Government has revised Uganda Revenue Authority (URA) tax collection targets, curving in to a number of voices that had indicated the Shs21.8 trillion target was too ambitious.
Tax experts, policy analysts and economists had for months called on government to revise revenue collection targets, mainly due to Covid-19-related economic contractions.
Finance Minister Mr Matia Kasaija, while delivering the budget speech in June, said URA would in the 2020/21 financial year be required to collect Shs 21.8trillion.
This target would translate into a 14.3 per cent GDP to tax ratio, which would still be lower compared to other East African Community member states such as Kenya, Rwanda and Tanzania.
However, URA will now be required to collect Shs19.6 trillion, which is about Shs2.2trillion less than the earlier target.
Speaking while releasing the revenue performance report for first quarter, Mr John Musinguzi, the URA commissioner general, said the development - change in budget - was instigated by the impact of Covid-19 on the economy, given its direct bearing on revenue collection efforts.
Mr Patrick Ocailap, the deputy secretary to the Treasury, yesterday told Daily Monitor, the revenue collection target had been revised downwards due to the projected lower performance of the economy.
“This was our forecast in July, to help us better manage our cash flows during Budget Execution. As it has turned out, URA performance seems better than we anticipated but still remains lower than targets set in the Budget,” he said, government would provide all necessary support for URA to meet targets as set in the Budget.
Mr Badagawa Gideon, the Private Sector Foundation Uganda executive director, said this was long overdue, noting this was the only logical measure to take.
“Today, trucks are stuck at the Malaba border while EAC market entry is being deeply constrained for Ugandan firms. Certainly, you cannot realise the targeted revenues because this is where it is largely generated,” he said, adding: “Even if the revenue target was not revised, it would have eventually revised itself downwards on account of the constrained business growth.”
Government has said economic growth will contract to 3.2 per cent, which Mr Corti Paul Lakuma, a research fellow at the Economic Policy Research Centre, said the revision would correspond with economic prospects.
Whereas Covid-19 has had adverse effects on the economy, the partial lifting of the lockdown has seen wholesale and retail sector, manufacturing, information and communication and financial and insurance services and public administration contribute the most revenue to the Treasury.
However significant declines in revenue have been registered in some sectors such as, accommodation and food services, education, arts, entertainment and recreation.
According to Business Barometer, the tool which PSFU uses to capture the current perception of business climate in Uganda, Covid-19 has been highlighted as the top key challenge that has affected all sectors with 80 per cent of companies saying their performance had been affected.