Uganda: Diageo Subsidiary Fined For Tax Scheme
The Diageo subsidiary in Uganda, East African Breweries International Limited (EABIL), was ordered to pay the Uganda Revenue Authority (URA) tax arrears of Shs9.7 billion as per a ruling by the Tax Appeals Tribunal.
The amount has been accumulated over a period of seven years according to the tribunal. East African Breweries had challenged the assessment which was dismissed by the tribunal with costs.
The ruling arose from an income tax assessment of Shs9.7 billion by the URA on the Diageo subsidiary for income received on transactions involving companies within the group. As per the ruling, URA had audited Uganda Breweries Limited, a subsidiary of East African Breweries Limited and discovered that it was transacting with EABIL.
EABIL – which is incorporated in Kenya – was purchasing and disposing stock where the company purchased goods from Uganda Breweries Limited at a cost and markup of 7.5%. There was doubt as to how EABIL was able to purchase goods from Uganda Breweries Limited and export them without having a presence in Uganda.
Evidence of invoices and dispatch notes shows that they were issued in Uganda. They had the address of the applicant as also in Kampala. Therefore evidence proves East African Breweries operated in Uganda.
The URA submitted that East African Breweries obtained income from the export of beer, which was sold to third parties at a cost and markup of 70 to 90%. But the company did not pay taxes to the Ugandan government.
The Tribunal dismissed evidence presented by Mr John Kambo who testified that he was an employee of East African Breweries Limited due to him working for another company and not Uganda Breweries Limited.
Diageo has a history of unethical business practices including, tax schemes, bribery, unethical marketing and manipulation of alcohol policy.
Read more on Diageo’s unethical business practices