Annual Press Brief

Period: July 2016 to June 2017

Theme: Making Progress Towards Cultivating A Tax

Paying Culture

1
2
 Performance Insights
In fiscal year 2016/17, URA was asked to collect UGX 13,177.15 Billion based on a set
of macro-economic assumptions. The net revenue collections for FY 2016/17 were
UGX 12,719.63 Billion, indicating a 13.26% growth compared to the same period last
financial year. In real terms, a total of UGX 1,488.76 Billion was the additional revenue
to the treasury compared to the past financial year.
Figure 1: Revenue and tax to GDP trends- FY 2014/15- FY 2016/17

Source: URA Databases, 2017

The overall net revenue collections have averaged at 16.61% growth during the past
three Financial Years. The tax as a percentage of GDP has increased from 12.3 % in FY
2014/15 to 14.05 % in FY 2016/17 registering an increase of 1.72 percentage points
over the three year period. In particular, the tax to GDP ratio in FY 2016/17 has grown
by 0.55%.
Table 1: Revenue generating variables
FY FY FY 2016/17 Growth rate
2014/15 2015/16
Net revenue (UGX Bn) 9,715.6 11,230.87 12,719.63 13.26%

Tax to GDP Ratio (%) 12.3 13.5 14.05 0.54%

Tax to Budget (%) 64.59 66.79 62.26 -4.54%
Tax register(No.) 763,150 902,339 1,029,542 14.10%
Value clients(No.) 147,797 176,942 492,648 178.42%
Source: URA Databases, & UBOS 2017

As I will shortly brief you below, the above sustained revenue mobilization efforts have
been attained amidst the challenging macroeconomic environment.Allow me to
3
 congratulate you the taxpayers for delicately remitting your taxes on time since without
your cooperation, we would not have added the above revenue to thegovernment
treasury. We take the opportunity through this annual press brief to bring to your
attention the factors that affected the previous years revenue collections and
administrative and policy interventions executed during the year.

Macro-Economic Effect on Revenue Performance

Table 2: Macroeconomic assumption used to project the FY 2016/17 revenue
targets
FY FY 2016/17 FY 2016/17
2015/16
Outturn Projection Outturn
Exchange rate (UGX per US Dollar) 3,476.6 3,474.8 3,524.1
Inflation (Headline) (%) 6.6 5.5 5.7

Change in non-fuel imports value (US$) (%) -7.6 9.1 7.1

Real GDP (MP) growth (%) 4.7 5.0 3.9

Growth in Private Sector credit(%) 14.7 16.6 4.0

Source: URA Databases, 2017

Sluggish economic growth: Whereas, the FY 2016/17 outturn was lower than
projected collections by UGX 457.51Billion, this performance was realized amidst
sluggish economic growth recorded at 3.9% against a projected growth of 5.0%. This
led to an estimated revenue loss of UGX 236.69 Billion.It shall be noted that the larger
percentage of the revenueshortfall (82%) was contributed by customs. Most of the top
import yielding items registered a decline in volumes during FY 2016/17.

Table 3: Top Customs yielding imports (tons)

Items FY FY Growth Estimated
2015/16 2016/17 rate revenue
4
 loss(UGX
Bn)
Wheat 497,283 695,700 198,417 68.821
Electrical apparatus for line telephony 2,410 1,965 (445) 34.63
Other footwear 10,607 1,693 (8,914) 23.26
Ethyl alcohol 24,501 23,657 (844) 22.34
Source: URA Databases, 2017

Limited access to credit: During the FY 2016/17, the limited access to credit affected
trade volumes especially in manufacturing and whole sale & retail construction sectors
which are the main revenue generators both for domestic taxes and international trade
taxes. For example, import values in USD were expected to grow at 9.1% but registered
a growth of 7.1% during the FY 2016/17.

Since most of the companies and business depend on credit to conduct businesses and
pay taxes, reduction in private sector credit affected their profitability leading to the
shortfall of UGX 197.15 Billion in corporation tax. It should be noted that limited
access to credit points to the high cost credit and it impacts on corporation tax since
interest payable on these loans is taxdeductible.

