Govt should target all business transactions to widen tax base

Boda boda riders waiting for customers at a stage in Kampala

Boda boda riders waiting for customers at a stage in Kampala

I was recently visiting some people a few kilometres outside Kampala. You can call it rural greater Kampala.

One of the young men was in an unpleasant mood. The family recently shared the land their grandfather bequeathed them. Each of the beneficiaries is getting a land title for their inheritance. What was bothering the young man was a tax identification number or TIN.

The surveyor who parceled out the land on the family’s behalf asked him to provide a TIN so that the land could be transferred to his name. The title was originally in the name of the administrators the grandfather had indicated in the will. That is the major reason he approached me.

Is the government trying to steal my land? He asked. Why do they want my TIN? What is a TIN? I hear I have to go to Kampala to get it. He was really bothered by the TIN. The Uganda Revenue Authority (URA) recently said that whoever is selling and buying land must have a TIN and must be indicated on the forms.

Otherwise there will be no transfer. This has made people apprehensive. Why land? Why not other transactions?

When it comes to land in Buganda because it is the only region where much of the land is titled, there is always suspicion that government is up to something with bad intensions. Of course, for the untitled land where transactions are based on just sales agreements, which aren’t registered in the land registry system, the government would never know who owns what.

I am not sure why URA wants land sellers and buyers to have TINs but I suspect they want to widen the tax base. Currently, people pay taxes when they buy land, amounting to 1.5% of the land value. The value is determined by the government valuers at the various land registry zonal offices. Perhaps they want the seller to pay some form of income tax on the land they have sold.

The challenge, though, is that not all land that is being transferred is sold. The young man I met in the village I mentioned earlier has not bought any land. He is simply getting what he was bequeathed by his grandfather. No money exchanged hands though of course he is going to pay the 1.5% tax before land is transferred into his name, that is if he gets a TIN.

If he remains as suspicious as I found him of government intentions, he will simply not transfer the land. He will keep the title and transfer forms assigned to him by the administrators of his grandfather’s estate. What this will mean is that eventually government will lose money — the 1.5% that they would have got if he transferred the land.

When people become suspicious, there will be reduction in land transactions being registered hence reductions in revenue being realized by URA. URA tends to focus on certain sectors where they think there is money to get. Sometime back it was the textile industry. And now land. I think it is the wrong strategy because it makes URA’s intentions, however good, suspicious.

What URA needs to do is to ensure that whoever is above 18 has a TIN. It must be universal not targeting a sector or two. Imagine boda boda guys in Kampala earn on average Shs 30,000 per a day and since they work 30 days a month, that is Shs 900,000. How can URA get some of this money in form of income tax?

The boda boda guy will be willing to pay this money but only if the requirement to have a TIN isn’t only required of boda boda riders. If URA says that all boda boda riders must have TINs, it will indicate that they are being targeted and there will be chaos in Kampala over this.

Yet if URA says everyone who is 18 years old must have a TIN, just like it is with the national identity card, there won’t be anyone apprehensive about it. It is the same issue with land. Why only targeting land transactions?

Land transactions aren’t any different from other transactions that are taking place in the country. When I buy cement to build my house, why can’t the hardware store ask for my TIN? When I take my wife out for dinner, why don’t they ask for my TIN?

When I sell my cows or milk from my farm, why don’t they ask for my TIN as well as that of the buyer? In fact there is more money in other transactions than land which is always largely a one-off. So, for URA to collect more taxes, they need to target everyone who earns some money, not just a few sectors.


The writer is a communication and visibility consultant.

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