overdue VAT and other taxes.
“This tax is unpaid and remains so to-date. Ernest & Young did a tax health check in 2010 which found out that Engen Uganda Ltd was liable to pay VAT and other to a tune of Shs180 million but the same has not been settled.”
Engen Uganda is also alleged to have declared losses since beginning operations in 2003, despite making profits. “The company kept repatriating all profits in the form of intercompany payments (from Engen Uganda to Engen Petroleum Ltd). As such profits were transferred back to South Africa disguised as expenses and/or losses,” said the whistleblower, as quoted by Chimpreports.
Engen Petroleum Ltd is 80 percent owned by Malaysia’s national oil company, Petronas.