Figure 2: Sector profitability

Source: URA Databases, 2017

Constrained aggregate demand

The constrained aggregate demand in the economy affected companies decision.
1
The drop in revenue was attributed to the exemption of Wheat grain from VAT in FY 2016/17
5
Traders decided to warehouse goods or re-export ex warehoused goods which further
affected the customs revenue. For example, re-exported goods registered a growth of
11.37% during the FY 2016/17 compared to a decline of 3.88% during the FY 2015/16.
Goods are mainly re-exported to Kenya and Rwanda.
Further still,the constrained aggregate demand led to cash flow challenges which
worsened revenue collection especially from withholding tax (WHT), PAYE and VAT.
For instance, a number of taxpayers filed returns but made no payments during the FY
2016/17.

Regional Performance
Low revenue performance was not only experienced in Uganda. Customs revenue for
all the revenue authorities in EAC were below target during the FY 2016/17 with the
exception of Burundi Revenue Authority (OBR). Domestic taxes in Rwanda Revenue
Authority (RRA) and OBRperformed above target which was not the case for the sister
revenue authorities.
Looking at the growth rates, the average EACrevenue performance was 11.8% during
the FY 2016/17 with Tanzania registering the highest revenue growth rate while
Burundi registered the lowest.
Figure 3: Revenue growth rates (%)- Figure 4: tax to GDP ratios (%) FY
FY 2016/17 2016/17

6
Source: EARATC Report, 2017

The average EAC tax to GDP ratio was 15.1% during the FY 2016/17 with Kenya
registering the highest tax to GDP ratio while Tanzania registered the lowest.
Figure 5: tax to budget (%) FY 2016/17

Source: EARATC Report, 2017

The average EAC tax to budget ratio was 57.6% during the FY 2016/17 with Kenya
registering the highest tax to budget ratio while Tanzania registered the lowest.

Administrative Achievements in FY 2016/17

As per the URA Corporate Plan 2016-2019 which is premised on three major pillars of
cultivating a tax paying culture through provision of reliable services, leadership
development and building strategic partnerships. FY 2016/17 was particularly the year
we celebrated 25 years of building the nation and we specifically appreciate all
taxpayers and partners that have supported us on this journey.
7
Theinitiatives implemented in FY 2016/17 to ensure that a tax paying culture is
cultivated are presented in each of the above facets.
1. Expansion of Tax Base
Tax Education: Several initiatives aimed at raising taxpayer awareness of the
importance of meeting their obligations and paying taxes were undertaken in FY
2016/17 to educate the public including about tax matters. These included 214 Tax
Clinics, 28 exhibitions, 8 online platform initiatives, 94 editions of tax literature, 22 tax
debates, 16 tax katales, university debates and a regional budget breakfast among
others. We have also introduced serialised publications to continue appreciating our top
taxpayers in their different sectors. So far, education institutions, religious institutions
have been covered among others. The feedback we have got has been good and we
hope this should in the long run foster compliance.
Taxpayer RegisterExpansion Program: In order to penetrate the informal sector,
URA collaborated with local governments, Kampala Capital City Authority (KCCA)
and the Uganda Registration Services Bureau (URSB). Ugandans have voluntarily
come out and registered for tax through Taxpayer Registration Expansion Project
(TREP) and over 110,000 taxpayers have been added onto the URA tax register.
2: Service Management
To ensure that revenue is optimally collected from all types of taxes and taxpayers, we
have provided a conducive environment for all taxpayers to comply through some of
the following initiatives.
Service Centres: URA has implemented services centres in all its stations aimed at
improving customer service and compliance. We have implemented platforms
(telephone, website and email) and arranged events (Face-to-face interviews and
stakeholders meetings) that have allowed our taxpayers to air their views especially
where service standards have not been met. We encourage taxpayers to use these
platforms so that areas of improvement are addressed.
Various Payment Methods: URA implemented electronic systems with numerous
payment methods such as the vending machines like (Payway) and Point of Sale (POS)
for holders of Visa and master cards which have made tax compliance less burdensome.
So far 5,742 and 38 taxpayers used the point of sale and VISA cards respectively during
the FY 2016/17.
Implementation of the Centralized Document Processing Centre (DPC): URA
launched a Centralised Document Processing Centre (DPC) in November 2016 to
effectively reduce the processing and dwelling time at the borders as well as mitigate
against any opportunity that would compromise the integrity of the officers. Since its
8
implementation, customs revenue collections have registered an impressive average
growth of over 20% compared to the average growth of 6.6% in the period before DPC.
Rolled out the Regional Electronic Cargo Tracking System (RECTS): The
Regional Electronic Cargo Tracking System (RECTS) a web-based integrated system
for monitoring transit cargo under customs control from Mombasa to Kigali was
launched to eliminate challenges such as lack of holistic end to end transit monitoring
mechanism that were leading to cases of dumping, delayed bond cancellation and
refund processing.

