URA closes financial year with Shs2.9 trillion shortfall

Uganda Revenue Authority (URA) will be closing the 2019/20 revenue collection calendar with a deficit of about Shs2.9 trillion, Daily Monitor has learnt.

Left with one week to close the revenue collection financial calendar, the tax prefect, currently preoccupied with enforcing changes in the institution, will have to contend with the biggest ever revenue shortfalls recorded in nearly 30 years of URA’s efforts to modernise tax administration.

By the beginning of the financial year, the government had projected to collect domestically about Shs20.6trillion, but as it stands now, the tax collector is looking at closing its accounts, in a about a week, with no more than Shs17.5trillion.

The deficit, which is an equivalent of just about three times the budget allocated to agriculture sector in the next financial year, comes at the back of a Shs700b revenue shortfalls registered in the first half of the year.

According to analysts, this shouldn’t be surprising, considering that achievements of revenue mobilisation are dependent on the health of the economy.

“It will come as little surprise that projected domestic revenues will fall short of target for the current year, with an overall deficit of Shs2.9 trillion. This is primarily attributed to falls in domestic demand and imports accompanying the slowdown in the economy due to the current pandemic but also with some impact from the locust invasion and flooding,” reads

PricewaterhouseCoopers (PwC) analysis of the fiscal (revenue) performance.
Other contributing factors are delays in implementation of digital tax stamps, electronic fiscal devices, VAT withholding and rental tax.

The shortfalls are generally manifested across all tax types, apart from corporate income tax which registered a Shs154 billion surplus arising from capital gains tax on a specific transaction. The expected oil revenue of Shs198 billion was capital gains tax that did not eventuate because of protracted issues.
In his Budget speech, President Museveni seems to think that more taxes can be collected if everybody pays their fair share.

Although that is correct, the crisis occasioned by Coronavirus and its resultant containment measures haven’t helped businesses and the economy. Instead, it suffocated normal economic environment, in the event taking a toll on revenue mobilisation efforts.
As a result some experts are urging the government to adjust the revenue collection target of Shs21trillion to be collected beginning next month (July 2020) to a cap that will reflect the reality on the ground.

“The revenue collections target should be reduced or else it will be difficult to achieve them. Businesses needs at least six months and in some cases, more than that to recover before beginning to contribute meaningfully in terms of paying revenue,” the Country Leader, Ernst & Young, Mr Muhammad Ssempijja said in an interview.

Analysing the budget on NTV-Uganda, the Managing Director of Alpha Capital Partners, Mr Stephen Kaboyo said by asking URA to raise all that revenue domestically is not only impossible but also speaks to the fact that there is very little appreciation of the reality on the ground.

URA speaks out
The Manager Public and Corporate Affairs at URA, Mr Ian Rumanyika, said the shortfall is understandable, considering the effect of Covid-19 so far on revenue collection.

“But we have put tax measures that will support sustainability of the businesses, including delaying payment of some taxes, waiver of interest and allowing instalment payments. In the long run, these measures will enable businesses to recover and meet their tax obligations,” Mr Rumanyika said.

With relief of Pay As You Earn and corporation tax being extended to some key sectors of the economy, Mr Rumanyika is of the view that this will allow recapitalisation of the money into the business which should boost productivity in the long run.

“In my view, it is not about the target. We are focusing on putting in a place a favourable environment and key service drivers that will enable the taxpayer voluntarily comply with minimal cost,” he added.
With the new administrative measures such as electronic receipting, digital tax stamps and widening the tax base with rolling out of digital rental tax collection, reducing revenue leakages and enforcing withholding tax across the economic sectors, will reap some good results by end of financial year 2020/21.

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