Revenue performance: URA records biggest revenue shortfall in decade

Sunday December 28 2014
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L-R: Uganda Revenue Authority officers James Kisaale, Julius Nkwasire, Asadu Kisitu and tracking Dustan Luwaga announce a collection Shs25 billion after enforcement early this month. PHOTO BY JOSEPH KIGGUNDU

Kampala. Uganda Revenue Authority (URA) closed the financial year 2013/14 with a Shs500 billion shortfall, the biggest revenue deficit in over a decade.
According to the tax body data, during the aforementioned financial year, URA was expected to collect Shs8.5trilion but it collected just slightly more than Shs8trillion. The revenue collected was able to finance nearly 72 percent of the country’s national budget.
According to tax analysts, the cumulative shortfall of Shs500billion was mainly as a result of the economy’s inability to generate sufficient economic activities that the tax body could have drawn revenues from.
Speaking In an interview (on December 16), the Ernst & Young Tax Partner/Country Leader, Mr Muhammed Ssempijja, said the revenue collections suffered from what he described as structural problem.
He explained: “The economic environment is not attracting and retaining enough investment. This means that the tax base is not expanding because there are fewer players.”
However, Mr Ssempijja reckons that compared to previous years, the tax collection has been growing although over the years its contribution to the GDP remains stagnant at 12.5 percent. GDP refers to value of goods and services produced in a country over a period of time, which could be either quarterly or annually.
Compared to Kenya, Tanzania and Rwanda, Uganda’s tax contribution to GDP also known as the gross domestic product, is the lowest.
And as long as the tax contribution to GDP remains static,Mr Ssempijja argued that collecting revenue to fund the national budget will always be a difficult task given that there are fewer economic activities that can generate sufficient income which the tax body can accrue revenue from.
Going forward, the executive director of East African School of taxation, Mr Godfrey Akena, said: “The tax base must be widened by bringing the informal tax payers who earn so much money, into the tax bracket.”

Change of guard
And after ten-years at the helm of the tax body, the tax institution underwent smooth changes with Ms Doris Akol, previously the Commissioner Legal Services and Board Affairs at URA taking over the leadership mantle from Ms Allen Catherine Kagina.
In her time at the helm she tripled the fortune of the institution and transformed it from a corrupt-ridden agency to a place where every young-competent professional want to work in.

Shs25 billion announced after enforcement
Uganda Revenue Authority enforcement department has collected about Shs25billion in revenue from tax payers who were trying to evade their tax obligations, the head of enforcement team has said.
While releasing the enforcement report, the assistant commissioner, enforcement, Mr James Kisaale said compared to the previous years, smuggling is reducing although with technological advancement, electronic fraud is emerging as a challenge to reckon with.
In the last one year the top five most smuggled goods include; garments with 76 seizures worth Shs1.8billion in value and Shs 1.2billion was recovered in taxes and penalties. Rice was also the other item that was most smuggled with 125 seizures worth Shs 218million in value and Shs 447million was recovered in taxes and penalties as well.
Hardware had 13 seizures worth Shs866million in value and Shs 309million was recovered in taxes and penalties.
Others in the top list include are electricals with nine seizures worth Shs 459million in value and Shs 189million recovered in taxes and penalties.
Agro Chemicals also made it into the list of top smuggled goods because of the introduction of taxes on agricultural inputs. It had five seizures worth 329million in value with shs153million being recovered in taxes and fines.
According to the annual enforcement report, efforts to engage the private sector to support the tax body in curbing smuggling based on a sector or industry -wide engagements is ongoing and has been showing success thus far.
“For example, we have been dealing closely with the Grain Milling sector to deal with smuggling of Rice and Wheat flour, the Petroleum industry to deal with Fuel smuggling, the Used Motor vehicle dealers to deal with the management of motor vehicles. We are also engaging the DRC Customs through sharing and exchange of information to deal with fraudulently registered motor vehicles from DRC,” Mr Kisaale said.
Other efforts such as stepping up Anti- Illicit sensitization campaigns and also targeting specific sectors of the economy such as the textile, and hardware sectors, transporters and drivers associations among others is being explored.
Inter-agency collaboration with other Law Enforcement Agencies to deal with various aspects of illicit trade, according to enforcement report is another alternative being explored.

authority puts measures in place to boost collections

Uganda Revenue Authority has entered a partnership with government bodies like Kampala City Council Authority (KCCA) and Uganda Registration Service Bureau (URSB) to identify traders, particularly the informal ones with the view to have them captured into tax bracket.
According to the Commissioner General, Ms Doris Akol, emphasis will be put in tightening the revenue loopholes, automating the tax payers’ processes in addition to widening the tax base through bringing on board players in informal sector who due to shoulder tax responsibilities.
Meanwhile, despite the Shs500billion deficit, domestic revenue performed much better compared to revenues accrued from international trade. This is important because taxes collected from customs is not only an indicator of a weak economy but it is unsustainable as it is unpredictable.

Numbers

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Shs500b
Amount of revenue shortfall registered in financial year 2013/14.

Shs150b
Amount of revenue shortfall registered in financial year 2012/13.

Shs39b
Amount of revenue surplus registered in financial year 2011/12.

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