3: Compliance Management
Audit cases: Managing andimproving overall compliance is one of our most important
goals. To this effect, we carried out 1,908 audits to examine whether taxpayers have
correctly assessed and reported their tax liability and fulfilled other obligations. We
examined taxpayers business records and financial affairs to ascertain that tax reported
and paid by taxpayers was correct and in compliance with laws and regulations. As a
result of this,UGX 68.91 Billion was recovered during the FY 2016/17.
Prosecution
As URA strives to inculcate a taxpaying culture among taxpayers, we shall not shy
away from taking any errant taxpayers to court for prosecution to serve as examples to
other taxpayers who may harbor certain traits of noncompliance in their tax
dealings.This we shall continue to do it in due regard of the law at hand and tax
administration procedures. In this regard, 71 judgements and convictions were secured
during the FY 2016/2017. Out of the 71 judgments, 30 convictions were secured, 33
cases judged in favour of URA and 8 cases judged in favour of taxpayers representing a
success rate of 88.7% achieved during the last FY 2016/2017.
In the FY 2016/17, the Supreme Court ruled during the Rabbo Enterprises case that the
Tax Appeals Tribunal is the Tribunal of first instance in all tax disputes, and cases can
only go to the High Court on appeal. The above Judgment had far reaching
ramifications key among them being that;
TAT will no longer be starved of tax cases to adjudicate.
Secondly, it meant that all parties involved will benefit from the wider expertise
of the Tribunal comprised of accountants, economists, lawyers, etc, and thus issues of
mathematics requiring adjudication/reconciliation will be best addressed by experts in
the area, with matters going on appeal to High Court on points of law only. This will
also help relieve the High Court of case backlog.
9
 Thirdly, given that judgement, Government will be able to collect 30 percent of
the taxes in dispute. Thus, the abuse of Court process where Taxpayers would run to
High Court without paying a percentage of the disputed tax and deliberately delaying
cases (revenue) will be no more.
We applaud the URA team (especially legal and customs) for securing such a
benchmark resounding court victory.
Recoveries from the Debt Collection Unit
The cumulative recoveries made for FY 2016/2017 amounted to UGX 80.68bilion
against an annual target of UGX. 75 Billion representing a performance of 107.5%.
These were recoveries made by our Debt Collection team as a result of enforcement
action taken like issuance of warrants of distress and under the facility of allowing
taxpayers to pay the outstanding tax liabilities in instalments.

Customs Enforcement
Enforcement interventions during the FY 2016/17 led to 6,710 seizures that yielded
UGX 51.56 Billion. Recoveries were majorly as a result of mis-declaration, under
valuation, outright smuggling, other offences and concealment. The top most risky
items included: electrical cables, rice, neutral spirit, garments, chewing gum, textiles,
wines, footwear, motor vehicles and motor cycle spares.
To minimize the above offences, we have implemented modernized system with
sufficient advanced technologies such as X-Ray and CT scanners, as well as a
Centralized Management System with ICT technology. We hope that these scanners
will enhance risk management function and contribute to URAs capabilities to manage
transit supervision and combat smuggling.
Tackling Fraud Schemes
URA also focused on identifying and tackling fraud schemes in order to improve
compliance so as to level the playing field among the different actors. In this regard, 93
investigations were concluded leading to the recovery of UGX 43.34Billion in tax
revenue. Our tax investigation team further reviewed and established the appropriate
input-output coefficients in the manufacturing & construction sectors to bridge revenue
leakages.

