KAMPALA – Uganda Revenue Authority (URA) together with the United Nations University World Institute for Development Economics Research (UNU-WIDER) are hosting the Tax and Development Workshop.
The 2-day conference in Kampala- Uganda brings together revenue authorities and researchers from Uganda, Tanzania, Rwanda, South Africa, Zambia and UNU-WIDER to exchange experiences on using Administrative Tax Data in the respective countries for research purposes.
The collaborative research shows that developing countries have been able to increase their tax revenue in the last decades, but overall revenues have often remained too low to sustain provision of crucially important public goods.
“Small businesses are an important part of the economy and an appealing target group for tax authorities in many of these countries. However, as operate mostly in the informal sector they are hard to catch into the tax net,” analysis indicates.
In Uganda, the informal sector covers half of the economy and only a small fraction of employees work in the formal sector. The study calls for broadening of the tax base by formalizing small businesses as one important step for enhancing domestic resource mobilization in the country.
“Many low-income countries have a dedicated tax regime for small businesses, usually referred as a presumptive tax, in which tax is based on business sales instead of profits. In Uganda, a presumptive tax regime is designed for small businesses who cannot keep comprehensive records of their sales and hence tax liability is calculated from estimated sales.”
Key findings
Data shows that one-stop-shops – where citizens could register for several authorities at the same visit and receive information – were the most successful policy in registration campaigns. They increased the number of taxpayers by approximately 70%
Also, simplified tax return form of presumptive tax doubled the number of tax filers after 2015
“Enforcement services and provision of information in one-stop shops and lowering the compliance costs are the most feasible mechanisms for increasing the numbers of tax filers,” says research.
It indicates that both interventions led to presumptive tax revenue gains as after the interventions more small businesses filed taxes.
Also, it shows that the taxpayer register expansion project (TREP) was highly cost-effective.
Mr. Jacob Abdullah, a researcher at UNU-WIDER underscored the importance of the study because taxpayers in many African countries file for taxes electronically which he said creates information about the taxpayers that can be used to examine how taxation influences behavior, employment in investment, but also how compliance can be enhanced.
He highlighted challenges faced by developing countries including the large informal sector which makes it hard to get the smaller informal businesses to become a part of the tax net.
“Another challenge is that we all know that we would like the bigger corporations that some of the multinationals pay their fair share and there’s a lot going on now in the international tax environment. So for example, the OECD [Organisation for Economic Co-operation and Development] has designed this tubular approach. It’s a big challenge to implement that in the African context,” he noted.
Ms Allen Nassanga – Assistant Commissioner Research and Innovation at URA appreciated the fact that revenue collection has always increased each year although the contribution to the national GDP remains low.
She underscored the importance of collaboration for research purposes which in turn helps them to improve their performance including capping any tax evasions improving tax collections.
“The collaborations also give us a chance to learn from other agencies within these collaborations to share information with other tax agencies….through these collaborations, we share knowledge, and we benchmark what has been done in other revenue authorities,” she noted.
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