URA should distribute the tax burden fairly

To accelerate and drive sustainable economic recovery, the government in Financial Year 2022/2023 changed its strategy to focus on controlling its expenditure in order to contain inflation and restore macroeconomic stability, long-term fiscal sustainability, and debt management.  

The theme for the next financial year’s budget remains: “Full monetisation of Uganda’s economy through commercial agriculture, industrialisation, expanding and broadening services, digital transformation, and market access”. 

To achieve this theme, the government will be looking to increase domestic revenue mobilisation, enhance inflows from global markets through exports, transition the 39 percent of households that are currently in the non-money economy into the money economy, and manage costs and expenditure, among other strategic interventions.

The specific focus areas for development include integrated transport, sustainable energy development; agro industrialisation; manufacturing; human capital development, private sector development (focusing on the Parish Development Model, Emyooga, supporting Uganda Development Bank and Uganda Development Corporation); oil and gas development (focusing on the crude oil pipeline); and peace and security.

These priority areas are in addition to crucial key investments in other fundamental areas such as education, health, water, mineral development, tourism development, and digital transformation, among others.

While some of these focus areas have the potential to generate income, others may be considered ‘cost centres’.

Achieving a balanced allocation between the two is important, with more priority given to areas with a high investment multiplier may promote better synergies.  Even more importantly, with such a very tight budget, it will be crucial to closely monitor the utilisation of the allocated resources under each priority area.  

Wearing my business hat, I would expect that before the allocations are adopted, government reviews the prior years’ budget allocations, the performance against those allocations and the gaps that should be addressed.  

This kind of review is continuously required.  Of the Shs52 trillion budget, Shs29.7 trillion is expected to come from domestic revenue (excluding borrowings) of which Shs27.4 trillion is expected from tax revenue. The government aims at containing debt within the 50 percent threshold, which means that the government has to achieve its target of domestic revenue and strive for consistent growth over the next three to five years.  

Targeted efforts are already underway to widen the tax base and improve tax revenue collection. These actions include a review of the existing exemption regime with a focus on putting in place clearer criteria for beneficiaries and ensuring that beneficiaries deliver the promised deliverables through effective monitoring.

Additionally, there is a push by the Uganda Revenue Authority (URA) to enhance taxpayer education, door to door field visits and increase registered taxpayers; focusing on the effective administration of taxes such as Value Added Tax (VAT), customs, and rental tax and encouraging taxpayers to pay tax arrears through tax amnesty, among others. 

Nevertheless, the URA will need to review the effectiveness of its ongoing measures and explore additional measures that can further accelerate revenue generation.  

For example, one potential area of focus is improving partnerships with the business community by better understanding their business challenges and objective engagement during dispute resolution.
 It is also important to ensure fair and equitable implementation of the tax law, fair distribution of the tax burden as well as seeking and implementing feedback on administrative processes. 

Further, it is important to continue tightening anti-corrption measures and ensure we [taxpayers]are paying the right taxes. 

Pamela Natamba is a Partner and Head of Tax at PwC Uganda.