KAMPALA – The Uganda Revenue Authority – URA has announced a substantial growth in revenue of UGX 1,506.83 billion (14.83%) for the first six months of 2022/23 Financial Year compared to the same period last Financial Year 2021/22.
Addressing the press on the body’s half-year performance, URA Commissioner General John Musinguzi Rujoki noted that the although they collected UGX 11,670.03 billion (46.40%) against the expected target of UGX 11,764.83 billion representing (46.78%) of the annual target, there was an increase.
The taxman is expected to collect UGX 25,151.57 Billion out of the national budget of UGX 49,990 Billion.
According to Mr. Rujoki, the wholesale and retail trade sector had the biggest contribution of UGX 3,300.86 billion (27.68%).
Other best performers included the manufacturing sector with UGX 2,702.90 billion (22.67%), the financial activities followed with UGX 1,225.02 billion (10.27%), the Information and communication sector contributed UGX 824.85 billion (6.92%) whereas Public administration, defence, compulsory social security contributed UGX 453.81 billion (3,81%).
PERFORMANCE OF DOMESTIC TAXES
The performance indicates that Gross Domestic revenue collections were UGX 7,470.03 billion against a target of UGX 7,450.71 billion, resulting in a slight surplus of UGX 19.32 billion. This represents a performance of 100.26% and subsequently, a growth of UGX 1,240.35 billion (19.91%) compared to the same period last Financial Year of 2021/22.
The CG also noted that direct domestic taxes registered a surplus of UGX 84.74 billion, Non-tax revenue posted a surplus of UGX 171.08 billion while indirect domestic taxes posted a shortfall of UGX 236.50 billion.
“Major surpluses were registered in PAYE (UGX 225.85 billion), casino tax (UGX 29.33 billion), rental tax (UGX 17.06 billion) and tax on bank interest (UGX 8.80 billion),” he said on Tuesday at the authority’s headquarters.
On the other hand, the performance shows shortfalls in withholding (UGX 63.78 billion), Corporate tax (UGX 59.08 billion), and treasury bills (UGX 39.31 billion).
Mr. Rujoki attributed the Domestic Taxes performance to:
The PAYE performance – due to growth in the wage bill witnessed by companies whose PAYE increased due to increased staff numbers and arrear management recovery initiatives. Bonus and gratuity payments by some companies to their staff also resulted into extra PAYE,
Increase in rental income tax – attributed to enhanced compliance initiatives such as deployment of the Rental Tax Compliance System, intensified field inspections and close monitoring of the arrears rental portfolio.
“Also, this sector is recovering as companies are increasing the supply of prime office space due to the economy’s full operationalization and people returning from the arrangement of working from home,” he noted.
The shortfall in Withholding tax, he says is partly due to reduced budget releases for the various Government entities for Quarter one and Quarter two, preventing them from paying some of their suppliers.
Uganda’s Imports
The country’s imports, according amounted to UGX 15,113.86 billion posting a growth of 19.04% (UGX 2,417.27 billion) compared to the same period last financial year.
“The top imported items that registered an increase were gold, palm oil, medicaments, wheat/meslin, persons motor vehicles, polymers, polyethers, motorcycles, insecticides, worn clothing and rolled iron/non-alloy steel among others,” said Mr. Commissioner General.
“Noticeable reductions in imports were in vaccines, Portland cement, goods motor vehicle, rice, sorting machinery, the flat rolled product of alloy steel, new pneumatic tyres, and other footwear among others,” he said, adding that the top five sources of Uganda’s imports were China, India, Kenya, Zimbabwe and Japan.
Uganda’s Exports
On the other hand, Uganda’s exports to the rest of the world amounted to UGX 4,235.74 billion. This was an increase of 7.13% (UGX 281.75 billion) compared to the same period last financial year. URA attributed the significant growth of exports to improved economic recovery from the COVID-19 pandemic.
Accordingly, the top exported items were; coffee, tea, beet sugar, iron/steel bars, wheat/meslin, salted/dry fish, mineral waters, other manufactured tobacco, grain sorghum, brans/sharps, other residue Viner sheets among others.
Rujoki noted that a decrease in exports was registered in fish fillets, mushrooms, cocoa beans, milk and cream, rolled iron/non-alloy steel, dried leguminous vegetables, articles of plastics and beauty make-up.
The country’s 5-leading export destinations were South Sudan, Italy, DRC, Kenya, and Germany.
Uganda’s Re-exports
Also, Uganda re-exported items including; palm oil, bulldozers, goods motor vehicle, persons motor vehicles, wheat/meslin, bread/pasty cakes, tractors, prepared tomatoes and petroleum oils among others whose contribution amounted to UGX735.15 billion, registering an increment of 8.99% (UGX 60.02 billion) compared to same period last financial year.
The Commissioner General also launched the new Client Relationship Management system – a tool intended at helping the body improve its client dialog, build a high-performing organization and enhance the culture of accountability and integrity.
