During the period July to December 2019, URA collected net revenue of UGX 9,042.01 billion and posted a growth in revenue of 11.15 percent in comparison to the same period in the FY 2018/19. In real terms, this reflects a growth in revenue of UGX 907.05 billion. It should be noted however that the outturn is short of the projected figure of UGX 9,739.39 bn by UGX 697.38 billion.
It should also be noted that the net revenue collection has consistently increased in absolute terms over the five year period.
Total domestic revenue collections during the period July to December 2019 were UGX 5,673.57 billion against a target of UGX 6,109.66 billion. This outturn in domestic revenue reflects a growth of UGX 831.91 billion (17.18 %) compared to the period July to December 2018. We have witnessed underperformance in VAT attributed to a lower than expected outturn of UGX 92.02 billion on phone talk time, UGX 38.27 billion on sugar, UGX 28.62 billion on beer and UGX 41.32 billion from the wholesale and retail trade. However we have registered positive growth in corporation tax of UGX 195.35 billion attributable to Capital Gains tax, which supplemented the collections from normal flows and arrears. Withholding tax also registered a positive outturn of UGX 13.40 billion.
The International trade tax collections during the period July to December 2019 were UGX 3,537.31 billion reflecting a suppressed growth in customs tax revenue of 2.80%. In real terms, this is an increase of UGX 96.33 billion compared to the period July to December 2018. This performance was mainly attributed to low outturn in import duty of UGX 82.98 billion on VAT on imports of UGX 135.80 billion on petroleum duty of UGX 8.64 billion and in excise duty of UGX 27.21 billion.
URA has also faced a number of challenges as they were collecting tax
Delayed implementation of planned policy and administrative measures that were targeted to start 1st July 2019 like; Digital Tax Stamps (DTS), Electronic Fiscal Devices (EFD) and gazzetting of withholding VAT agents, rental tax rates and the implementation of a specialized rental income tax collection solution did not take off. This affected domestic tax collections leading to a deficit of UGX 38.60 on Spirits and waragi and UGX 37.93 billion on rental taxes. We projected to collect UGX 49.46 billion from withholding VAT agents after gazetting but only collected UGX 2.98billion.
Majority of the policies and legislative changes introduced for this financial year were revenue reducing and erosion on the existing tax base, especially the corporation income tax base. As a result of this measure, we anticipate to fore go about UGX 500 billion tax revenue in this financial year.
Under International Trade taxes, as a result of the policy changes, import duty is collected from only 23% of goods imported and this figure is projected to worsen with the implementation of regional trade agreements especially the African Continental Free Trade Area Agreement. This therefore calls for us to focus on domestic sources to mobilize revenue.
The change in consumer tastes and preferences where they are now prefering to use data on applications like WhatsApp, Twitter, Facebook, Instagram, Skype among others as compared to use of call time has led to a reduction in tax collected too. In addition, there was a price drop for both on-net and off-net calls from UGX 5 to UGX 3 per second (25 percent drop) due to competition which affected phone talk time collections.
There has also been an increase of agency banking in the banking sector. Levy on mobile money contributed a deficit of UGX 30.48 billion which can be explained by the fact that high value clients withdraw their funds from agency banking. A case in point, MTN has had a drop of 36% in mobile money transaction values since the introduction of the levy on mobile money. To make matters even worse, most clients are now paying for services using mobile which has reduced banking transactions.
The low growth of Dutiable and VATiable imports has also been a huge challenge for the revenue authority. The value of dutiable and VATable goods has consistently dropped and currently at 23% of the country’s total imports of these items and less than half pay import duty of 25% and above. This is largely attributed to a lot of imports that fall in the exemption category.
The country has also been producing a lot of some of the items that were previously being imported like; tiles, steel products, cement, tile adhesives, cables, motor cycle tyres, household appliances among others which has increased the trend of import substitution.
The implementation of EAC & COMESA comes along with foregone revenue in the short run hence affecting collections. Furthermore, the implementation of the African Continental Free Trade Agreement (AFCFTA) while it opens us up to wider continental market opportunities will lead to an estimated 10% reduction in import duties.
