UGANDA, Kampala | Real Muloodi News | The Uganda Revenue Authority (URA) officials claim they have unattainable revenue collection targets for the next three years, Uganda Radio Network reported.
According to officials, URA is facing many challenges which will hinder revenue collection targets. URA receives its annual targets from the Ministry of Finance, Planning and Economic Development, which are part of the broader midterm strategies for the next 3-5 years.
Currently, URA should collect revenues amounting to 16-18% of the Gross Domestic Product (GDP) under the government’s Domestic Revenue Mobilisation Strategy. The current tax revenue to GDP is at 12.9%, comparatively much lower than other East African countries, with Rwanda collecting 16% and Kenya raising 18%.
What Does Tax Revenue to GDP Mean?
Revenue collection is measured against the size of the economy to aid policymakers, lenders and development partners in understanding whether the government is collecting enough revenue compared to its size. If the ratio is low, it means the country is less wealthy, more likely to borrow, yet unlikely to pay its creditors.
The COVID-19 pandemic had a severe impact on the Uganda economy. Revenue collection for this year declined from 21.8 trillion to 19.6 trillion.
Michael Masembe, Acting Manager of Corporate Affairs for URA, explained that the targets set in the strategy were unachievable.
“Even the international average growth of the Tax-to-GDP ratio is 0.5% per year and even if URA achieved this, still, the target in the strategy would not be met. I sincerely think the Ministry of Finance should revise this target,” Masembe explains.
Masembe further explains that URA faces many challenges, including smuggling, even after implementing additional measures. Another enormous challenge is to figure out how money moves in digital businesses. Masembe explains:
“It is difficult to tell how the money moves and how much, even if you know the people involved in the trade. For example, do you go for Jumia, or for MTN?”
Further, donor-funded projects are also frequent as they are donations and not their obligation to pay tax. In addition, court cases take too long, resulting in the lost value of taxes.
Measures URA Has Taken for Effective Tax Collection
- Installation of scanners at border points that detect any goods that may be under-declared.
- Enforcement of the Digital Tax Stamp System guarantees the verification of every product on the market for tax compliance.
- Implementation of the Electronic Fiscal Receipting and Invoicing System (EFRIS) ensures that documents transactions at points of sale and that taxpayers remit tax requirements directly to URA.
- For URA to curb smuggling and dumping of goods, they have enforced an electronic cargo tracking system that contributes towards effective cargo surveillance.
- Implementation of the Rental Tax Compliance System (rTCS), to determine the highest priority individuals or corporations likely to be underpaying their rental income tax obligations.
Masembe calls on the government to track the renegotiation of Double Taxation Agreements with developed countries since Uganda loses out in most cases.
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