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Other sectors
PERFORMANCE OF CUSTOMS TAXES (INTERNATIONAL TRADE)
Gross International taxes collections from July December 2022 were UGX 4,453.85 billion against a target of UGX 4,563.95 billion, representing a performance of 97.59%.
Whereas the customs tax collections were UGX 110.10 billion below the target, there was a realized growth in revenue of UGX 377.73 billion (9.27%) compared to the same period last financial year.
Surpluses were registered in; import duty (UGX 23.75 billion), sur- charge on imports (UGX 1.06 billion) and Temporary Road License (UGX 16.10 billion).
However, shortfalls against the target were registered in the following tax heads:
- Petroleum duty by (UGX 69.80 billion),
- Excise duty by (UGX 21.95 billion),
- VAT on imports by (UGX 42.89 billion),
- Withholding tax by (UGX 8.80 billion),
- Infra-structure levy by (UGX 5.68 billion)
- Export levy by (UGX 1.90 billion
Key highlights and reasons for Customs Revenue Performance
1 The good performance of import duty is attributed to an increase in imports of goods that attract import duty. For example; personal motor vehicles increased by UGX 113.06 billion, worn clothing increased by UGX 29.39 billion, palm oil increased by UGX 97.30 billion, wheat/meslin increased by UGX 170.46 billion, motorcycles increased by UGX 40.98 billion and petroleum oils increased by UGX 17.80 billion among others.
2 The surcharge on imports was due to the increase in tax paid by key imported items like; personal motor vehicles by (UGX 3.69 billion), worn clothing by (UGX 2.74 billion), passenger motor vehicles by (UGX 0.12 billion), motorcycles by (UGX 0.05 billion) and electric space/water heaters by (UGX 0.01 billion)
3 Performance of petroleum duty was affected by reduction in diesel and Kerosene fuel import volumes by 8.07% (41.54 million litres) and 9.79% (2.46 million litres) respectively. Much as there was overall growth in fuel volumes by 4.2% (45.68 million litres) precipitated by growth in petrol by 12.98% (63.87 million litres), this didn’t offset the decline in diesel and kerosene.
In addition, petrol stations did not perform as expected because of the importation of fuel through Tanzania in preparation for the August 2022 election in Kenya. The fuel was purchased expensively due to the increase in the cost of transportation but had to be sold at a loss as the international oil prices declined during the same period, which affected the profit margin. This created a contraction behaviour in the subsequent months.
4 Other shortfalls in international trade tax collections were due to major decreases in the tax yield registered in imported goods like; goods motor vehicle, Portland cement, new pneumatic tyres, beet sugar, a flat rolled product of alloy steel, iron/steel bars and un-denatured ethyl alcohol among others.
5 Increase in the import goods that enjoy preferential treatment and exemption like; the semi-finished product of alloy steel worth UGX 82.83 billion, other furnishing articles of UGX 82.87
billion and cleaning/milling machinery worth UGX 38.44 billion among others that paid less than expected revenue.
Twenty sectors registered growth in revenue compared to the same period last year as shown below.
a) Wholesale and retail trade; repair of motor vehicles and motorcy- cles and Manufacturing registered the highest absolute growth of UGX 289.54 billion (12.00%) and UGX 269.85 billion (8.90%) re- spectively.
b) The arts, entertainment and recreation sector had the highest pro portionate growth of UGX 69.60 billion (186.25%).
c) The Education sector with UGX 65.58 billion (47.73%).
d) Construction sector with UGX 86.25 billion (44.13%).
e) The biggest decline was in the Mining and quarrying with UGX 10.70 billion (7.06%) and the Information and communication sec- tor with UGX 56.12 billion (6.37%).
With the recovery of the economy from the global COVID-19 pandemic, the arts, entertainment and recreation sector, accommodation and food service activities sector and construction sector have continued to register significant growth.
The growth in the arts, entertainment, and recreation sector, was mainly due to gambling and betting activities that grew by UGX 35.25 billion (86.69%) and the creative, arts and entertainment activities by UGX3.37 billion (52.68%),
The growth in the accommodation and food service activities sector is mainly from short term accommodation activities that grew by UGX 27.70 billion (78.05%) and Botanical and zoological gardens and na- ture reserves activities with UGX 12.25 billion (328.44%) compared to the same period last financial year.
Administrative Interventions applied in the period under review important to note is there were no new policy measures introduced by Government to increase revenue yield, but rather the expected revenue growth is to come from administrative measures that will enhance compliance, improve processes, and boost the effectiveness of tax ad- ministration.
During the period under review, the measures implemented included taxpayer segmentation, taxpayer register expansion initiatives, filing ratio monitoring, arrears/debt management, litigation, tax compliance investigations, and enforcement operations, as detailed below.
Expansion of the Taxpayer register
At least 449,975 new taxpayers have been added to the taxpayer register during the period representing a growth of 17.19% against a targeted growth of 8.50%.