URA has implemented Measures to ensure efficiency in Tax Administration
The Tax body concluded 53 investigations against a target of 40 cases representing a performance of 132.5% in the period July to December 2019. The compliance initiatives of investigations taskforce and technical support resulted into a revenue yield of UGX 29.68 billion.
Implementation of the exchange of information (EOI) regionally and internationally: URA has enhanced the Exchange of Information (EOI) facility to counter risks presented by globalization, open markets and digitalization.
URA shifted its strategy from a revenue centred institution to a client centered entity as a way of improving service delivery. URA has overtime worked towards providing customer service that supersedes customers’ expectations. Any acts of misconduct by staff has severely been punished.
Implementation of Digital Tax Stamp and Electronic Fiscal Devices: URA implemented electronic systems like Digital Tax Stamps (DTS) piloted on 1st November 2019 and Electronic Fiscal Devices (EFD)/e-invoicing to be piloted on 1st March 2020.
Stability of the IT environment: The average URA real time tax system recovery rate was at 1.79 hours less than the targeted 2 hours. As a result, there was minimum interruption to normal business during the period July to December 2019.
In order to expand the tax base, URA used third party information from KCCA and Ministry of Education to identify potential tax taxpayers for rental and income tax.
A number of initiatives aimed at educating taxpayers on their tax obligations through customised and tailored tax education were implemented. These included; Taxpayers Appreciation Month (TPAM) in September where we focussed on the Small and Medium Enterprises (SME), held over 200 countrywide taxpayer appreciation visits, recognized and awarded the most compliant taxpayers of the financial year 2018/19.
We also rolled out the “My Taxes Work” campaign focusing on the fruits of tax compliance at national level, the ‘Return Filing” campaign dubbed “URA Tick Tock” to remind taxpayers of their tax obligations. stated the commissioner.
In an effort to build staff capacity in last six months, URA implemented a number of staff development programmes and these include; Striving for Excellence and Effectiveness to drive Results (STEER) leadership training for supervisors, Postgraduate Diploma in Tax Investigations (PODITI), Integrated Tax and Revenue Administration Training (ITRAT), oil and gas trainings by IMF, interpretation of oil and gas laws, on job and refresher trainings on DT and Customs core processes, sponsored staff on virgin areas in legal education, professional ICSA, prosecution case file management, intelligence modern techniques, IDEA, standard operation procedure, international taxation, transfer pricing, advocacy, public debt management and collection among others.
In 2018, URA Automated the Performance Management Process right from Performance Planning through to appraisal process using the Enterprise Resource Planning (ERP) system. Automating the PM system has enabled Management to monitor staff performance. These were put in place to monitor staff productivity and time management.
During the period July to December 2019, URA implemented a number of integrity enhancement programmes and these include; 8 regional and 2 external integrity sensitization workshops, 7 print and social media publications on public call for staff lifestyle audits, 130 announcements and 6 radio talk shows, 2 TV live show, 2 series messages sent to staff on mail & social media and participated in the anti-corruption activities and walk.
In a bid to strengthen strategic partnership, URA hosted the African Tax Administration Forum (ATAF) 10 years of fruitful existence to celebrate its achievements from 18th to 22nd November 2019. The main objective of being the driver of Africa’s economic independence through domestic resource mobilization. This gave Uganda and URA a golden opportunity to learn from other revenue authorities in Africa especially on the issue of digitized economy and harnessing technology to improve tax system that has become a global concern.
URA is committed to identifying and tackling fraud schemes in order to improve compliance. A number of initiatives were implemented during the half year period to reduce on tax fraud.
Uganda Revenue Authority is targeting to collect 10.4 billion Uganda Shillings for the second half of the financial year 2019/2020 which will be from January 2020 to June 2020.
Author: Moses Echodu
Moses is an avid Sports and Tech enthusiast. He loves to keep up to date with all the latest information and research on some of the most compelling stories.