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KAMPALA - Uganda is mooting digitizing the entire tax system in a bid to cut out tax avoidance and evasion.

This was revealed by Treasury Secretary and permanent secretary to the finance ministry, Ramathan Ggoobi, in a recent televised interview.

“Everybody pays their due tax and as a result of that we shall make Ugandans pay less tax per head but at the end of the day we collect more revenue than now having fewer Ugandans paying and others don’t pay,” Ggoobi said. 

His comments come in the wake of the International Monetary Fund advising that Uganda should prioritize funding of basic infrastructure to achieve a digitally efficient tax system.

According to IMF, the move would be key in supporting revenue administration, as well as transforming the Uganda Revenue Authority (URA) to supporting and satisfying international practices "across the compliance continuum". 

Details in the Uganda fifth review show that the IMF suggests that for Uganda to achieve targeted revenue administration measures, there is a need to focus on taxpayer perceptions and confidence in the revenue system.

This can be done by prioritising funding for basic infrastructure, enhancing the digitalisation and IT strategy, and fast-tracking the implementation of a new e-tax 2 system.

Responding to the review, finance minister Matia Kasaija and Bank of Uganda deputy governor Michael Atingi-Ego, agreed government would abide by the advice during the 2024/25 financial year.

“We will step up implementation of the new e-tax system,” the letter by the government officials noted briefly.

For five years now, Uganda has been implementing a number of digital tax measures.

These include digital tax stamps, implemented by SICPA, electronic fiscal receipting and invoicing solutions, and rental income tax.

The measures have been key in supporting URA to realize targeted revenue collections as well as improving compliance.  

In the run-up to June 2023, a Ministry of Finance report indicated that government had recorded an improvement in tax performance among digital tax stamps-rated goods as well as an improvement in production volumes and sales. 

Details contained in the background to the budget report noted that digital tax stamps had seen an increase in both production and sales with some goods registering increments of more than 80 percent in the year ended 2023.  

URA has previously indicated that increased declarations among digital tax stamps-rated goods had boosted tax collection, rising by 30 percent by June 2023 from shillings 740.79 billion to shillings 963.38 billion. 

The digital tax stamps register also increased during the period, rising from 40 to 1,201 digital tax registered taxpayers, of which 886 were manufacturers while 315 were importers. 

URA also indicated that digital tax stamps had led to an expansion of the local excise duty register, which during the period, grew from 127 to 662 taxpayers.