By 31st December 2022, the taxpayer register had 3,067,983 taxpayers. Of these, 180,486 were non-individuals and 2,887,497 were individual taxpayers.
The registration performance is attributed to key initiatives like tax education and sensitization. Taxpayer Register Expansion Program TREP), Analysis of Data, stakeholder engagements and usage of the Tujenge Uganda mobile tax offices to reach our taxpayers.
Segmentation of taxpayers
Segmenting taxpayers as a compliance technique improves taxpayer behaviour analysis, risk management, and tax liability tracking. It also enables URA to provide tailored service delivery to distinct tax- payer segments and target-specific compliance tactics that ease revenue collection.
Consistent Arrears Management
This compliance strategy mainly involves ledger reconciliation, tax- payer clearance, certificate verification and agency notice issuance.
The total arrears stock as at end of December 2022 was UGX 4,698.28 billion, of which domestic tax arrears portfolio was UGX 4.228.12 billion while customs arrears portfolio was UGX 470.16 billion.
The total recoveries for the period of July to December 2022 were UGX 561.95 billion.
Enforcement Interventions
Customs country wide enforcement operations during the period of July to December 2022 led to a recovery of UGX 57.21 billion because of 5,734 seizures. From these seizures, 4,503 were from dutiable goods and 1,231 were from non-dutiable goods. Revenue recovered from specific offences was as follows:
Under-declaration at 40.71%;
Other offences at 32.85%;
Misdescription/false documentation at 13.58%
Undervaluation 4.04%;
Outright smuggling at 5.98%;
Misclassification at 1.55%;
Concealment 1.30%.
The most at-risk goods were: assorted items, garments, footwear, textiles, motor vehicle spares, hair, hardware, used Items and bags.
Tax dispute resolution
From July to December 2022, UGX 59.79 billion was recovered from tax dispute resolution mechanisms against a target of UGX 40,00 billion hence a performance of 149.48%
The investigations division utilised several compliance enhancement measures, including intelligence gathering, investigation, information sharing, scientific analysis, and forensic document inspection, to detect, prevent, and deter tax fraud and systematic noncompliance tendencies.
As a result of these efforts, eighty (80) cases involving UGX 98.84 billion in recoverable revenue were closed as analysed below:
Implementation of EFRIS and DTS
URA has been able to onboard new taxpayers and enhance taxpayer declarations due to the full implementation of the Digital Tax Solution/Stamps (DTS) and increased enforcement efforts.
There are now 957 clients on the DTS register, representing 751 manufacturers and 206 importers. More inspections are being performed to bring in more customers. This leads to increased Local Excise Duty (LED) registration and consequently improved declarations.
The compulsory adoption of the Electronic Fiscal Receipt and Invoicing Solution (EFRIS) has increased VAT compliance and enhanced taxpayer declarations. Additionally, URA is now better equipped to verify taxpayer declarations and rectify any discrepancies it uncovers. As at 31st December 2022, the total EFRIS register stood at 57,588 taxpayers out of which 31,890 are VAT-registered taxpayers and 24,455 not VAT registered. Effective 1 Feb 2023, we shall launch the deployment of EFRIS APP on desktops, this will greatly enhance the roll out of EFRIS. The mobile APP is also under development and will soon be released.
OUTLOOK FOR THE SECOND HALF YEAR (JANUARY – JUNE 2023)
The revenue target for the second half of the financial year is UGX 13,386.74 billion, which accounts for 53 22% of the annual target of UGX 25,151.57 billion. Below are the key initiatives that we will continue to pursue,
Tax education & sensitization
URA is rolling out a holistic approach to tax education that teaches taxpayers about their rights and responsibilities, tax laws, opportunities of compliance and the consequences of noncompliance.
This will be achieved through taxpayer engagements, sector-specific outreach programmes and dynamic communication platforms, such as TVs, radio stations, and tax bazaars. The Mobile office (Tujenge Uganda buses) is our most recent approach to providing Taxpayer Education and Registration in hard-to-reach areas. Currently, the URA operates two buses for tax education and outreach, with intentions to acquire two more soon.
Continued roll out of Technology and use of Data in revenue collection.
The authority will continue the roll out and support of key technology initiatives like EFRIS and DTS, Non-Intrusive Inspection (NII), Automated Integrated Warehousing Information Management System (BWIMS), Rental Tax Compliance System to improve revenue collection and close revenue leakages. The analysis and use data internally generated and from third-party sources, will continue to guide all our decision-making.
Skilling of Staff, Performance Management and Integrity Enhancement:
We shall continue and intensify our staff skilling programs in all the technical areas of taxation, establish a new performance and zero-tolerance culture towards corruption. All these initiatives have already been rolled out but will continue to be ingrained in our processes until they become part of our new culture.
Stakeholder collaboration and engagements
URA will also continue to engage with the Business Sector, Civil Society, Religious Leaders and Government stakeholders to harness each other’s strengths in attaining our targets. Information exchange, system integration, and capacity building are essential areas of collaboration in these engagements.
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