URA’s missed collection targets

Akol says URA will also focus on international taxation, especially of multinational corporations that contribute 40% of the taxes in Uganda.

“Research has also indicated that they are also the highest risk-taxpayers,” Akol said. She said multinational corporations employ aggressive tax planning practices through Base Erosion and Profit Shifting (BEPS) which has exploited gaps and mismatches in tax rules to artificially shift profits to low or not tax locations.

“They jeopardise our ability to mobilise domestic resources,” Akol said. She added that they plan to equip staff in international unit with skills required to effectively handle transactions that involve cross border and intra-group transactions.

 Tax experts’ views

Finance Minister, Matia Kasaija and supporters of tax exemptions say such incentives are good for attracting investments and growing the tax base and the economy in the long term.  But in separate interviews with The Independent several top taxation experts say instead of looking to tax existing taxpayers more, URA should be looking at ways to innovate and broaden the tax base. Many also said URA needs to understand why tax payers make certain business decisions before rushing to impose new taxes on them.

“Focusing only on already existing and compliant tax payers will be over burdensome given that the economic environment is already tough as it is without higher taxes,” Ronald Kalema, the manager for Tax and Legal Services at KPMG Uganda said.

He said because the economy has been growing slowly, bringing new tax payers into the fold is URA’s best option. He said URA should use data collected through their robust IT systems such as Asycuda and E-tax to expand the tax base.

Kalema said using tax exemptions to attract investment is good but the government needs to take a wider view and include creating a good economic environment and lowering tax rates across the board. He said it has worked for countries like Ireland and Mauritius.  He added that the government needs to strike a balance between its long term focus on investments in public infrastructure with a short term economic growth.

Francis Kamulegeya, the PwC Uganda country senior partner who is also a member of the PwC Africa Governance Board said tax exemptions are not among the top items new investors consider while making decisions. He said it is at number six, below infrastructure, rule of law, corruption, access to financing, and sanitation.

He said URA needs to understand the nature of multinational business before deciding whether or not they are deliberately avoiding taxes.

He said multinationals often operate in multiple tax regimes using a common model. He said this may benefit one tax regime and disadvantage another in terms of discount benefits, quality issues and price.

He said although he sympathises with URA when some tax measure erode the tax base, some tax incentives are intended to make the country attractive to investors in the international arena.

Kamulegeya said the tax exemptions on Bujagali Energy Ltd (BEL) are good because they are intended to lower the consumer power tariffs. He also supported exempting profession bodies because they are not trading entities. He said SACCOs should not be exempted and should pay tax like any other entity that pays interest income on earnings from NSSF, fixed deposit accounts, and investments in government Treasury Bills.

Gideon Badagawa, the executive director at Private Sector Foundation Uganda (PSFU) said tax exemptions will attract more investors with good technology and human resource skills that will create more jobs, pay more taxes, and grow the economy.

He said while the government focuses on infrastructure investment for the long term, it needs to focus on the coffee, tea sectors and other short term ventures to fuel economic activity in the short term and boost tax revenue collection efforts. He said most of these sectors need extension services, SACCOs and Cooperatives.

“We need to look far to avoid registering shortfalls,” he said, “even if it means giving a tax break to investors for a year let it be.”

****