Domestic taxes grow as global revenue sources decline

A customer scrolls a mobile phone. Phone talk-time is one of the items where Uganda Revenue Authority collected surplus revenue worth Shs35 billion. FILE PHOTO

What you need to know:

The performance of domestic taxes according to URA records is attributed to the surplus which was registered in PAYE, tax on Bank Interest and other income taxes.

Taxes collected internally have edged out revenue collected from imported and exported goods, thanks to the expanding economy and the tax body’s initiatives, with the most prominent one being the move to embrace technology in revenue collections.
Over the years, Uganda Revenue Authority (URA) has been more reliant on international taxes as domestic taxes repeatedly succumbed to shortfalls.
However, latest tax body figures show that domestic taxes have gained ground, becoming the tax body cash cow.

According to the URA performance report, the financial year 2013/14 collection target was supposed to be Shs8.5 trillion but only Shs8 trillion was collected compared to the Shs7.1 trillion garnered in Financial Year 2012/13.
Despite the revenue shortfall of Shs503 billion recorded in the just-ended financial year, which is half the Ministry of Education and Health budget, the total collection grew by 12 per cent.
That domestic taxes have become the major source of good news according to Ms Kagina because that is an indication of a growing economy and a reward for the tax body’s transformation that was started 10 years ago.

She said: “Domestic tax collections amounted to Shs4.6 trillion. This represents a growth of 9 per cent (translating into Shs396 billion) compared to the same period last year and the performance rate of 90 per cent.”

She continued: “Revenues from international trade taxes were Shs3.5 trillion. This represents a growth of 15 per cent (translating into Shs477 billion) compared to the same period last year when it performed at the rate of 98 per cent against the target.

Speaking last week at a joint press conference where Ms Kagina enumerated the tax body’s 10 year-journey since she took over, the chairperson of the Parliamentary Finance committee, Mr Robert Kasule (Kyadondo North MP), said his committee is willing to help URA in terms of legislations that will maintain revenue growth.

The Private Sector Foundation (PSFU) executive director, Mr Gideon Badagawa, said laws should be made to make it compulsory for all businesses to be registered. This, he said, will not only help in formalising the large informal sector but will also widen the tax base.

He said: “There are so many people running business and owning arcades that give them an income of Shs300million a month but are not paying taxes. If we have a law that makes it mandatory for any business to be registered, those hiding behind informality will be dealt with accordingly.”
The performance of domestic taxes according to URA records can be explained by the surplus which was registered in PAYE (Shs41 billion), tax on bank interest (Shs34 billion), and other income taxes (Shs34 billion).

More surplus was recorded in excise duty on spirits (Shs10 billion), phone talk-time (Shs35 billion), international calls levy (Shs24 billion) and Value Added Tax on electricity (Shs85 billion).
However, shortfalls in corporation tax (amounting to Shs304 billion), withholding tax (Shs51 billion), Excise Duty on beer (Shs31 billion), mobile-money transfers (Shs43 billion) and Value Added Tax on sugar (Shs25 billion) all impacted on the improved performance of domestic taxes.
Meanwhile, URA data also shows that International Trade tax lines were hit by decline in particularly excise duty collections (amounting 104 billion) and withholding tax (Shs89 billion).

The underperformance is linked to the decline in volumes of imported neutral spirits and cigarettes mainly due to increased tax rates of excise duty on these products.