Domestic Revenue Mobilization
Minister Kasaija: Madam Speaker, at only 13.8% of GDP, our tax revenue effort is very low and inadequate to finance our development needs. Government will therefore boost domestic tax revenue in order to increase financing of the budget from domestic tax revenues. Accordingly, the Uganda Revenue Authority (URA) has been allocated additional Shs 90 billion to enforce compliance.
Non-Tax Revenue and Appropriation in Aid present a potential source of financing the budget. In view of this, all Non-Tax Revenue and Appropriation in Aid shall henceforth be collected by the Uganda Revenue Authority, and be remitted directly to the Consolidated Fund in accordance with the 2015 Public Finance Management (PFM) Act. This will utilize URA’s more efficient tax collection systems. The allocation of these resources to Government departments will be done through the National Budget process.
Madam Speaker, revenue performance this year has been subdued as a result of slow economic growth. Tax collections for the financial year now ending are projected to amount to Shs 12,882.3 billion, against a budgeted figure of Shs. 13,259.32, reflecting a shortfall of Shs. 377.02 billion. The shortfall has been caused by declining import volumes which grew marginally by only 0.79% against a target of 9.1%. This decline is a result mainly of the depreciation of the Uganda shilling. Major tax collection heads reflected this trend with direct taxes on business, employment and property incomes, registering a shortfall of Shs 96.04 billion by April 2017. Despite the tax collection shortfalls I have just mentioned, this year’s revenue performance, however, represents a 13.6 % increase over the previous year.
Minister Matia Kasaija: Madam Speaker, in the forthcoming year and the medium term, Government’s revenue mobilization strategy will focus on enhancing tax administration by building a stronger compliance culture. Tax administration will be enhanced through taxpayer education, strengthening detection of non-complaint taxpayers, recovery of tax arrears and combating smuggling, undervaluation and under declaration. The automation of online assessments and the electronic tracking of transit goods from Mombasa are also ongoing. Customs data will be synchronized with domestic tax returns.
Madam Speaker, the Income Tax Act has been amended as follows:-
i) As an incentive for businesses to invest upcountry, deductions for accelerated depreciation have been introduced. This will allow recovery of costs of acquiring plant and machinery and construction of industrial buildings much faster before the payment of corporate income tax.
ii) To improve compliance in rental income, I will issue minimum rental charges based on location and value of properties, as basis for rental tax for non-compliant taxpayers.
I appeal to all rental income taxpayers to file their returns accurately and on time to avoid paying tax on estimated income and penalties.
iii) The Bujagali Energy Limited has been exempted from Corporate Income Tax as part of the effort to reduce the cost of power;
iv) The income of a body established by an Act of Parliament to regulate the conduct of professionals, such as the Institute of Certified Public Accounts of Uganda and the Uganda Law Society has been exempted;
v) The interest on outstanding tax and the penal tax has been limited to the principal amount to enhance tax compliance. This measure will also apply to interest due as at 30th June 2017; and
vi) The income of a Savings and Credit Cooperative Society is exempted to promote savings.