UGANDA, Kampala | Real Muloodi News | Uganda Revenue Authority (URA) fell short of revenue collections targets in the first six months of this 2021/22 financial year (July to December 2021), registering a shortfall of UGX 900.81 billion.
The Ministry of Finance, Planning and Economic Development set an ambitious annual collections target for the Authority, at UGX 22,363.51 billion. This target is 16.10% (UGX 3,100.51) higher than the actual revenue collected from the previous financial year.
The net revenue collections for the first 6 months of this FY 2021/22 were UGX 10,163.09 billion, representing 45.44% of the annual target.
“A shortfall of Shs 900.81Bn was incurred with a performance of 91.86%. In the last six months, URA projected to collect 49.47% representing Shs 11,063.90 billion, an increase of 16.80% (Shs 1,591.43 billion) from the realised revenue for the same period last financial year,” John Rujoki Musinguzi, the URA Commissioner General told reporters on Wednesday.
Highlights of Revenue Performance
Domestic Taxes
For the period of July to December 2021, domestic tax revenue collections were UGX 6,229.62 billion against a target of UGX 7,180.94 billion, registering a shortfall of UGX 951.32 billion, and collections performance of 86.75%.
Deficits were incurred in:
- Corporate tax (UGX 232.75 billion)
- Rental tax (UGX 95.69 billion)
- Withholding tax (UGX 53.26 billion) and
- Treasury bills (UGX 14.75 billion)
International Trade Taxes (Customs)
Customs tax collections in the first 6 months of the FY 2021/22 were UGX 4,076.18 billion against a target of UGX 4,102.51 billion, posting a shortfall of UGX 26.33 billion, and collections performance of 99.36%. However, a year to year growth of UGX 389.78 billion (10.57%) was realised this year compared to the same period in the previous financial year.
Key Highlights of revenue performance
Sector performance
During the period July to December FY 2021/22, 75.46% of the revenue was generated from these top 5 sectors:
- The wholesale and retail trade sector which had the most significant contribution, amounting to UGX 3,031.01 billion (29.41%)
- The manufacturing sector followed with a contribution of UGX 2,413.36 billion (23.42%)
- The financial activity sector contributed UGX 1,064.43 billion (10.33%)
- The information and communication sector contributed UGX 880.97 billion (8.55%)
- Public Administration contributed 3.75%
During the same period, there was a decline in revenue collection from the following sectors, in comparison to FY 2020/21;
- Information and communication declined by 14.55%
- Electricity, gas, steam and air conditioning supply by 37.79%
- Real estate activities by 10.78%
- Construction sector by 14.06%
The decline is attributed to a slow down in business in these sectors resulting from the impact of the COVID-19 pandemic. Commissioner General Musinguzi commended the business community for the great work towards meeting their tax obligations, in light of the challenges posed by COVID-19.
Tax Register Expansion
The one area where URA outperformed targets was in widening the tax base. During the period of July to December of the FY 2021/22, 182,553 new taxpayers were added to the taxpayer register.
As a result, as of the end of December 2021, the taxpayer register had 1,966,106 taxpayers. Of these, 150,849 were non-individuals, and 1,815,257 were individual taxpayers. This represents a growth of 10.24% against a targeted growth of 7.50%.
Of those new taxpayers, in the last six months (first half of the FY 2021/22), at least 33,341 of them became value taxpayers, from whom UGX 13.12 billion was generated.
Outlook for the Remaining Half of FY 2021/22
The revenue target for the second half of the FY 2021/22 inclusive of January 2022 is UGX 12,328.51 billion, which accounts for 55.13 percent of the annual target, inclusive of the accumulated deficit for the period July-December 2021.
URA purposed to collect UGX 1,919.65 billion in January 2022, of which UGX 1,791.55 billion had been collected by by end January 2022 before final reconciliations.
Strategic Mitigation Measures
For the remaining part of FY 2021/2022, the following reforms will be implemented to increase on revenue collections and tax to GDP ratio to 14.99%;
Alternative Dispute Resolution
To further encourage voluntary compliance, URA has adopted the use of Alternative Dispute Resolution (ADR) to amicably resolve tax disputes with taxpayers.
Through the ADR mechanism, three cases were amicably resolved outside the court process yielding UGX 75.8 billion in revenue collected for the period 1st July 2021 to 31st December 2021, thus unlocking revenue that had been locked in some of the court cases with large taxpayers.
Cumulatively, a total of 15 cases have so far been settled through ADR ever since the initiative was introduced in June 2020, and URA has so far collected revenue of UGX. 285.8 billion and USD 10.4 million.
According to the URA, this initiative has proved to be very effective in resolving long-standing tax disputes. In addition, it has further improved the relationship between the taxpayers and URA since the ADR is conducted in an unbiased, non-confrontational and cordial environment.
Strengthen the Implementation of Smart Business Solutions
- Rental Tax Compliance System (rTCS): In an effort to enhance tax compliance among rental property owners, URA has implemented rTCS; a software application used to determine the highest priority individuals or corporations likely to be underpaying their rental income tax obligations. A pilot of the system was deployed in December 2021, and investigations into non-compliant landlords are currently underway.
- Electronic Fiscal Receipting and Invoicing System (EFRIS): URA has developed the EFRIS electronic invoicing and e-receipt solution for VAT declaration in commercial transactions. Once a transaction is initiated, the details are transmitted to the URA in real time to generate electronic receipts and electronic invoices. Transactional data or copies are digitally stored in the system, thereby eliminating the risk of losing paper documents. EFRIS came into force in Uganda on July 1, 2020. Its use became mandatory in 2021.
- Digital Tax Stamps (DTS): Tamper-proof physical paper or numerical markings, known as Digital tax stamps, are applied to goods or their packaging with security features and codes to prevent counterfeiting. It also helps in tracking and tracing goods. URA introduced the digital tax stamp to combat illicit trade, seal revenue leakages, boost collection and increase efficiency in managing taxpayer compliance. URA will expand on the traced and tracked products beyond the current eight products (cigarettes, beers, sodas, water, wines, spirits, sugar and cement).
In concluding the media press conference, Musinguzi said “The journey to Uganda’s economic independence is bound to find some hurdles. We are confident that the digitalisation of processes, enhanced stakeholder collaboration, strengthened sector-based tax education, client-centric approaches, and data analysis and optimisation will get us to self-sufficient status as a nation.”
“We encourage taxpayers and the public to embrace these offerings and ease their compliance. URA also pledges to continue supporting the taxpayers as we collaborate to develop Uganda together,” he added.
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