Kampala. President Museveni has asked Uganda Revenue Authority (URA) to increase the tax to GDP ratio to at least 20 per cent by 2020. This means the tax body would have to increase its collections from Shs11.2 trillion to Shs34 trillion.
Currently, URA’s revenue collections are at 12.78 per cent, the lowest in the region. This is also lower than the regional sub-Saharan Africa average of 18 per cent.
Mr Museveni challenged URA to tap into the informal sector to widen the tax base. He also said they would convert the 68 per cent households involved in subsistence farming to commercial farming as a way of broadening the tax base.
“Although this figure is still low, one of the lowest in the region, efforts are being made to enhance the capacity of URA to widen the tax base to increase revenue collections from areas that are untaxed like the informal sector,” he said in a speech delivered by Mr Ruhakana Rugunda, the Prime Minister during URA’s 25th anniversary dinner last weekend.
“We must give URA all the support to ensure that the tax to GPD ration grows to at least 20 per cent by 2020,” he said.
President Museveni said in 1986, tax revenue as a percentage of GDP was 6.85 per cent, representing revenue collections of Shs2.8 billion. By 1991 when URA was formed, it stood at 6.83 per cent, representing revenue collections of Shs133 billion. At end of last year, it stood at 12.78 per cent, which is Shs11.2 trillion.
At the end of the last financial year, the rate of revenue growth rate after 25 years stood at 8.295 per cent while year-on-year revenue growth currently stands at 15 per cent.
Since 1988, the volume of exports has grown from $536m to $2.6 billion as at end of 2015. He asked the body to focus on ensuring that all imports are properly taxed.
Mr David Bahati, who represented the Minister for Finance, said in 1991 tax collection was full of corruption. Although a number of reforms were introduced and their implementation has enhanced the tax to GDP performance from 7 per cent in the financial year 1991/92 to 12.9 per cent in 2015/16, Mr Bahati said they were going to create fiscal policies that support economic growth and development.
‘President’s target achievable’
Tax experts say the new target for URA is achievable by 2020 going by URA’s new reforms that make it hard to evade taxes. Mr Ronald Amega, a senior tax consultant with audit firm Ernst and Young, said: “Government is linking the Uganda Registration Services Bureau and Kampala Capital City Authority with the tax system which is a step in the right direction,” he says.
Mr Amega also said today, more companies are dealing with people who have TIN numbers. Data sharing between ministry of Lands and URA will add the lucrative real estate sector to the tax system which can further increase the collections,” he said.
Mr Simon Kagugube, the URA board chairman, said the new corporate plan of URA for the next four years is premised on cultivating a tax paying culture through provision of reliable services and leadership development.
“The corporate plan lays out URA’s road map for the future. It has been launched at a crucial stage in Uganda’s development agenda where URA is required to increase tax collection to finance Vision 2040 objectives and the National Development Plan 2,” he said.
Ms Doris Akol, the URA commissioner general, said they are working on raising the per capita income ratio to 2,500 by 2020 and raising the tax ratio to GDP from 12.5 per cent to a minimum of 16 per cent. “This will require us to collect Shs22 trillion from the current Shs11 trillion,” she said.