All traders renewing licences will be required to demonstrate compliance with applicable tax laws and regulations, according to the Ministry of Finance.
Speaking during the launch of the Domestic Revenue Mobilisation strategy in Kampala yesterday, the Director for Economic Affairs at the Ministry of Finance Moses Kaggwa, said government was looking at having everybody contribute fairly to the resource envelope as a way of ensuring fairness of the tax system.
For example, he said: “Traders renewing licences will be expected to demonstrate compliance with applicable tax laws and regulations,” noting that as a way of bringing everyone into the tax fold, informal and semi-informal businesses must be encouraged to register as taxpayers and to report their income in full.
However, he said, government will act more firmly in relation to professionals and formal businesses that fail to report or under declare their income. “We are looking at having everybody contribute fairly so that the confidence in the fairness of the tax system is not damaged,” he said.
Nearly 50 per cent of Ugandans are engaged in the informal sector but majority do not pay or rarely pay taxes.
The Domestic Revenue Mobilisation Strategy, which was launched yesterday seeks to empower Uganda Revenue Authority to deal with tax abuses, among them exemptions that will cost government close to Shs500b this financial year and illicit financial flows.
In a document prepared in support of the Domestic Revenue Mobilisation, it was noted that some of investors had taken advantage of the tax system to avoid paying taxes.
As a result, the document noted, Ministry of Finance and URA had been obliged to tighten the rules relating to taxation of international business.
Mr Kaggwa said the strategy has been developed to respond to Uganda’s unique tax challenges, putting in account the dynamics of the country’s informal sector.
Ms Carol Namagembe, a budget expert at Civil Society Budget Advocacy Group, lauded the new strategy but warned that focus should be on government ministries, departments and agencies, which according to Auditor General’s report, lack coordination and cooperation resulting in revenue leakages.
URA has been seeking ways through which it can grow and widen that tax base through recruiting the informal sector into the tax fold.
Last month, URA reported a revenue shortfall, which it blamed on unrealistic targets set by government against poor economic fundamentals.
However, government and multilateral agencies have insisted on the need to improve revenue collection to grow Uganda’s tax to GDP ratio to at least 15 per cent.
Billions not collected due to poor coordination
According to Ms Carol Namagembe, the Civil Society Budget Advocacy Group budget expert because of poor coordination, URA and the Gaming Board had previously failed to collect Shs54b while Shs393.8b was never collected due to failure by URA to access the Integrated Financial Information Management System.
Ms Regina Navuga, an expert on trade and taxation, yesterday said government will be judged on how best it implements the three years strategy, noting that this is a move towards the right direction, but if not implemented well, it will be a waste of time.