Why URA is struggling to hit tax collection targets

URA to tax bank agents

Uganda Revenue Authority Commissioner General John Rujoki Musinguzi (PHOTO /Courtesy)

KAMPALA – The Ministry of Finance, Planning, and Economic Development is proposing that the Uganda Revenue Authority raises almost 29.96 trillion Shillings in taxes next, up from the current year’s 29.67 trillion for this year. However, this will prove a tall order for the tax body considering that it has not been meeting its targets for almost all of the last one decade, according to the Tax Justice Alliance Uganda, a coalition of NGOs fighting for an equitable tax regime in the country.

URA Commissioner General, John Musinguzi says theirs is to ensure that they perform ministry, adding that the ministry as planners of the economy look at the strengths and challenges in the country to determine the target. Mark Mulumba, the Program Officer, Financing for Development at SEATINI Uganda, a member of the alliance, says, the government and URA have a lot to do to meet the desired domestic revenue mobilization levels.

Mulumba says the main hindrance is the low capacity in terms of resources available to URA, which has restricted it to manning just one-fifth of the border points of the country, causing a major tax leak. The other challenge is the ability of the URA personnel to cope with the growing digital economy which needs more qualified personnel, as well as collaboration with other government agencies to enforce against tax fraud especially by multinationals, according to Mulumba.

Despite the almost constant shortages by URA, it has steadily maintained revenue growth over the years, with the current levels at about 26 trillion Shillings from about 700 billion shillings when it was formed some three decades ago.  Last financial year, URA exceeded its target by about 58 billion Shillings. This, Mulumba says, should be lauded, but says this would have been better but for challenges like the large informal sector that is hard to tax with very few taxpayers compared to the eligible number.

He adds that there is a need to increase the number of tax personnel to reduce the tax officer-to-taxpayer ratio that is currently too high meaning the officials are too stretched ably perform their roles. He was speaking to URN on the 2024/2028 Tax Justice Strategy for Uganda, a plan aimed at helping the advocates achieve their goal of a just tax system for all.

Among others, Mulumba also castigates what he calls political factors, including presidential pronouncements, the attitude of legislators on some government programs, as well as their ability to interpret some laws. Some of the challenges facing legislators regarding fiscal matters include policies that are made at the international and bilateral levels like double taxation treaties.

Mulumba says the MPs many times find themselves at the receiving end of decisions they have not participated in making.

On the other hand, the Tax Justice Alliance Uganda was faulted for not doing enough to bring confidence, trust, and interest to Ugandans to pay taxes. Winfred Anyaiti, from Youth for Tax Justice Network, a pan-African platform aimed at mobilizing the youth to participate in tax-related decision-making, says advocacy has concentrated on increasing revenue mobilization and hardly monitoring its performance. She says there is a need to follow up on how government revenues are utilized, to not only press for proper utilization but also help the public see how their contribution to national coffers is doing.

She says that as the youth, they are pushing for the regional and subsequently continental harmonization of tax incentive policies to avoid related fraud. Anyaiti, for example, says some companies take advantage of the gap by establishing in one country, and after the tax incentives given expire, they move to another country for fresh benefits. She says, that if the EAC countries harmonized their incentive regimes, this would be defeated.

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