South Sudan loses “billions” due to tax exemptions
August 5, 2014 (JUBA) – South Sudan lost billions as a result of tax exemptions on imported goods and telecommunication operators last year, the parliamentary committee on economy and finance told the country’s lawmakers Tuesday.
A heated debated ensured in the assembly with lawmakers demanding that finance minister, Aggrey Tisa Sabuni be tasked to explain the discrepancies and what they said was a violations of the constitution.
“The committee has discovered that customs exemptions amounted to SSP 627,863,418 (or SSP 627.9 million – about US $209 million) during the fiscal year 2013/2014”, Goc Makuac Mayol, the chairperson of the committee told the assembly during the second reading of the 2014/2015 budget.
Minister Sabuni presented the proposed budget to parliament on 2 July. The parliamentary select committee, however, said the delay to debate the budget was to enable is members study the document identify mistakes, make recommendations for restructuring of the budget and seek explanations from various government spending agencies on last year’s expenditure of the budget.
The entire budget, Makuac said, showed that South Sudan’s economy was fragile due to “dependency on oil, limited domestic production and high reliance on imports”.
“The non-oil sector is still dominated by low productivity and subsistence agricultural activities accounting for about 15% of the Growth Domestic Product, but engaging 78% of the population,” he said.
TELECOM COMPANIES TAX EXEMPTED
The parliamentary committee on finance recommends diversification of the economy through disciplined revenue collections. 2014/2015 budget is mainly funded through oil revenue, non-oil revenue such as profit income tax, value added tax and business profit tax which all telecommunication mobile operators are exempted by ministry of telecommunications.
“Telecommunication is a major revenue generating agency. Despite this, their contribution to the national treasury is below expectations,” Makuac said, reading from a prepared committee document.
MTN mobile operation paid SSP over 10 million for frequency fees and over SSP 29 million for excise duty, Zain paid over SSP 6 million and 35 million for frequency fees and excise duty respectively in 2013/2014 budget. Vivacell mobile operator is exempted from paying frequency fees and excise duty, which the telecommunications minister described as a “contract mistakes”.
All mobile operators, except Gemtel, do not pay profit and business taxes costing “millions or billions annually” in financial lost to the government.
“The committee observed that the Gateway system acquired in 2008 with the purpose of regulating all operators in the country is not operational and as a result the government is losing millions if not billions of pounds annually,” Makuac said.
For a period running June 2013 -July 2014, the committee said, total revenue customs collection amounted to SSP 528 million and “exemptions in the same period amounted to SSP 627,863,418 giving a total grant of SSP 1,156,414,471.”
“This huge discrepancy in customs collection generates a lot of questions to be answered by the minister of finance and economic planning,” Makuac said.
The deputy finance minister, Jakor Kengen, however, told lawmakers that more time was needed to study the findings, recommendations and restructuring proposals of the lawmakers before any response.
Telecommunication minister, Rebecca Joshua, said she inherited mobile operators’ licenses that allowed exemptions for taxes, but promised to recoup government funds at large.
“There is contract mistake that happened before I came to the ministry. We are working very hard. We have already worked on documents. It has to be corrected so that we give ourselves a chance to recoup a lot of our money that is still at large,” Joshua told MPs.
The country’s lawmakers failed to debate on the budget on Monday due to total power blackout. Tuesday session lasted four hours.
MINISTRIES OVERSPENDING, UNDERFUNDED
The budget debate disclosed that while some ministries are spending out of budgeted funds, others are being underfunded.
“Approved budget for financial year 2013/2014 for the ministry of finance and economic planning was wages and salaries as SSP 151,737,677 and the overturn in six months was SSP 131,447,760. This indicates that the budget for salaries and wages almost got exhausted just in six months,” Makuac said adding that “there is discrepancy in the budget of the ministry of finance which is a violation of the Appropriation Act 2013/2014.”
“Ministry of education, science and technology transfers only 35% by December 2013. [That means] it was underfunded by June 2014,” said Onyoti Adigo, the leader of minority in parliament.
Ministry of health received only 14% of the money budgeted for by December 2013 as well as does the ministry of agriculture which got 11% in the same period.
Other leading spenders include the office of the president which spent 102% by December 2013 and ministry of road (spending 254.7% by December 2013).
“Which roads were constructed with this huge amount of money above the approved budget? It (the spending) [went] more that 500% by June 2014,” Adigo said.
However, the ruling SPLM dominated house passed the propose budget for third reading due next week.
Makuac said his committee will meet relevant government spending agencies and top officials from the ministry of finance to incorporate MPs’ views for restructuring before being blessed.
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