Businesses register sharp decline in annual incomes

Business incomes experienced a sharp decline in the four years to June 2023 with several companies falling out of their traditional income bands, according to data from Uganda Revenue Authority (URA).  

The decline, data shows, mostly impacted large taxpayers, which saw businesses earning an annual turnover of between Shs50b and above Shs100b drastically reduce, illustrating the devastating impact of Covid-19-related disruptions and subdued economic growth resulting from the Russia-Ukraine conflict since 2020.   

Covid-19 was first announced in February 2020, followed by several restrictions on movement and business operations, whose impact continues to date.  

In details contained in the 2022/23 Annual Data Book, URA noted that whereas companies that earn an annual turnover of Shs50m and below increased, there was a drastic reduction in the number of businesses in all income bands, many of which URA categorises as large taxpayers. 

At least 74 percent of Uganda’s tax revenue is collected from a total of 1,000 large taxpayers.  

During the period ended June 2023, URA noted that the reduction largely impacted all income bands, with the most reductions recorded among businesses that have an annual turnover of above Shs50m and Shs100b.  The report does not give reasons for the declines, many of which were drastic. 

The URA data book indicates that during the four years to June 2023, businesses with an annual turnover of above Shs100b reduced from 125 to just six.  

However, this was an improvement from four businesses in the period ended June 2022 and one in June 2021.  

Other declines were noted among businesses that earn an annual turnover of between Shs50b and Shs100b, which reduced from 130 to just three, while businesses that earn an annual income of between Shs10b and Shs50b reduced from 871 in the four years to June, to just 63.

In an interview yesterday, Mr Ibrahim Bbosa, the assistant commissioner of corporate affairs at URA, said the data is collected from the income tax returns filed by businesses, which provide information on their turnover per year. 

“The decrease in the number of businesses registering lower turnover could be attributed to economic conditions and market forces such as supply and demand.”

The reduction in business incomes, URA data indicates, also impacted tax performance, with net collections against the budget standing at just 68.6 percent. 

URA further indicates that other reductions in turnover were registered among businesses that have an annual income of between Shs1b and Shs5b, which reduced from 2,912 to just 773, while businesses that earn between Shs501m and Shs1b reduced from 1,958 to just 191. 

Additionally, businesses that earn between Shs50m and Shs500m declined, reducing from 10,562 in the period ended June 2020 to just 1,784 in June 2023. 

URA classifies taxpayers, according to annual turnover bands, which eases its efforts to create an efficient tax system.  

Businesses in the lowest tax band with an annual income of Shs50m and below increased to 79,411 from 68,799, after recovering from slumps in 2021 and 2022. 

Number of taxpayers by income group

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