The Finance ministry in Uganda has directed the Uganda Revenue Authority (URA) to urgently address declining revenue and high staff turnover. A letter dated December 7 from Permanent Secretary Ramathan Ggoobi to URA Commissioner General John Musinguzi highlighted a Shs600 billion deficit in revenue collection from July to October in the 2023/2024 financial year. The shortfall is projected to reach one trillion shillings by the end of the fiscal year if comprehensive measures are not taken. The ministry is concerned about potential budget constraints affecting government services.
In the letter titled “Revenue Performance for Financial Year (FY) 2023/2024,” PS Ggoobi pointed out three areas of revenue leaks for URA to investigate. These include deductions and expenses claimed by multinational companies as “others,” practices by commercial banks related to treasury bills expenses, and tax evasion within the informal economy.
The Finance ministry aims to scrutinize the rental income tax regime to establish links between business income, employment income, and funds used to construct rental properties. This initiative responds to concerns raised in a study about formal entities hiding investments in the informal economy to evade taxes.
While specific details about affected budget areas were not provided, the government faces a challenging financial situation with a supplementary allocation of Shs3.5 trillion approved by Parliament on December 7. The revenue deficit contrasts with the government’s commitment to collecting Shs29.7 trillion, Shs4 trillion higher than the previous financial year.
URA officials are expected to present “administrative interventions” to address revenue deficits and high staff turnover in upcoming meetings. The government had previously implemented measures to improve tax administration and fight internal corruption after URA posted a Shs57 billion surplus in the last financial year. The current focus is on widening the tax base to achieve higher revenue collections and reach the government’s target tax-to-GDP ratio of 16-18% over the next five years.
Concerns about multinationals using creative accounting to reduce tax payments have been raised, with the government urging URA to task multinational companies to explain the “others” category in their deductions and expenses claims. Studies by URA and the High-Level Panel on Illicit Financial Flows have identified multinationals as significant contributors to illicit financial flows.
