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Suppliers to ministries, departments, and agencies (MDAs) of government are now not required to pay value-added tax on their supplies at the time of delivery of goods and services.

John Musinguzi Rujoki, the Uganda Revenue Authority (URA) commissioner general, said Saturday that the move is in a bid to relieve the pressure on suppliers and prevent them from tying up their capital in the event of delayed payment for their supplies.

He said the suppliers can now only pay the tax after getting payments for their services from the government.

Musinguzi made the revelation while appearing on a local talk show.

Under Uganda's tax law, VAT is payable upon invoicing or receiving payment by the suppliers —whichever comes first.

According to Musinguzi, there is a provision in the law for an exemption for people or businesses with a small turnover, for example, sh500 million and below.

He said these can apply strictly upon receipt of payment.

"We agree that it ties up capital but at the same time, this is what the law says, but it was changed for government suppliers recently. Now government suppliers pay upon getting paid," said Musinguzi.

He said, however, that after giving this relaxation to government suppliers, some of them get paid and they don't pay them, adding that they are working to get integrated into the IFMS "so we know when they are paid".

The Integrated Financial Management System (IFMS) tracks financial events and summarizes financial information.

At 14 percent, Uganda has one of the lowest tax-to-GDP ratios in the region, according to analysts.

This has reportedly resulted in an overload of the tax burden on the few existing taxpayers, including salaried earners, through the pay-as-you-earn (PAYE) tax.

However, the government is pushing to bring it to at least 20 percent in the next five years, according to the URA boss.