Business
URA to tax government at source
Publish Date: Apr 13, 2014
URA to tax government at source
Keith Mukahanizi, the finance ministry permanent secretary.
  • mail
  • img
newvision

By Samuel Sanya

IN the recent past, teachers and nurses have laid down tools demanding higher pay. Each time this happened, the Government was quick to point to lack of resources. However, it turns out that government departments have a lot to do with the lack of funds.

In September 2013, when James Tweheyo, the general secretary of the Uganda National Teachers Union, led a nationwide teacher strike for a 20% pay rise, government ministries, departments and agencies were unlawfully holding sh131b in unpaid taxes.

This represents 77% of all unpaid taxes and close to 1.3% of the total amount of taxes that the Uganda Revenue Authority (URA) is meant to collect for the national coffers.

The Auditor General’s report for the financial year 2012/13 notes that the amount of unpaid taxes by government departments was sh31b at the end of June 2013.

The eventual sh131b in September was a result of 13 government ministries not remitting Value Added Taxes, Pay-As-You-Earn and Withholding tax. At the time, the National ID project alone, under the internal affairs ministries, was holding sh40b in unpaid taxes.

The Government has approximately 88 ministries, departments and agencies. While most only receive money from fees for services and from budget allocations, some such as the Uganda Electricity Transmission Company Limited and local government engage in business.

Waiswa Abudu Sallam, the URA debt collection manager, says tax collection projections include the private sector and government.

“When government agencies fail to remit taxes, it affects service delivery. It also makes it hard to hit our targets,” he says.

The URA has a tax collection target of sh10.5 trillion. To date, the annual tax collections are off target by about sh270b, partly due to non-remission of taxes from government departments.

He explained that government institutions are meant to collect 6% withholding tax on service contractors that are paid more than sh1m. Additionally, government workers are charged a PAYE tax.

A third tax, VAT, is collected by government departments whenever they charge for services. But Sallam notes that not all government departments have been diligent in remitting the taxes after they are collected.

New policies to limit tax arrears

All payments to government ministries, departments and agencies are now being channeled through the Uganda Revenue Authority (URA) in efforts to cut public sector corruption and increase tax collections.

Payments of police fines, court fines, passport fees and other non-tax revenue have to be done through commercial banks.

An electronic system alerts the URA and the respective recipient government agency the moment the bank acknowledges payment.

A pilot project of the new system in the internal affairs ministries resulted in a 300% improvement in non-tax revenue collections according to Simon Ngabirano, a URA service support officer.

Henry Saka, the URA commissioner domestic taxes, noted that the system cut reconciliation time between the URA and government departments to two days from three months. The error rate also fell to 0.01%.

Non tax revenues have gradually grown to sh130b in the financial year 2012/13, from sh124b four years ago. This year, URA intends to collect about sh274b in non-tax revenues.

While releasing funds to government department for the months of April to June 2014, Keith Mukahanizi, the finance ministry permanent secretary, noted that there are proposals to withhold the tax obligations of the departments and remit them directly to the URA.

“If the proposals are successful, the amount of tax arrears owed to the URA by government agencies will drop,” Sallam says.

The statements, comments, or opinions expressed through the use of New Vision Online are those of their respective authors, who are solely responsible for them, and do not necessarily represent the views held by the staff and management of New Vision Online.

New Vision Online reserves the right to moderate, publish or delete a post without warning or consultation with the author.Find out why we moderate comments. For any questions please contact digital@newvision.co.ug

  • mail
  • img
blog comments powered by Disqus
Also In This Section
Uganda
Uganda oil industry has entered the most crucial and most lucrative phase, energy ministry officials have said....
Kenya
It was a symbol for Kenya's growing well-heeled middle class: a vast supermarket crammed with flat screen televisions, imported wines and chilled cabinets of cheese and meats....
Aviation: Fastjet secures Entebbe, Dar route
FastJet completes the first of many flights between Dar es Salaam and Entebbe, reducing a trip of 12 hours to just over an hour on top of boosting tourism, business and ties between Uganda and TZ....
Private Sector to implement child-friendly business principles
The Ugandan business community has signed up to the implementation of international principles to respect children’s rights, eliminate child labour, provide young workers, and ensure safety of children....
Minister promotes cassava growing
Cassava farmers should add value to their produce to meet the rising demand for the crop in local and regional markets, finance state minister, Fred Jachan Omach, has said....
Parliament set to scrap taxes on agricultural inputs
The House is today poised to adopt a finance committee report that recommended that the proposed 18% Value Added Tax (VAT) on agricultural inputs and equipment be scrapped...
Will early retirement solve Uganda’s unemployment problem?
Yes
No
Can't Say
follow us
subscribe to our news letter