Low alcohol consumption forces drop in tax revenue
Ministry of Finance says a drop in the consumption of beer, spirits, wines and non-beer beverages caused a deficit in Excise Duty collection during February. PHOTO | FILE
What you need to know:
- Taxes on international trade also registered a surplus, realising Shs711.02b during the period against a planned target of Shs684.79b on account of surpluses collected on Petroleum Duty, especially on petrol, Import Duty on textiles and VAT on iron and steel imports.
Administrative challenges in effective implementation of the digital tax tracking system coupled with lower than anticipated consumption of alcoholic drinks such as beer, spirits, wines and non-beer beverages affected tax collection during February, according to the Ministry of Finance Performance of the Economy report.
In details contained in the February report, the Ministry of Finance noted that tax collections were lower than targets due to shortfalls in Excise Duty and Value Added Tax (VAT) resulting from challenges in proper implementation of some digital tracking systems and difficulties encountered in the roll out of the Electronic Fiscal Receipting and Invoicing System.
“Indirect domestic tax collections were affected by underperformance by Excise Duty and VAT. Excise Duty collections were affected by administrative challenges in effective implementation of the digital tracking system coupled with lower than anticipated consumption of items such as beer, spirits, wines and near beer beverages. Similarly, collections for VAT were affected by roll out difficulties of the Electronic Fiscal Receipting and Invoicing System,” the report said, noting that during February tax collection shortfalls stood at Shs86.06b.
During the period, both tax revenue and grants were lower than targeted, realising Shs1.672 trillion against the planned Shs1.836 trillion.
Tax revenues stood at Shs1.54 trillion, which was lower than the targeted Shs1.63 trillion while grants registered a Shs96.29b shortfall.
During the period, Ministry of Finance indicated that domestic revenue collections stood at Shs1.662 trillion against the planned target of Shs1.73 trillion due to a shortfall in both tax and non-tax collections.
Tax revenues, according to the report stood at Shs1.548 trillion while Shs113.68b was realised from non-tax revenue sources.
However, the Ministry of Finance, indicated that despite a pick-up in economic activity, tax collections continue to perform below the target because “some of the administrative tax measures proposed in the budget for the financial year have not been effectively implemented as earlier anticipated”.
Direct domestic tax collections stood at Shs426.47b against the planned target of Shs458.08b due to shortfalls in Withholding Tax, Tax on Treasury Bills and Bonds, Presumptive Tax and Rental Income Tax.
However, the report noted there was a surplus under the pay as you earn (PAYE) segment due to a pickup in private sector employment following the full re-opening of the economy in January.
Taxes on international trade also registered a surplus, realising Shs711.02b during the period against a planned target of Shs684.79b on account of surpluses collected on Petroleum Duty, especially on petrol, Import Duty on textiles and VAT on iron and steel imports.
Spending
According to the Ministry of Finance, during February, government spent Shs2.306 trillion but was lower than the planned Shs3.332 trillion due to lower than planned.
However, payments for wages and salaries rose above projected to Shs479.23b against the planned Shs467.83b due to additional payments made towards the education sector for teachers following the reopening of schools in January2022.
On the other hand, government spending on non-wage recurrent activities stood at Shs698.28b against the planned Shs824.7b while expenditure towards domestically financed development activities was lower than planned, standing at Shs516.7b against the planned Shs1.112 trillion.
