URA in Shs900b shortfall

Five months to closing its revenue collection account for this financial year 2021/2022, Uganda Revenue Authority (URA) will have to dig deep to find Shs12.3 trillion to beat its revenue collection targets and cover the Shs900 billion revenue deficit registered in the half year, Daily Monitor has established.

While presenting the highlights of revenue performance for the period starting July to December 2021 and outlook for the remaining half of Financial Year 2021/2022, URA Commissioner General, Mr John Musinguzi Rujoki, noted that the revenue target for the second half of slightly more than Shs12.3trillion for the Financial Year 2021/22 encompasses the Shs900billion deficit registered by the tax body. 

This revenue shortage is an equivalent of nearly 10 times the budget allocated to Ministry of Trade, Industry and Cooperatives.  

The remaining half year target accounts for 55 per cent per cent of the annual target inclusive of the accumulated deficit for the period July-December 2021. 

Growth in revenue

Yesterday, Mr Musinguzi in a news conference at the URA Towers, noted that despite the deficits, tax collectors are collecting more revenue compared to the previous revenue collection calendar.   

At the beginning of the financial year, URA was given a revenue target by Ministry of Finance of Shs22.3trillion which is 16 per cent or Shs3.1 trillion higher than the actual revenue collection from the last financial year.

As a result, in the last six months, URA projected to collect 49 per cent, representing slightly more than Shs11 trillion, an increase of 16.8 per cent or Shs1.59 trillion from the realised revenue for the same period last financial year.  

In comparison, the net revenue collections for the first six months of this FY 2021/22, represent 45 per cent of the annual target, with a shortfall of slightly more than Shs900 billion incurred with a performance of 91.8 performance.

In this period, domestic tax revenue collections registered a shortfall of Shs951.32 billion, and performance of 86.7 per cent. The shortfalls were from direct domestic taxes (Shs273.61 billion), indirect domestic taxes (Shs 487.20 billion) and Non Tax Revenue (NTR) (Shs190.51 billion) 

Customs tax collections in the first six months of the FY 2021/22 also posted a shortfall of Shs26.33 billion, and performance of 99 per cent. However, a year to year growth of Shs389.78 billion (10.57 per cent) was realised this year compared to the same period in the previous financial year 2020/21.

Sector performance  

According to URA revenue performance report, during the period July to December FY 2021/22, 75.46 per cent of the revenue was generated from the top five sectors, including the wholesale and retail trade sector which had the most significant contribution, amounting to Shs3 trillion, translating to 29 per cent performance, the manufacturing sector followed with a contribution of Shs2.4 trillion, representing 23 per cent performance and then followed by the financial activity sector contributed Shs1 trillion, accounting or 10 per cent. 

Then the information and communication sector with a contribution of Shs880 billion, representing 8.5 per cent and finally public administration contributing 3.7 per cent. 

The revenue growth in the Wholesale and retail trade sector is attributed to the wholesale of solid, liquid and gaseous fuels and related products. The growth of revenue from financial activities is attributed to contributions by mobile commerce due to gazetted regulations by Bank of Uganda’s directive to all telecom companies to separate financial services from telecom services. 

Flopped tax measures 

Some of key tax measures instituted to enhance revenue collection did not pay off as anticipated. For example, the tax measure on some exports such as a levy of 5 per cent on a kilogramme of processed gold, 10 per cent on the value of unprocessed minerals and the imposition of a tax on fish maw and leaf tobacco all resulted in no export of processed gold, reducing the export of fish maws and unprocessed minerals.  

It also emerged at the news conference yesterday that in the first half of FY 2021/22 there was decline in import and export value by 24 per cent and 54 per cent, respectively, which negatively impacted international trade, according to Mr Musinguzi. 

Further, he revealed that motor vehicles, worn clothing and insecticides were some of the top imported items that registered a decrease.  This is in addition to top exported items such as plywood, salted/dried fish, milk, oil seeds and oleaginous fruits. 

There were also decrease in tax yield by some items such as personal motor vehicles, plastic footwear, cigarettes, woven fabrics and insulated wires and reduction in fuel volumes. 

There was also less than projected growth in revenue and smuggling. In the period July to December, international trade tax collection grew by 10 per cent against the projected growth of 11 per cent. This was due to the reduction in international trade and increased smuggling of commodities such as wheat, garments, cooking oil, fuel and lubricant oil.

Despite tough times, worsened by Covid-19 pandemic, URA is upbeat following the full reopening of the economy. 

“The journey to Uganda’s economic independence is bound to find some hurdles. Still, we are confident that the digitalisation of processes, enhanced stakeholder collaboration, strengthened sector-based tax education, client-centric approaches, and data analysis and optimisation will get us to self-sufficient status as a nation,” said Mr Musinguzi.

TOP REVENUE GENERATING SECTORS       

According to URA revenue performance report, during the period July to December FY 2021/22, 75.46 per cent of the revenue was generated from the top five sectors, including the wholesale and retail trade sector which had the most significant contribution, amounting to Shs3 trillion, translating to 29 per cent performance, the manufacturing sector followed with a contribution of Shs2.4 trillion, representing 23 per cent performance and then followed by the financial activity sector contributed Shs1 trillion, accounting or 10 per cent.

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