Taxman to capitalize on new revenue collection initiatives to achieve better results going ahead
Kampala, Uganda | JULIUS BUSINGE | Doris Akol, the Commissioner General at the Uganda Revenue Authority and her team have recently been in the news over failure to hit the revenue target.
This is happening amidst the team’s effort to expand the tax base and collect more revenue on an annual basis to enable the government deliver services to the population.
On Feb.06, Akol addressed the media about the revenue so far collected during the first half of this financial year (July-December).
She said that the purpose of the briefing was to notify the public about the trends in revenue performance, and to explain the administrative and policy interventions that were implemented in the period under review.
During the period, the body collected approx.Shs9trillion against a target of Shs9.7trillion. This means, it registered a shortfall of close to Shs700bn in the period under review.
But in comparison with the previous financial year, the tax authority posted a revenue collection growth of 11.15% – reflecting a growth in revenue of Shs907bn.
The total domestic revenue collections during the period were Shs5.6tn against a target of Shs6.1tn. Akol said that there was underperformance in VAT attributed to a lower than expected outturn of Shs92bn on phone talk time, Shs38.27bn on sugar, Shs28.62bn on beer and Shs41.32bn from the wholesale and retail trade.
However, the revenue body registered positive growth in corporation tax of Shs195.35bn attributable to Capital Gains Tax, which supplemented the collections from normal flows and arrears. Withholding tax also registered a positive outturn of Shs13.40bn.
International trade taxes contribution to the half year performance was Shs3.5tn reflecting a suppressed growth in customs tax revenue of 2.80%. In real terms, this represents an increase of Shs96.33bn compared to the period July to December 2018.
Behind the shortfall
Akol listed several reasons that were behind the shortfall recorded during the first half of the year. First, she said this year’s target was higher than the year-on-year targets for recent years recorded at 24%, or an increment of approx. 1.4% tax-to-GDP ratio.
“This is higher than the usually projected annual increase of 0.5% tax to GDP ratio,” she said.
She added that there were also delays in implementation of some of the tax administrative and policy measures like the digital tax stamps, electronic fiscal devices and gazzetting of withholding VAT agents, rental tax rates and the implementation of a specialized rental income tax collection solution which did not takeoff.
This delay, according to Akol affected domestic tax collections leading to a deficit of Shs38.6bn on spirits and waragi and Shs37.93bn on rental taxes. The body had projected to collect Shs49.46bn from withholding VAT agents after gazzetting but only managed to collect a paltry Shs2.98bn. Overall, Akol said the new policy measures yielded a total revenue gain of Shs52bn by the end of December 2019 against an annual target of Shs847bn.
The other key issue was the new revenue reducing measures related to incentives for investment that also negatively impacted on revenue collection. Akol sited changes made to some sections in the Income Tax Act that introduced income tax exemptions for selected strategic investments.
“…as a result of this measure, we anticipate to forego about Shs500bn tax revenue in this financial year,” she said.
She also said that under international trade taxes, as a result of the policy changes, import duty is collected only from 23% of goods imported. This figure is expected to deteriorate further with the implementation of regional trade agreements especially the African Continental Free Trade Area.
“This therefore calls for us to focus on domestic sources to mobilise revenue,” she said. One key example on this was the tax waiver on imported brown husked rice which led to revenue foregone of $5.8million (approx.Shs21bn).
Other policy measures that affected revenue performance were; a ban on importation of cars above 15 years old, exemptions on steel billets and cement clinkers.
The other areas were, changes in consumer taste and preference for data as opposed to airtime for telecom customers, increase in the use of agency banking as opposed to mobile money that contributed to more tax revenue and low growth in the value of dutiable and VATable imports.