Only 1 million Ugandans are paying taxes, says URA

Monday June 14 2021
fina01pix

The number of registered tax payers in the tax register is 1.7 million people but not all of them are actively paying tax.

By MARTIN LUTHER OKETCH

Uganda Revenue Authority statistics reveal that only one million people in Uganda are paying taxes despite the large population engaged in economic activities.

The low number of tax payers implies that government still has a long way in its quest to increase domestic revenue to finance the national budget, which is still partly financed through donor aid in form loans and grants.

However, the budgetary challenges facing the government are significant in the sense that in the past years, government expenditure has consistently been higher than revenue.

Speaking during the Absa Bank Uganda post National Budget forum to discuss the FY2021/22 National Budget and foster dialogue between the private and public sectors on the implications of the National Budget on manufacturing and trade at Kampala Serena Hotel on Friday, the Commissioner General, Uganda Revenue Authority, Mr John Musinguzi Rujoki said currently, the number of registered tax payers in the tax register is 1.7 million people. But not all of them are actively paying tax.

“Only 1 million people are active and filed tax returns in the last one year. This number is still very small compared to the total population in Uganda,” he said.

Low tax to GDP ratio
Mr Musinguzi said Uganda’s tax ratio to the GDP is is one of the lowest in the region in the range of 12 to 13 per cent of the Gross Domestic Product.  

Advertisement

In 2019, the government launched the Domestic Revenue Mobilisation Strategy covering 2019/2020-2023/24, in the strategy the government seeks to narrow the gap between current and potential revenue performance.

The core objective of the DRMS is to improve revenue collection, lifting Uganda’s tax-to-GDP ratio to between 16-18 per cent within the next five financial years. This will bring Uganda closer to its theoretical potential and exceeds the target of a 16 per cent tax-to-GDP ratio as set out in the NDPII and the Charter of Fiscal Responsibility in NDP III.

With the DMRS, the government hopes to raise additional revenue to support the government’s budgetary position; to encourage a healthy flow of investment; and address issues of fairness and transparency in the tax system.

It builds on the government’s existing policy of seeking to increase tax revenues as a share of GDP by at least 0.5 per cent per annum, requiring them to grow at a rate in excess of the rate of growth in GDP.

Mr Musinguzi expressed concerns that Uganda still has a long way to go since the number of people in the tax registry is one million compared to the total population of 45 million people.

Hinting on the top tax payers in Uganda, he said trade and manufacturing are the largest contributor of tax. Trade contributes slightly over 30 per cent, manufacturing 20 to 24 per cent.

“However, the impact of Covid-19 has caused a decline manufacturing from 24 per cent to 23 per cent and trade has declined 30.7 per cent to 30.5 per cent. This may sound small but still the decline points they (trade and manufacturing) are still supporting revenue collection of the top tax payers,” he said.

Going forward, he said URA will step up expansion of the tax registry to raise domestic revenue collections because that is how Uganda will be self-sufficient to finance the national budget wthout relying on donors.

The director of budget in the Ministry of Finance, Planning and Economic Development, Mr Kenneth Mugambe said the 2021/22 budget focuses on growth of the income of the populations in Uganda through targeted interventions and to grow the economy.

Parish development model
Mr Mugambe said government will use the parish model to increase peoples’income.
Government will revamp parishes by recruiting parish chiefs in are areas where there are no parish chiefs, community workers and establishing the data collection centres for accuracy.

“We plan to begin recruiting parish chiefs in the first quarter of FY 2021/22, there are 10,500 parishes in Uganda. 50 per cent of them don’t have parish chiefs, the starting money for the parish model is Shs200 billion, the plan is to use SACOS in the parish and apply the use of community development community for vetting people to have access of the fund which going to be provided,” he said.

The managing director of Absa bank, Mr Mumba Kalifungwa said Uganda’s 2021/22 Budget is well-aligned with the National Development Plan III because it dealing with agriculture development, industrialisation, trade, oil and gas development, mineral development (exploration), skill development, infrastructure development and digitalisation.

Agriculture
“There are various interrelations in agriculture credit facility being provided by the government. In this budget, the government has put Shs50 billion so the contribution will total to Shs100 billion when the banks also contributes Shs50 billion. Since the establishment of Agriculture Credit Facility in 2009, it has grown to Shs600 billion,” he said.

Mr Kalifunga said infrastructure development is well targeted to facilitate trade, manufacturing, industrialisation because there is interrelation between the road networks and electricity power.

Ms  Damali Ssali, Acting country director, TradeMark East Africa, said Kampala contributes 80 per cent of Uganda’s economy but problems associated with logistics still affect trade in the region. Ms ssali said: “Shs800 million is lost in Uganda per year because of logistics problems in the trade corridors.”

Ms Ssali expressed disappointments over Uganda’s exports such as coffee which brings in $500 million, fish $200 million and dairy is also $200 million. “While coffee exports brings about $500 million annually, 90 per cent of Uganda’s coffee exports are coffee beans.  So there is need for value addition in coffee exports,” she said.

Mr Daniel Birungi, the executive director, Uganda Manufactures Association, said, “The cash flow to the private sector in form of credit still remains a challenge.”

moketch@ug.nationmedia.com

Advertisement