4: People Management
Integrity Enhancement Drives: In order to minimize revenue losses and consequences
10
related to corruption such asbiased tax systems, low tax morale and poor services for
taxpayers, weimplemented proactive, preventive, detective and reactive measures
during the FY 2016/17. We have sensitized all our staff on ethics and integrity issues.
We have also engaged taxpayers through external stakeholders workshops, the media,
events and seminars to chiefly address taxpayers rights and obligations, the quality of
service expected, the mechanisms in place for handling complaints, and arrangements
for reporting cases of non-compliance. Workshops were designed for tax advisors,
clearing agencies, the police, politicians (RDCs, DISOs, DPCS, CAOs, town clerks)
and church leaders on their role in improving integrity, and channels for reporting non-
compliance all of which have helped us build anti-corruption partnerships.
As a result of these measures, 44 investigation cases were issued relating to flouting of
procedures, fraud, negligence, corruption and bribery, conflict of interest,
insubordination, abscondment from duty and immorality.

5: Giving back to Society (Corporate Social Responsibility (CSR)

During the FY 2016/17, URA carried out a number of activities to give back to society.
However most prominent of all that is worth sharing is the regional corporate social
responsibility (CSR) day that was on the 20th of September 2016. On this day, all URA
staff across the country carried out various types of social responsibility such as;
visiting the sick in hospitals; cleaning streets, markets and hospitals; providing schools
stationery and text books; visiting childrens homes among others. This was from funds
mobilised from staff and carried out in the respective staff regions of deployment.

Tax Policy

During the budget reading of FY 2016/17, the government made numerous tax policy
pronouncements aimed at, improving revenue collections and protecting government
revenues by closing loopholes in the tax laws and raising tax rates in some areas. Major
areas where changes were made include; Excise duties (on Petroleum products,
cigarettes, ready to drink spirits, cement, motor spirit (gasoline), and sugar
confectionaries), VAT and income tax.

Net estimated revenue from approved measures was UGX 264.5Billion representing
0.19% of GDP.Analyses conducted on policies indicate a total of UGX 361.91Billion
was realised, a performance of 36.8 percentage points above the annual target.

11
Table4: Summary Performance of Tax Measures
Tax Head Annual Target Annual Outturn Achievement Rate
(%)

Excise Duty 181 321.24 177.48

VAT 12 3.22 26.83

Income Tax 40 14.99 37.48

CET Adjustments 10 7.17 71.70

Non Tax Revenue 21.5 14.68 68.30

Adjustments

Total 264.5 361.30 136.60

Source: URA Databases, 2017

During the budget reading of FY 2017/18, numerous policy measures have been passed
such as the reinstating VAT on wheat grain, setting minimum rent chargeable for rental
income tax etc. Estimated revenue from the tax policy changes is UGX 289.67Billion.
However a series of exemptions in the agricultural sector, interest income for SACCOs,
and key professions were also passed expected to spur growth in the medium term
while impacting revenue through the multiplier effect.

Outlook for F/Y 2017/18

The net target for the FY 2017/18 is UGX 15,062Billion. In an effort to collect the FY
2017/18 annual target, URA will harness the investments already made in the previous
FY2016/17 in quality service delivery, emphasizing zero tolerance to corruption among
others. Peculiar effort will also be placed in the implementation of key administrative
measuressuch as:

a) Tax Education Strategy (TES): With the help of USAID, we will improve the
current tax education strategy. An end to end Tax Education Strategy that will include
12
taxpayers inputs will bedrawn to ensure that all media and events bring professionals
together with taxpayers.The TES will ensure that tax education activities are organized
according to taxpayers ability to: attend and benefit from different workshops, access
online information, and use call centres, read printed manuals and guides on tax
compliance. The TES will also develop financial literacy programsand guarantee that
taxpayers are appreciated through various media to encourage voluntary compliance.

b) Risk Management Enhancements: We plan to build a stronger compliance

culture across all segments of the taxpayer population, through a more developed
approach to risk management, as well as a comprehensive joint risk compliance strategy
that will ensure that all taxpayers prone to non-compliance are audited and enforcement
effected.

