Will URA achieve the Shs420bn revenue target from small businesses by 2018/19?

The taxman plans to increase sentisation to meet targets of the program

Last financial year, Uganda Revenue Authority (URA) set an ambitious target to collect Shs420bn from small businesses across the country but preminary performance shows that it is likely  not to be as expected.

Data from the URA shows that it registered Shs47bn in the past financial year and Shs4.5bn in the nine months of this financial year  as revenue from small businesses under the Tax Register Expansion Program (TREP) that was started in Kampala and the municipal councils.

The program involves  URA, Uganda Registration Services Bureau (URSB), the Kampala Capital City Authority (KCCA) and the Ministry of Local Governemnt. It is being implemented under the 2014 Income Tax Act (ITA) amendment in currently 39 Municipal Councils.

The program largely targets the informal sector that makes money in all sectors while not contributing any taxes to governemnt that makes it possible for their businesses to operate on services like roads, water, peace and security.

Doris Akol, the commisioner general at the URA said on May 17 that 187,160 formerly informal businesses have so far been added to the tax register that currently has a total of 996,832 taxpayers.

The prorgam targets businesses with annual turnover of between Shs 50 million to 150 million in turnover.

The new development comes at the time URA recorded Shs 9.23 trillion instead of Shs 9.47 trillion target for the first nine months of this Financial Year, 2016/2017, representing Shs 240 billion as a shortfall.

Yasin Sendaula, the commissioner in charge of urban inspection at the ministry of local government told The Independent that the other taxes targeting turnover of Shs 50 million and below being implemented under TREP include withholding tax and rental tax collected by URA, local service tax, local hotel tax, property rates and trading licenses collected by KCCA and local government.

“So far, the program is moving on well,” he said, adding the biggest challenge is related to system breakdown due to internet connection problems in addition to some well-connected individuals owning unregistered businesses trying to frustrate the program by dodging taxes,” he said.

“We end up spending a lot of money and time trying to sensitise them on the benefits of this program.”

He said this is a common problem in Entebbe and Kiira Municipal Councils.

Sendaula said that their long term target is to register farmers engaged in sugarcane growing, banana farming and ranching and others.

Analysts welcome the initiative

Analysts say that whereas the main objective of TREP is to reduce the informal sector, particularly by identifying and taxing small businesses, the program is likely to result in the identification of businesses that maybe small in terms of physical size, but have huge gross turnovers.

John Mark Agong, the budget policy specialist at Civil Society Budget Advocacy Group (CSBAG) said there is no way a business that consistently records turnover of Shs 50 million, 100million, 200 million can make losses and thus fail to remit taxes every year.

“Sharing a profit with government that is going to make it easy for you to do business in terms of providing roads, water, internet and communication is not bad,”   he said.

‘Killing enterprises’

 However, Katamba (pseudo name), who registered his media and graphics company under the program at the end of last year says the initiative is likely to kill businesses.

“The process of business registration alone costs over one million and there are other costs regarding rent, office equipment…it is hard to start a business and sustain it in Uganda today…. The economy is not good.”

Katamba, however, gives credit to officials manning the exercise on the issue of reducing on the time for registering a business.

He said tax incentives of over two years to business like his should be granted if they are to expand and create more opportunities in the economy.

Katamba’s argument is supported by sections of people who are against TREP.

A female entrepreneur, vending human medicine in Kampala and whose business is transacting under TREP said taxes have forced her to minimise other costs.

“…I am better off not employing many people because I am already incurring costs related to taxes.” She said; “We have complained many times but government never listens to us.”

Agong agrees that some Ugandans are discouraged from paying taxes because of high levels of corruption and the failure by government to correctly link service delivery to areas that contribute taxes to government.

He also said that “our tax system is complex and many businesses don’t understand it.” “It needs to be simplified so that whoever is supposed to pay tax does when they understand it.”

Even Matia Kasaija, the minister of finance planning and economic development does not want to buy into the idea of not taxing a business.

He told The Independent on May 19 that for as longer as a business is making money, it has to be taxed.

“If I don’t tax them, where will I get the money to build hospitals, roads for them,” Kasaija said.

Kasaija’s response clearly represents views of those running government that first proposed TREP some years back and ensured it is inserted in the budget speech for the Financial Year 2013/14.

Going forward

Akol and Sendaula said that they are continuing with sensitisation programs to meet targets of the program.

“We are optimistic that the targets for this program will be achieved,” Sendaula said. TREP targets a total of 412,044 new clients on the tax register by the end of FY2018/2019.

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