To maximize tax collection, Uganda Revenue Authority (URA) has established mechanisms to start collecting VAT from non-resident service provider companies operating in the Ugandan economy, including Facebook which is currently blocked in Uganda and is only accessible via VPN.
Collection of VAT from these companies is starting effective July 1, 2022 and will focus on all electronic service providers. Others are Netflix, Amazon, Uber, and the like. John Musinguzi, URA commissioner general says that collection of this tax has been delayed by the lengthy discussions with these companies, but they agreed and have been finalized, then other levies will follow as time goes on.
Without detailing how much is expected as well as the enforcement mechanism in case of non-compliance, Musinguzi says the authority has finalized all the digital infrastructure required to effectively collect this tax.
Under section 16 (2) of the VAT Act, a non-resident person who supplies electronic services to a non-taxable person in Uganda makes a taxable supply. Such a supplier is therefore required to charge VAT on the supply, file quarterly returns, and pay VAT due on supply within fifteen days from the end of each quarter.
Such companies include those websites, web hosting software companies, and those supplying images, text and information, self-education packages, music films including gambling, and other broadcasts and events, as well as those on remote maintenance of programs and equipment.
Next financial year, the government increased URA’s revenue collection target to Shs 25 trillion up from Shs 23 trillion, yet there have been no new tax policy measures introduced.
“We are left with only one option, we must efficiently collect revenues from within the country, and we must mobilize more stakeholders to join us within this effort,” Musinguzi said.
He revealed the strategy at the URA post-budget conference where stakeholders gave views on how URA can be effective in the next financial year. Ramathan Ggoobi, the permanent secretary to the ministry of Finance and secretary to the treasury said that for the first time Uganda is to collect Shs 25 trillion locally, yet there are no new taxes introduced as well as increasing the existing ones, and this will give the economy room to reduce borrowing.
According to Ggoobi, the government is to ensure the restoration of fiscal discipline by managing its expenditures, and the money which the parliament allocated for spending is to focus on production projects that can generate more revenue.
“We are avoiding borrowing for consumption, Uganda will never do that, we are to borrow for productive projects, which we are also sequencing now, and we are going to cancel those which are not likely to deploy the money on time to avoid huge debt repayments,” said Ggoobi.
Uganda currently has a debt to GDP ratio of 53.12% with a public debt of more than Shs 73 trillion.