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KACITA blames URA over narrow tax base

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KACITA blames URA over narrow tax base

New URA Commissioner General Doris Akol

The General Secretary for Kampala City Traders Association (KACITA) Ephraim Sentamu has challenged Uganda Revenue Authority (URA) to scale up efforts in a bid to reduce the number of un-taxed businesses if Uganda’s dream to fund her budget by 100% will ever see the light of day.

Sentamu who is also a former customs officer with URA over 12 years intimated to this Newspaper that the tax body has done little to expand the tax base, include failure to carry out adequate sensitization campaigns with a view to increase compliance expected to ensue in the event that the public comes to fathom the role of taxes in national development.

“Many of the traders evading VAT for examples are simply ignorant of the fact that their URA reimburses their money paid in VAT in the event that they you remit more vat than they pay monthly, ” Sentamu said adding that “Just as URA has a 5 Billion budget for staff training, we expect them to have an equally reasonable budget towards sensitizing the public if they are to ever succeed in bringing as many  un taxed businesses to the taxable bracket  as possible.

Supporting Sentamu’s argument, Aaron Katunzi a tax consultant with Opinion Consultants Ltd, says that Uganda’s tax contribution to the Gross Domestic Product (GDP) is unfortunately among the lowest in the region compared to that of Rwanda, Tanzania and Kenya.

While all the three neighbors boast of the GDP tax ratio of above 15% with Kenya having the highest at 25%,Uganda still languishes at a bare 13%, a record Sentamu fears will take long to change if URA does not wake up and do the needful.

Observers argue that while the informal sector accumulates billions in profits, they escape most of the taxes leaving a huge tax burden to be shouldered by the formal sector resulting into the vicious circle of a non expanding revenue base.  

Responding to this challenge, former URA Commissioner General Allen Kagina shifted blame to the government particularly its legislative arm for lack of political will.

She particularly faults parliament for allegedly frustrating efforts to open up the informal sector specifically agriculture for taxation.

This follows the value added Tax (Amendment) Bill 2014 which parliament recently passed into law exempting business people importing 23 types of agricultural machinery and equipment from VAT from which URA would collect UShs 30bn.

 “Whenever I hear such activism opposing new taxes, I don’t understand whether they understand the importance of paying taxes in every growing economy. For Uganda to be finally economically independent, we Ugandans must be able to sacrifice by paying taxes in order to build for the future” Kagina said angrily while addressing the 8th edition of the open minds forum at the international conference center last week.  

She added: “We can only bring about the desired change through a change of policy. But when we are defeated at the policy level, then our efforts to improve revenue collection get painfully frustrated.”

Sentamu does not spare what he calls government’s lethargy in scaling production for export vis-à-vis imports in a bid to improve Uganda’s balance of trade which he opines, will go a long way in reducing over reliance on revenue from import taxes, a state of affairs which predisposes the economy to sporadic shortfalls which Kagina  herself agrees to.

 Kagina thus said: “We need to get to a point where we are able to fund our budget 100%. And for us to do that, we must invest our resources in productive areas. This now means that we must change our attitudes and be able to suffer today for a better tomorrow.”

Relatedly, the incoming commissioner General Dorils Akol has vowed to leave no stone unturned pursuing the same policy in a quest to achieve a stiff target currently laid before her by the Finance Minister Maria Kiwanuka namely; pushing Uganda’s GDP tax ratio from 13% currently up to 16% translating into 14 trillion by the year 2018.

“I will continue with the policy of efficiency in tax collection and indentfying weaknesses and closing the gaps. There will be a large serving of carrots and URA would dole out some sticks and we will use enforcement for those that do not comply” Akol said while receiving the reins of her new office in Ministry of Finance boardroom last week.

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