c) Rental Income Tax Enhancement: As you are all aware, the Minister has been
empowered to determine rental income tax in specific geographical areas and also put
in place other rental income tax management. This is only applicable to persons who
fail to file rental income return or whose return appears misleading. This policy will
target errant taxpayers who have not been filing rental income returns as well the
unscrupulous ones who have been under declaring their rental income. We are currently
profiling the taxpayers through analysis of both internal and external data before we can
come up with the specific area rates.

d) Full roll out of Single Customs Territory (SCT).Toensure that excellent

revenue services are delivered everywhere, all the time at the lowest cost to the clients.
Allow me to inform you that we plan a full roll out ofSingle Customs Territory (SCT)
procedure for all other items imported through Mombasa Port effectiveon 31st July
2017 while those imported through the port of Dare salaam will be done in September
2017. We expect improved turnaround times for transporters; at least 3 round trips per
month from 1 round trip/month before SCT.

e) Implementation of the Electronic Fiscal Devices (EFDs):We plan

toimplementEFD - machines designed for use in business for efficient management
controls in areas of sales analysis and stock control. This will provide a mechanism for
providing daily taxpayer transaction details to URA. Implementation of EFDs will
address a number of challenges and these include; under declaration of sales and profits
non-issuance of invoices, false refunds & offset claims, un traceable taxpayers and
reduction of the LARGE informal sector.

13
f) Enterprise Resource Planning (ERP): In August 2017, we plan to launch an
enterprise resource planning (ERP) module. It is an automated system that manages
financial accounting, stocks and requisitions of goods and items in addition to
managing staff related functions. Managing of the recruitment, accountability,
performance, training and retaining of URA employees will be streamlined leading to
high productivity. Secondly acquisition, management and accountability of URA assets
and tools will improve which will enable us to offer quality services to taxpayers.

g) Strengthening the Effectiveness of International Taxation:As we may be

aware, Multinational enterprises are the largest revenue contributing companies in
Uganda and Africa at large. Research has indicated that they are also the highest-risk
taxpayers because of their aggressive tax planning practices through base erosion and
profit shifting (BEPS) which has jeopardised our ability to mobilise domestic resource.
To this effect, we plan to equip our staff in the international unit with skills required to
effectively handle transactions that involve cross border and intra-group transactions.

h) Upgrade of our Systems: The existing e-platforms will be reviewed to

accommodate all the amendments over the past years and handle increasing business
demands. The systems will have in an inbuilt validation mechanisms that will ensure
the accuracy of the submitted information. Monitoring will be closely done to ensure
full compliance of all taxpayers flagged by the systems.

i) Enhanced Use of Information and Data Analysis: with the support of

USAID, we will strengthen compliance management and minimize revenue leakages
through investing in third party information matching and data analysis. Wewill
continue to invest in staff to ensure that they are equipped with data mining skills to
effectively analysis returns to guarantee that the right tax amount is declared and
remitted across all sectors. Abusiness intelligence module will be added to the e-hub- a
data warehouse with software intelligence and analytics tools toeffectively drive
decision-making. We encourage taxpayers to voluntarily come out and meet their
obligation before our systems flag them up for non-compliance.

j) Events to be held during FY 2017/18: Some of the events lines up for

2017/18 that I would like to bring to your attention are ;

We shall have an Open Minds Forum, mainly focusing on the need for
development of a medium term revenue strategy that is all inclusive. This is slated for
14th August 2017.
We are also planning for a taxpayers appreciation week from the 24 th to 28th of
14
September 2017. We shall be sharing with you details soon.
We plan to give back to society through corporate social responsibility activities
that shall be held on the 18th of October 2017.

Conclusion

The financial year 2017/18 target will require concerted effort from all stakeholders. On
the part of URA, we will continue to invest in efficient systems, quality people and
nonbureaucratic processes to ensure smooth expeditious service delivery. We will
continue to commit to fostering a taxpaying culture through easing the process of tax
compliance. Once again, I thank the compliant taxpayers and encourage others to
follow suit as we DEVELOP UGANDA TOGETHER.
For God and my Country
Doris Akol
COMMISSIONER GENERAL

15