Monday, February 10, 2014 

Uganda tax returns plunge

DISAPPOINTED: Kagina said many companies that were previously posting profits declared smaller profits or losses, citing a slowdown in the economy and low access to affordable credit. (Photo by Emma Onyango)

KAMPALA, Uganda - Uganda’s tax body, Uganda Revenue Authority (URA) will have to grow tax returns by 27% per month if they are to meet the set revenue target for the FY2013/14.

This follows the release of the half year revenue performance for the FY2013/14 that showed that the collections have registered the largest ever deficit of Ush 246.93 billion (about $99 million).

The huge deficit was a result of a shortfall in domestic taxes of Ush 216.37 billion ($87 million) while International taxes that have always posted huge deficits recorded a small deficit of Ush 26.42 billion ($10.6 million) in the six months leading up to December 2013.

A deeper insight into the revenue performance shows tale tell signs that there could be a major problem in the economy given that Corporation tax accounted for the large deficit experienced in the domestic taxes department, registering a shortfall of Ush 161.19 billion ($64 million).

The sectors that registered declines in corporation taxes were the manufacturing, financial intermediation, Transport, Storage and Communication, Electricity, Gas, Water among others.

Speaking to the media at a news conference at the Customs Business Center in Nakawa last week, Allen Kagina, the Uganda Revenue Authority Commissioner General said that shortfall in corporation tax was as a result of a slowdown in the economy and low access to credit.

 “Many companies that were previously posting profits declared smaller profits or losses citing a slowdown in the economy and low access to affordable credit. Some 325 companies that posted profits in FY2011/2012 registered losses in FY 2012/2013 which had an impact on corporation tax performance over the first half of the FY2013/14,” she explained.

Kagina also added that there were increased capital investments made by key sectors in the economy worth $17m especially in the beer and steel industries which increased their allowable deductions and thus reduced their profit and corporation tax paid.

The international taxes on the other hand posted a slight deficit. It was only a deficit of Ush 53.43 billion on withholding tax on imports as well as a Ush 47.73 billion deficit on excise duty on imports that made the customs department perform at 98.5%. Import duty, VAT on imports as well as petroleum duty registered surpluses.

According to the report, domestic taxes performed at 91.15% but the overall revenue performance was at 93.99%.  

Net revenue collections for the first half of the FY2013/14 were Ush 3.86 trillion against a target of Ush 4.11 trillion. Despite the deficit, revenues grew by 487.17 b (or 14.4%) when compared to the first half of the FY2012/13.

On the regional front, only Kenya and Burundi performed above their set target in the first half of the FY2013/14 returning a 100.1% and 104.24% performance respectively.

Rwanda performed at 95.8%, Uganda at 93.99% while Tanzania performed at 88.6% in overall revenue mobilization. 

However, URA is optimistic that given the improving macroeconomic indicators like the projected 6% GDP growth rate, stable exchange rate and a manageable inflation rate, revenue collections will improve in the second half of the FY2013/14 as investment expenditures trickle down to businesses.

“Given the factors that affected corporation tax performance in the first half of the financial year and its relatively longer cycle, we intend to pay close attention to the major industry players in order to arrest the trend. 

The initiatives being implemented are expected to enable us recover the shortfall within the second half of the FY2013/14,” Kagina said.

By Emma Onyango, Monday, February 10th, 2014