When the minister of Finance reads the national budget in June, the amount of money available to spend might not be as much as the Uganda Revenue Authority struggles to meet its target amid a narrow tax base.
Uganda Revenue Authority (URA) registered shortfalls amounting to Shs 697.38 billion, according to its half-year performance report for the financial year 2019/20 that was released recently, offering signs that the future will remain just as tough.
The report noted that while the net revenue collection of the authority had increased tremendously over a five-year period, URA only managed to collect net revenue of Shs 9 trillion, which came short of the projected Shs 9.7 billion target that had been set by government.
Doris Akol, the commissioner general of URA, while briefing the press about the report, said the collection targets were too ambitious for the tax body to beat.
“The revenue targets for this period were premised on a number of macroeconomic assumptions, administrative policy measures and expenditure requirements. Compared to the earlier years, the target for FY2019/20, a year-to-year growth of 24.4 per cent or an increment of approximately 1.4 per cent tax to GDP ratio. This is higher than the usually projected annual increase of 0.5 per cent tax to GDP ratio,” Akol said.
Akol also added that new policies on income tax, where changes were made to exempt tax in selected strategic investments, were partly responsible for the failure to beat the revenue target.
Already, the government is struggling to shoot up its revenue kitty amid a slowdown in economic activity. With an election fast approaching, which is usually preceded with anxiety among the business community who prefer to hold back investments, URA will have to engage its beast mode to aggressively collect revenue on behalf of government.
Similarly, URA said international trade taxes resulting from policy changes have led to collection of import duty from only 23 per cent of goods imported and this figure is projected to worsen with the implementation of the regional trade agreements, especially the continental free trade area agreement .
This, according to Akol, calls for URA to focus on domestic sources to mobilize revenue. Increased use in agency banking contributed to a Shs 30 billion deficit on the levy on mobile money and this, according to Akol, can be explained by the fact that high-value clients withdraw their funds from agency banking.
“A case in point, MTN has had a drop of 36 per cent in mobile money transaction values since the introduction of the levy on mobile money. In addition, other clients are adopting the use of mobile money as a mode of payment for services as opposed to withdrawing for cash,” Akol explained.