UGANDA, Kampala | Real Muloodi News | Uganda Revenue Authority (URA) statistics reveal that out of a population of 45 million people, only one million Ugandans pay taxes. This is despite a large percentage of the population being engaged in economic activities.
During the Absa Bank Uganda’s post-national budget forum discussion, the Commissioner-General, Mr John Musinguzi Rujoki clarified that only 1.7 million Ugandans are registered taxpayers. He explains:
“Only 1 million people are active and filed tax returns in the last one year. This number is still very small compared to the total population in Uganda.”
Fewer taxpayers mean that the government will struggle to increase domestic revenue to finance the national budget. Much of the federal budget relies on aid from donors.
Like many governments worldwide, Uganda’s expenditures exceeded revenue, leading to a shortfall. The negative impact of the pandemic further reduced overall revenue.
The top taxpayers in Uganda at the moment are from the trade and manufacturing sectors. Trade contributes about 30% of the tax revenue and manufacturing between 20% and 24%. As a result of the pandemic, a significant loss of tax revenue occurred.
“However, the impact of Covid-19 caused a decline in manufacturing from 24 per cent to 23 per cent. Also trade declined 30.7 per cent to 30.5 per cent. [Trade and manufacturing] are still supporting revenue collection of the top tax payers,” Mr Musinguzi explained.
Uganda’s Tax Ratio to the Gross Domestic Product (GDP)
The current tax to GDP ratio is between 12 and 13%, which is the lowest in the region. To tackle this, in 2019, the Domestic Revenue Mobilisation Strategy (DRMS) was released, which aims at reducing the gap between current and potential revenue performance.
DRMS seeks to increase revenue collection to boost the tax to GDP ratio to 16-18% in the next five years. With this strategy, the government seeks to:
- Raise revenue to complement the government’s budget.
- Encourage investment.
- Enforce transparency in the tax system.
- Complement the current policy of increasing tax revenues as a share of GDP by 0.5% per annum.
Way Forward:
URA aims to expand the tax registry to raise domestic revenue collections to make Uganda independent and not rely on donors for the national budget.
The government is also looking at the parish development model to increase people’s income. The idea is to upgrade parishes and recruit parish chiefs in areas to streamline data collection.
“We plan to begin recruiting parish chiefs in the first quarter of FY 2021/22, there are 10,500 parishes in Uganda. 50 per cent of them don’t have parish chiefs, the starting money for the parish model is Shs 200 billion. The plan is to use SACOS in the parish and apply the use of community development community for vetting people to have access to the fund which is going to be provided,” Mr Kenneth Mugambe, Director of Budget in the Ministry of Finance, Planning and Economic Development explained.
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