The government through the ministry of finance has embarked on a process to review tax exemption guidelines with the aim of increasing domestic revenue collections.
Though Uganda Revenue Authority (URA) surpassed its first quarter target by over 300 billion, the country’s tax collections against the GDP ratio, are stuck at 13 percent, yet the government’s five-year domestic mobilization strategy that is aimed at, among others, increasing tax revenues from 16 to 18 percent of GDP by 2025.
Experts said a lower ratio is dangerous for Uganda in terms of indebtedness because the tax revenues are hardly enough to service the debts and cater for recurrent expenses like salaries.
Speaking about the URA performance for the last quarter that ended in September 2022, Moses Kaggwa the head of policy at the ministry of finance said that despite the advantages, these guidelines ought to be reviewed in order to increase revenue collections.
According to Kaggwa, tax exemptions take up to 2 percentage points of the tax-to-GDP ratio, meaning that currently, up to 4 trillion shillings are lost in tax exemptions. This, according to him, calls for attention in order to strategize if the country is to hit its five-year tax mobilization target that would enable a self-sustaining economy.
Ugandan authorities offer exemptions on different categories of commodities and the various classifications of companies as deemed necessary by the policy. However, several taxpayers always complained about their implementation.
Geraldine Ssali, the permanent secretary in the ministry of trade, and a board member at URA said the review of the exemptions will be very ideal, especially at this time when many businesses are struggling due to the aftereffects of Covid19 pandemic.
About the 2022/23 taxi collection projections, URA said the collections were 5.4 trillion shillings against the 5.1 target, indicating a quarterly surplus of 300 billion. This financial year, URA is expected to collect 25.5 trillion shillings, and this amount is 4 trillion highest than that of the previous fiscal year.
John Musinguzi the URA commissioner general said that these revenue collections were due to increases in direct taxes like pay-as-you-earn due to improved wage bills, and more VAT collections. The major surpluses were registered in PAYE, casino tax, Corporate tax, tax on bank interest, and rental tax.