URA urged to overhaul current tax education programme

The Uganda Revenue Authority (URA) has been urged to overhaul its current tax education programme if it is to broaden the tax base and increase the country’s tax-to-Gross Domestic Product (GDP) ratio.

The appeal was made by the Principal of the College of Business and Management Sciences (CoBAMS), Makerere University, Dr Eria Hisali during the dissemination of the “An interrogation of Tax Education Gaps in the Informal Sector and how they can be leveraged in Broadening the Tax Base” research findings, at Makerere University on Wednesday.

While not very many people would want to pay taxes voluntarily, Dr Hisali noted that URA’s current tax education programme is also disconnected from the needs of the informal sector players, explaining why they have failed to be enticed to pay taxes.

“One of the mechanisms that can increase tax compliance is tax education and tax information but the tax education programme in place today is not effective. It can only be effective if it speaks to the different contexts and characteristics of taxpayers, especially the informal sector which we are looking at today.

“Thus, we recommend that going forward, the tax education programme is overhauled or improved to take into consideration the perceptions of the potential taxpayers on a number of things such as the taxes paid vis-à-vis service delivery, perceptions about risks associated with non-compliance and perceptions around the conduct of URA officials,” Hisali said.

While URA has been conducting tax education programmes over the years, they are yet to bear the needed results as the tax-to-GDP ratio remains low while the informal sector has also continued to expand.

The figure

At about 15.1%, Uganda’s tax-to-GDP ratio remains one of the lowest, when compared to the 16% Sub-Saharan average. This is partly due to the big size of the informal sector, which is not taxed.

The informal sector accounts for close to 55% of Uganda’s GDP, according to Hisali.

“The informal sector is expanding and you must thus make efforts to deliberately bring them into the tax bracket. It is also one of the single biggest employers and currently, about 9 million people are estimated to be employed in this sector,” he said, adding that the tax register could be having less than 2 million taxpayers.

Dr Faisal Buyinza, a lecturer at CoBAMS said there is a need for motivation for businesses to formalise and start paying taxes.

“Is there a motivation for businesses to become formal; these are the questions you should discuss before you think about these potential taxpayers being educated to pay taxes,” he said.

He, however, said that the research findings are a good starting point to ask how to expand the country’s tax base by reducing the informality.

The huge tax load that businesses have to pay was also cited as a contributor to informality.

Businesses have to pay multiple taxes including Value-Added-Tax, income tax, local service tax/property tax, trading license, garbage collection fee and street parking, among others, which erodes their income.

URA

The Supervisor, Tax Education at URA, Robert Wamala Lumanyika, however, said that while they welcome the research findings, it overlooked some of the initiatives the tax body is undertaking to improve tax education.

“URA has put in place several initiatives to foster tax education but some of them were not captured by this research especially that to do with the electronic channels we are using to disseminate information to the public.

“We have a lot of social media presence and YouTube. We have a financial literacy programme where we have a door-to-door engagement and we also have serialised TV and radio programmes which are great avenues to tax education,” Lumanyika said.

Maybe the researchers limited their scope but we hope they can expand it to ensure that many other people are captured.

He, however, acknowledged that they need to evaluate the various tax engagement initiatives and assess whether they have delivered the intended results.

About multiple taxation, Lumanyika said that there is need for coordination with the various authorities engaged in the collection of the various levies to agree on a harmonised structure.