The Constitution of Uganda provides that it is the duty of every citizen to pay taxes. It also states that a person who earns income, but fails to pay income tax, breaches their constitutional obligation hence he or she is liable to punishment by the government.
Tax is a compulsory payment done by taxpayers to increase government revenue. Article 152(1) of the Constitution provides that “no tax shall be imposed except under the authority of an Act of Parliament.”
Tax is supposed to be paid by every individual whose employment income is Shs235,000 and above. The taxpayers are basically categorised into two, resident and non-resident individuals with different tax rates at different income levels.
The taxpayers have to first register their business and the amount they receive per month or annually at Uganda Revenue Authority (URA). This helps URA to identify who has paid the tax and who has defaulted.
First, taxation is the biggest source of government revenue, yet Uganda’s economy is dominated by informal business where most of the businesses earn below the taxable income. The Covid-19 pandemic has also affected Uganda’s manufacturing sector.
Factory closures in China have resulted in supply chain disruptions for manufactures in Uganda, including delays, raw material shortages, and increased costs and reduced orders.
The growth registered in September 2020 (8.27 per cent) and August 2020 (1.40 per cent ) shows a resurgence from the impact of Covid-19. Decline in revenue were posted in April, May, June and July 2020 due to the pandemic.
This also reduced government revenue since we basically depend on other countries. More so, many citizens have failed to comply with their taxes due to Covid-19 that led to total closure of businesses , especially those dealing in non-food products, closure of schools, shopping malls, churches, and bars which have been major sources of income to many Ugandans.
After being hit by the Covid-19 pandemic, the country’s economy is yet to stabilise. Essential workers such as health workers, were the only few people who remained working as other sector workers were required to, among other measures, to stay home in order to curb the spread of Covid-19.
However, on April 7, 2020, URA put in place measures of tax administration and nature to support taxpayers in meeting obligations during unexpected situations such as extension of time for two months from March 31, 2020 to May 31,2020 within which to file corporation tax returns for September, hence encouraging use of online services. Most of the things are done online and there are some staff in the office to help taxpayers.
In support of government interventions to combat effects of Covid-19, NSSF has put in place measures to ease the cash flow burden of affected employees in the private sector.
It indicated that with effect from March 31, 2020, it will allow Ugandan businesses facing economic distress to reschedule their NSSF contributions for three months.
Bank of Uganda has also intervened in the foreign exchange markets to smoothen out excess volatility arising from the global financial markets.