URA shakes off Covid-19  with surplus in revenue

By November 17, URA had collected Shs973 billion, which is a proportion of 74 per cent of the official target and 64 per cent of the operational target.
Before that, net collections for October were above target, with a surplus of Shs147 billion. 

In October, the tax collector collected Shs1.4 trillion against a target of Shs1.2 trillion, recording over 100 per cent performance, according to URA records. 
This came from the back of another impressive performance recorded in the half year.  
In the financial year 2020/21 (July 2020 to June 2021), URA was expected to collect Shs19.6 trillion, compared to what was targeted in the financial year 2019/20—which was Shs20.3 trillion. 

Despite being in the midst of lockdown, URA in the first quarter FY 2020/21 (July to September) collected Shs4 trillion against a target of Shs2.9 trillion, resulting into a significant surplus of about Shs1 trillion.  
As a result, a revenue growth of Shs64 billion was registered during the period July to September 2020 compared to the same period in the previous financial year July to September 2019.  

Leading the pack 
According to the URA Commissioner General, Mr John Rujoki Musinguzi, the achievement this year is above the regional peers.
In a letter he authored recently, Mr Rujoki noted that Uganda’s overall performance against her target of the first quarter July-Sept this financial year was at 135 per cent with a growth in revenue of 1.62 per cent compared to the same period last year.

In comparison, the Burundian Revenue Authority performed at 108 per cent against their target and at a growth of 11.82 per cent. Rwanda performed at 106 per cent at a growth rate of 2.1 percent, Tanzania performed at 88.7 per cent per cent, and a growth of 1.5 per cent while Kenya performed at 88.5 per cent and a declined growth of revenue at -13.7 per cent. Zanzibar performed at 41 per cent of their target and registered a declined growth of revenue at -44.85 per cent.

“Whereas all revenue administrations faced a steep decline in revenue growth due to the effects of Covid-19 lockdown, Uganda is the only country whose growth is steadily and consistently rising out of this slump,” Mr Rujoki wrote recently.  
He attributed the revenue surplus and growth figures to the government’s efficient management of the Covid-19 pandemic , which he said kept the economy hibernating even during the months of total lockdown.

“Allowing of the inflow of goods, especially raw materials for factories, allowing the factories and construction sites that could accommodate workers to go on during the lockdown, encouraging food production and agriculture, public sensitisation and observance of the SOPs and a range of other Covid-19 mitigating measures  (policy and administrative) helped navigate the nation forward,” he said.  

Although international trade taxes have performed above target with easing of the lockdown and re-opening of some key economies and supply chains across the globe, URA must have learnt that reliance on international/customs taxes is no longer the smart way to go.   
Value Added Tax - one of the indirect taxes is performing well, especially on cement and the sale of spirits. There is a high demand for cement due to the ongoing infrastructural developments in the country.

Surplus has also been registered in tax heads such as Pay As You Earn (PAYE), a tax mostly paid by people in formal employment, Withholding tax, deducted from an income, Corporation tax, directly imposed on income or capital and Local Excise Duty charged on imported or selected locally manufactured goods and services, for this case on beer and mobile transactions.

Measures 
Going forward, use of Alternative Dispute Resolution to resolve tax disputes will continue, considering that out of this effort alone about Sh100 billion has been reaslised through amicable settlements. 
Leveraging technology and data analytics to enhance revenue collection, compliance, and identification of potential revenue as well as enhancing support to taxpayers, according to URA will remain part of their operations.

Lifestyle audits and having a zero-tolerance for corruption will also become a permanent fixture. This will be in addition to ensuring that staff are technically competent in core business areas in tax audit, tax investigation, taxing the digital economy, international tax, and data analytics.

Mr Rujoki is also keen on collaboration and in information exchange with peers, ensuring system integrations and tax register enhancement. 
With all that, he is optimistic that URA shall maintain this performance, paving way into a self-sufficient Uganda.

Behind regional counterparts
But Uganda still lags behind in tax collection among her regional peers in EAC, COMESA and Sub-Saharan Africa.
For example, the average tax-to-GDP ratio for Sub-Saharan Africa is 20 per cent. Kenya’s stands at 18 per cent while Uganda is yet to achieve 15 per cent. 

Tax experts, economic analysts and policy specialist, among them, Dr Godfrey Akena of the East African School of Taxation, Dr Fred Muhumuza of the Makerere School of Economics and Research Fellow with the Economic Policy Research Centre, Paul Corti Lakuma, have argued that only a small  percentage  of  Ugandans, particularly those in the formal sector, pay tax.

To President Museveni, several commodities in the country are undertaxed due to weak tax officials and policymakers.
However, the solution lies in widening the tax bracket or else the “bubble” according to experts will soon burst. 

As a result, URA will find itself in the familiar territory—burdening the same small formal sector as many more in the informal sector, comprising nearly half of the economy, and not to mention some multinational companies, including tech corporations, walk away with taxable earnings. 
The government believes Uganda could raise its tax revenue up to 23 per cent of GDP (total production of goods and services) annually if tax leakages are reduced with improved efficiency of the revenue administration systems. 

Research indicates that there is room for Uganda to expand its tax base and raise more domestic revenue without hurting the economy.
For example, one study shows that the  VAT  compliance  gap  (the  difference  between  potential  VAT  revenues  under the current legal framework and the actual VAT revenues stands at 60 per cent, which translates into 6 per cent of Uganda’s GDP or nearly Shs2.5 trillion. 
 
To maintain the performance that URA has maintained despite the economy taking a hit from the Covid-19 pandemic and resultant containment measures, the tax prefect has put in place a five-year domestic revenue mobilisation strategy whose main objective is to raise the tax-to-GDP ratio (reflection of how much of a country’s budget is raised domestically) to 16 per cent by 2023.
While recognising the most compliant taxpayers, Mr Rujoki noted that Uganda can not fully fund her national expenditure.

Top sectors
Trader’s tale     
Wholesale and retail, manufacturing, Information and Communication, Finance and Insurance, and Public Administration remain the five top sectorS out of the 21 economic sectors. 

Meanwhile, the Covid-19 containment measures are still taking a toll in accommodation, education, and entertainment sectors, resulting into revenue declines. 
 Unless lockdown is lifted in these sectors, their revenue contribution will have to be foregone.

[email protected]