Uganda Revenue Arthority Under pressure to get more Tax from businesses 2013-2014

The mood at the Uganda Revenue Authority these days is edgy; the pressure the guys at the tax body's headquarters at Nakawa are under is visibly telling. Even at July 25 presentation of the annual revenue performance report, one could easily see the tension on the faces of the top officials, led by Commissioner General Allen Kagina.

It didn't take long to understand why. And by the end of the press briefing, one message was abundantly clear: enough is enough; we will leave no stone unturned when it comes to collecting our taxes. From the report, it was clear that the past financial year - 2012/2013 - was an unusually difficult one for the tax collectors.

For the first time in many years, the tax body failed to hit its target for the year, collecting about Shs 7.15 trillion against a target of Shs 7.28 trillion, hence reflecting a somewhat hefty deficit of Shs 135.2 billion.

Comparatively for instance, the tax body beat the odds in 2011/12 to collect a surplus of about Shs 40 billion. Any deficit is always bad news particularly to the staff as it presents a lost opportunity to get a good bonus. And apparently, for the first time in several years, there might not be a bonus this time round.

Compared to the previous financial year, net revenue collections however, increased by 15%, which is equivalent to Shs 941.13 billion - but still way below the Shs 1 trillion annual growth mark that it has hit since 2009.

On another rather positive note for economic planners as it could potentially point to the rebounding of the economy after two years of stagnation, domestic tax collections shot up by 23 % (Shs 802.69 billion) and registered a surplus of Shs 202.2 billion, having amassed more than Shs 4.2 trillion against a target of about Shs 4 trillion.

For the first time, the manufacturing sector overtook the wholesale and retail sector by contributing 25.11% of total revenue, which points to a robust and effective industrialisation effort. Value Added Tax also registered a surplus of Shs 144.67 billion, which was mainly attributed to increased power capacity following the commissioning of three power plants - Bujagali, Nzizi and the Nyagak - during the financial year.

Also, Withholding tax on bank interest saw a surplus of Shs 103.77 billion, thanks to the increase in the issuance of treasury bills and bonds. However, the international trade tax head performed below target with a Shs 322.4 billion deficit against a target of Shs 3.3 trillion. The report shows that CIF values of the non-fuel imports declined by 1.41% - against the projected growth of about 8% - from $4.52 bn in 2011/12 to $4.46 bn in 2012/13.

Apart from a slowdown in imports, this tax head was also hit by exchange rate fluctuations as the applied average exchange rate of Shs 2,584 for the year was below the projected rate of Shs 2,609 to the dollar, which effectively led to a revenue shortfall of Shs 22.85 billion.

However, falling short of the target last year has not stopped the Ministry of Finance from handing the tax collectors another record target of Shs 8.53 trillion for the new financial year - indicating an increase of 17%. URA bosses cautiously said they are up to the task - given the strategies they have put in place to increase revenue collection.

Last year, thanks to these strategies, the tax register grew by a commendable 91% from slightly more than 128,000 taxpayers in July 2012 to over 245,000 as at June 2013. This growth was driven by new initiatives such as mobile services in districts of remote districts in central, western and eastern Uganda. Also, the tax body adopted the use of e-tax and third party information to identify unregistered tax payers.

In a bold move to clamp down on tax defaulters, the tax body has bolstered the audit function. Last year, they conducted 1,831 audits, which uncovered more than Shs 370.87 bn in unpaid taxes more than Shs 100 billion of which has already been recovered.

Also, more than 224 post clearance audits yielded Shs 17 bn, plus debt recovery mechanisms that led to recovery of arrears amounting to Shs 223.30 bn. Those who are bent on dodging taxes should brace for more audits as these measures, according to the officials, as the tax man will be more vigilant to pounce more than ever before.

Kagina suggested that the tax body is investing massively to ensure a good experience by tax payers. For instance, it has rolled out the ASYCUDA world system to customs business areas of Malaba, Busia, Jinja and Entebbe.

Also, it has rolled out online motor vehicle registration, which has made tax clearance faster and cheaper. But the large informal sector, which makes it difficult to widen the tax net, is still proving to be a hard nut to crack.

The tax body is therefore desperate to collaborate with local governments (including KCCA) and business sector member associations to register new tax payers. Also, using intelligence gathered from registered taxpayers and third parties to identify suppliers is being seen as a good way to bring more tax payers into the net.

"From an enforcement perspective, publicizing non-compliant taxpayers in the media will be strengthened as it has proved to be effective," Kagina said. Also, the tax collectors are keen to take investigations a notch higher by instituting scientific investigations in the selected industries to detect fraud.

Going forward, revenue officers will physically conduct inspections and factory test runs to obtain the actual input-output ratios used in production instead of depending solely on the goodwill of taxpayers for that information. If or not these measures will put the tax collectors in a better mood come July 2014 is what remains to be seen.

The Independent Newspaper
2-Aug-2013