UGANDA, Kampala | Real Muloodi News | Armed with a new intelligence tool that identifies landlords in Uganda who don’t comply with their rental income tax obligations, the Uganda Revenue Authority (URA) has in the last three months alone identified and registered 40,799 new landlords who are liable to pay rental income tax.
URA deployed the new intelligence tool in April of this year, dubbed the Rental Tax Compliance System (rTCS) to improve tax collections from rental income.
Uganda’s rental sector has been a largely untapped revenue source according to John Rujoki Musinguzi, URA’s Commissioner General, who estimates that only eight per cent of landlords comply with their rental income tax obligations.
Musinguzi says that many Ugandan landlords earn bigger incomes than the average citizen, yet they often do not pay taxes, despite demanding better services from the few taxes paid by faithful citizens.
rTCS is a big data platform that ingests various government data sets and then organises the data into a coherent visual display that can be readily interpreted and understood by URA’s tax investigators. The data is scored and sorted by likelihood of tax deficiency, with link graphs to show the relationships between people and properties, and a geospatial display of a landlord’s rental properties on a map.
Eight Ministries, Departments, and Agencies (MDAs) contributed data for the collaboration to identify landlords not declaring income, including the Ministry of Lands, Housing and Urban Development (MLHUD), National Identification and Registration Authority (NIRA), Kampala Capital City Authority (KCCA), Ministry of Local Governments (LG), National Water and Sewage Corporation (NWSC), Uganda Communications Commission (UCC), and URA.
The Rental Tax Compliance System is part of a more significant digital component under the Domestic Revenue Mobilization Strategy (DRMS), meant to run from 2019 to 2024.
The DRMS is a five-year medium-term strategy by the government to strengthen Uganda’s internal revenue generation capacity to sufficiently meet budgetary expenditures and hence reduce foreign debt and donor dependency.
According to Musinguzi, Uganda finances only about 50% of its national budget. “Our target is 100%, to achieve total economic independence,” he says.
“To do this, we must all contribute our fair share of revenue in taxes and be willing to voluntarily comply with our tax obligations,” he adds.
The DRMS’s core objective is to improve tax collection and ultimately increase the tax-to-GDP ratio from under 13% to between 16-18% by 2025. Musinguzi says this is necessary for Uganda to advance.
Musinguzi made the comments while addressing Makerere MBA Graduates (Class of 2020/21) during a dinner at Kampala Serena Hotel on Saturday, October 1st, 2022, citing research by the World Bank and IMF which he says confirms that for any country to develop, it must collect at least 20% of its GDP.
“Uganda is currently at a Tax-to-GDP ratio of 13%. We just moved up by 1% last year. We have been oscillating between 10-12% for the last 12 years,” he emphasized.
“This is lower than Sub-Saharan Africa’s average at 16%, South Africa at 26%, Tunisia at 34%, Kenya and Rwanda at about 16%. Our target is above 18% by 2025.”
To achieve this, among other initiatives, URA is working to increase the number of taxpayers to 5 million, Musinguzi disclosed.
“Our tax-base is currently low at almost 3 million (2,797,548 as of September 21),” says Musinguzi.
“We have just moved up by 1 million and our target is to be 5 million by 2025,” he emphasized.
Experts say tax avoidance and evasion, partly resulting from generous tax exemptions to investors, weak tax administration, and a large informal sector (now at 80 per cent), pose challenges to increasing revenues.
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