Tax collections hit by telecom wars
Sep 26, 2011
TELECOM price wars are undermining domestic tax collections, the Uganda Revenue Authority (URA) warned last week.
By Samuel Sanya
TELECOM price wars are undermining domestic tax collections, the Uganda Revenue Authority (URA) warned last week.
Moses Kajubi, the URA commissioner for domestic taxes, explained that the competition led to a sh24b revenue shortfall in the financial year ended July 2011.
“The decline in average call rates to sh96 from sh395 per minute on the same network calls and a drop to sh204 from sh391 across networks significantly reduced excise duty between June 2010 and March 2011,†Kajubi said at the release of the 2010/2011 revenue performance highlights in Kampala.
Warid Telecom ignited the tariff war last year, changing the mobile market with a vengeance of a wounded lion.
Pushing its mobile calling rates to the bottom of the market to sh5 per second and later, to sh3 for cross network calls and a sh1 per second for calls within its network, Warid cut closer to the bone of its main rivals.
This triggered other networks –utl, MTN, and Zain to cut their call rates too in attempts to maintain their market shares.
However, experts had predicted that the price wars would reach a level, which is not sustainable any more, a global phenomenon.
True to their prediction, hard economic conditions, recently forced operators to revise their call tariffs upwards.
Domestic taxes fell shy of the sh2.9 trillion target by sh89m. However, this was offset by international trade taxes, which recorded a surplus of sh89b.
Total collections for the 2010/2011 financial year peaked at sh5 trillion, 21% higher than the previous year.
The growth in the total collections was attributed to increase in Pay As You Earn (PAYE) collections from the Bank of Uganda, Tullow Oil and Stanbic Bank, which paid out large amounts in employee benefits, gratuity and bonuses.
Dividend yields, management fees, general supplies and the 6% withholding tax on government and company payments also boosted domestic tax collections during the year.
On the other end, collections from Value Added Tax (VAT) on electricity and excise duty on cigarettes and phone airtime recorded combined deficits of about sh172b.
The revenue body has initiated a stringent petroleum truck surveillance programme to minimise fuel dumping and increase tax revenue collections.
Richard Kamajugo, the URA commissioner for international taxes, pointed out that trucks destined for Burundi, Rwanda, and DR Congo are required to park at the Namanve Industrial Park by night and are escorted by daytime.
“Some unscrupulous oil companies were duping us by sending petroleum consignments to non-existent consignees in Rwanda and Burundi before dumping the fuel on the Ugandan market to dodge tax payments,†he said.
Kamajugo noted that the exercise would save the country sh3b in tax collections from the approximate 105 petroleum trucks that move through the country daily.
TELECOM price wars are undermining domestic tax collections, the Uganda Revenue Authority (URA) warned last week.
Moses Kajubi, the URA commissioner for domestic taxes, explained that the competition led to a sh24b revenue shortfall in the financial year ended July 2011.
“The decline in average call rates to sh96 from sh395 per minute on the same network calls and a drop to sh204 from sh391 across networks significantly reduced excise duty between June 2010 and March 2011,†Kajubi said at the release of the 2010/2011 revenue performance highlights in Kampala.
Warid Telecom ignited the tariff war last year, changing the mobile market with a vengeance of a wounded lion.
Pushing its mobile calling rates to the bottom of the market to sh5 per second and later, to sh3 for cross network calls and a sh1 per second for calls within its network, Warid cut closer to the bone of its main rivals.
This triggered other networks –utl, MTN, and Zain to cut their call rates too in attempts to maintain their market shares.
However, experts had predicted that the price wars would reach a level, which is not sustainable any more, a global phenomenon.
True to their prediction, hard economic conditions, recently forced operators to revise their call tariffs upwards.
Domestic taxes fell shy of the sh2.9 trillion target by sh89m. However, this was offset by international trade taxes, which recorded a surplus of sh89b.
Total collections for the 2010/2011 financial year peaked at sh5 trillion, 21% higher than the previous year.
The growth in the total collections was attributed to increase in Pay As You Earn (PAYE) collections from the Bank of Uganda, Tullow Oil and Stanbic Bank, which paid out large amounts in employee benefits, gratuity and bonuses.
Dividend yields, management fees, general supplies and the 6% withholding tax on government and company payments also boosted domestic tax collections during the year.
On the other end, collections from Value Added Tax (VAT) on electricity and excise duty on cigarettes and phone airtime recorded combined deficits of about sh172b.
The revenue body has initiated a stringent petroleum truck surveillance programme to minimise fuel dumping and increase tax revenue collections.
Richard Kamajugo, the URA commissioner for international taxes, pointed out that trucks destined for Burundi, Rwanda, and DR Congo are required to park at the Namanve Industrial Park by night and are escorted by daytime.
“Some unscrupulous oil companies were duping us by sending petroleum consignments to non-existent consignees in Rwanda and Burundi before dumping the fuel on the Ugandan market to dodge tax payments,†he said.
Kamajugo noted that the exercise would save the country sh3b in tax collections from the approximate 105 petroleum trucks that move through the country daily.