The inevitable relationship between the procurement function and tax

Today, Procurement is more connected to the business than ever before and impacts almost every aspect of organizations involved. Procurement as a function of business process has already gained a voice in areas such as managing group demand, maintaining supplier relationships, overseeing raw material quality, and strategically sourcing goods and services.

In recent years, there has been an observed marked increase in the involvement of procurement functions in specification optimization, new product development and innovation, often empowering them to promote supplier integration throughout an increasingly connected supply chain. This evolution of the procurement function has not gone unnoticed by tax authorities where in Uganda it’s the Uganda Revenue Authority(URA).

Tax authorities are particularly interested in understanding the nature of their activities and the value they deliver. This helps them make recommendations on the kind of tax a buyer and seller of a tender or contract winner has to pay. From corporation tax and Value Added Tax (VAT) registrations and returns, transfer pricing reports, and tax file obligations, to new tax liabilities, individual income tax compliance and social security obligations for business plus, their tax compliance

For those thinking that this is more about being caught in a “storm in a teacup” than being caught in “the eye of the storm,” it is worth noting that one is obliged to be tax eligible and cleared for their entities are involved in performing procurement functions.

The direct consequence once URA identifies a non complaint tax entity are significant increase in tax costs, reducing the value delivered by procurement teams. Continued tax ineligibility furthermore leads to suspension in any procurement processes from bidding to contract awarding.