DEADLINE LOOMS…As URA grapples with shs2trn revenue shortfall

The plea was made by Ibrahim Bbossa, Assistant Commissioner, Public and Corporate Affairs at URA

The Uganda Revenue Authority (URA) has admitted that if Ugandans refuse to pay their fair share of taxes within two weeks, the Government is not likely to hit its revenue collection target after recording a shortfall of Shs2Trn.

The plea was made by Ibrahim Bbossa, Assistant Commissioner, Public and Corporate Affairs at URA during the East African Community Post Tax and Budget Dialogue FY2022/2023 at Kampala Serena Hotel on Tuesday, 21 June, 2022.

Bbosa explained: “As we end this financial year in the coming 10 days or so, our target for this FY 2021/2022 was Shs22.4Trn and we are optimistic that together we are going to achieve it come June 30th. As of yesterday [June 20], we were at Shs20.5Trn and we need only Shs2Trn to finish this financial year successfully. So for those of you who haven’t been paying, it isn’t too late, there is room to correct any previous mistakes.”

In the FY 2021/2022 URA was mandated to collect revenue to a tune of Shs 22.4 Trn but with hardly 10days to the closure of the FY, the Authority is grappling with a revenue shortfall to a tune of Shs2Trn.

But for three consecutive years, URA has failed to hit its revenue target but the dismal performance hasn’t deterred Government from increasing revenue target to Shs25.4Trn in the 2022/2023 national budget with former Commissioner General URA, Doris Akol in January 2020 when appearing before Parliament lashed out at Ministry of Finance for setting what she described as unrealistic revenue targets for URA.

While reacting to the news of the projected revenue shortfall, Fred Muhumuza lecturer at Makerere University said it isn’t uncommon for governments not to realize their revenue targets but consecutive shortfalls would require a review into their revenue projections, because constant revenue shortfalls affect planning and have an impact on Uganda’s debt portfolio.

“But looking back and noting that shortfalls have been for three or four consecutive years, you may want to come back and say, am I making the right assumptions? Therefore, if every time I set, what is wrong with my estimations?” said Muhumuza.

He said that the 2021/2022 revenue projections were impacted by parameters beyond Government’s reach, where the global economy was disrupted by the Russia-Ukraine war but that doesn’t negate the need by Government to review its projections.

“Those estimations if not correct may misinform the process and you end up over borrowing because now you want to match your revenue, if you have a shortfall of Shs2Trn, you may be forced to borrow because you aren’t able to cut out costs to realize those things for which revenue actualize and that may drive up your debt, that may disrupt your future investment plan because in future you may be spending more money to pay up debt than doing actual investment that give you revenue,” he said.

During the dialogue, Jane Nalunga Executive Director, Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda revealed that revenue shortfalls aren’t unique to Uganda but across the region with EAC countries being forced to tailor their budgets towards accelerating economic recovery and enhancing productive sectors for improved livelihood in the EAC region, but majority of the countries have struggled to collect the much needed revenue resources to finance their budgets.

Nalunga remarked: “Due to the shortage of revenue, East African nations have had to increasingly rely on debt to finance development.  As of October 2020, the region was mired in debts to a tune of US$120Bn. This will likely be worsened by the existing economic shocks. In order to pay off the ever increasing debt, countries have had to increasingly rely on indirect taxes such as VAT which is rather regressive. Countries also take austerity measures where budget allocations to key sectors like education, health, agriculture and social protection are cut in order to repay or finance their budget.”

Nalunga also castigated the EAC governments for failing to intervene in skyrocketing prices of commodities, warning that the reluctance to take action is likely to impact on revenue collections in the coming financial year.

“There is limited awareness and appreciation of citizens on the way governments in the EAC have handled the rising cost of living which is likely to further affect local revenue mobilisation this forcing the governments into incurring more loans to supplement  their proposed budgets,” said Nalunga.

However, some experts have said that even if there are just 10 days left until the end of the Financial Year, URA is able to collect all the Shs2Trn because this is the week that most companies file their corporate taxes.

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