Taxpayers should prepare for a more aggressive URA

It is important to note that in the month of July 2023, Parliament passed the Anti- Homosexuality Act 2023 which was already accented to by the President. There are indications that this law made some donors unhappy and may withhold some of the money they had promised as budget support in form of loans and grants which will create a big revenue gap. The likely impact of this revenue gap is twofold.

In the first place, the government may postpone or reduce some activities on the expenditure side that had been planned in the year, which will negatively impact the service delivery. Secondly, the government may also try to cover some of the revenue gap by asking URA to collect more tax revenue than earlier planned.

One needs to be reminded that the original URA domestic revenue target for the year 2023/24 is an increment to Shs29.7 trillion from Shs25.2 trillion actually collected last year, which is a growth of 18 percent yet the economy is expected to grow by only 5 percent to 6 percent. The higher tax revenue growth percentage of 18 percent compared to the expected economic growth of 6 percent will most likely be realised through more URA aggressive tax collection measures.

In addition to the above, the potential withholding/ suspending of the planned donor funding will create a revenue gap in the already approved budget of up to Shs8.3 trillion or less (about 15.7 percent). This will increase the pressure on URA to collect more domestic revenue, meaning that URA will have to press local taxpayers harder in order to get the additional revenue.

The key likely impacts from these state of affairs to the Uganda taxpayers may include the following:

More aggressive and extensive URA tax audits during the year. URA officers are more likely to increase the scope and frequency of tax audits.

URA will most likely give taxpayers little time to provide relevant documents and explanations in response to URA audit queries/ assessments before URA officers conclude the assessments and objection decisions in order to collect the assessed tax as early as possible.

More aggressive tax collection efforts by URA including frequent use of agency notices on taxpayers’ banker accounts to recover any taxes due.

 Less waivers of tax penalties and interest except those claimed under the relevant tax amnesty and waiver provisions.  Taxpayers should therefore fully exploit the tax penalty and interest waiver/ amnesty by engaging their tax advisors early to review their tax affairs and pay any tax due within the periods and conditions provided for in the Tax Procedures Code Act – as amended so that they can legally get the relevant tax penalty and interest waivers.

Without such strict compliance to the tax amnesty laws, it is less likely that URA will be generous in this area for those who do not meet the amnesty/ waiver conditions as provided for in the laws.  Tax objections for assessments will have less compromises from URA officers due to the pressure to collect more taxes.

Taxpayers are therefore advised to double check that their tax compliance positions are in very good shape.                                               

CPA Muhammed Moses Ssempijja [FCCA, B.Sc. (Econ)] is a tax partner at Ernst & Young Certified Public Accountants of Uganda.