The problem of tax evasion, especially by high-net-worth individuals and multinational corporations, has plagued economies for decades.
These entities have historically hidden financial assets across borders, using tax havens and complex legal structures to avoid paying taxes in the jurisdictions where they should be contributing.
This not only undermines public trust in the fairness of tax systems but also deprives governments of critical revenue needed for development and social welfare.
The world of taxation has undergone several monumental shifts, driven by the need to combat tax evasion and enhance financial transparency.
At the heart of this transformation is the Organization for Economic Co-operation and Development (OECD).
Uganda is part of the 38-member countries that came together to create global standards for taxation and financial reporting.
Through initiatives like the Common Reporting Standard (CRS) and Automatic Exchange of Information (AEOI), the OECD is tackling the issue of tax evasion and financial secrecy, which has historically allowed multinational corporations and wealthy individuals to hide assets and income across borders.
In September 2021, Uganda joined over 120 countries in committing to the Automatic Exchange of Information (AEOI), a framework designed to ensure that tax authorities can automatically exchange financial account details of taxpayers who reside outside their borders.
This move represents a crucial step in aligning Uganda with international tax transparency standards, helping to combat illicit financial flows and encourage fair tax practices. Through the AEOI, financial institutions are mandated to collect and report detailed information about their clients, including personal details, account balances, income, dividends, and interest earned on those accounts. The first exchange of information is scheduled to take place in September 2025, marking a new era of tax compliance for Ugandan taxpayers.
The Uganda Revenue Authority (URA) has been working diligently to improve data security and legislative frameworks to support the AEOI.
The implementation of the Convention on Mutual Administrative Assistance in Tax Matters (CMAA) Act, which provides the legal foundation for AEOI, further strengthens Uganda’s position in the global fight against tax evasion.
In addition, the URA has been actively collaborating with the OECD to ensure the safe and efficient exchange of sensitive financial data, as well as to guide Ugandan taxpayers on their responsibilities under the new framework.
Banks, insurance companies, and other financial entities will therefore be required to identify the tax residency of account holders and report their financial information to the URA.
This diligent reporting ensures that Uganda receives detailed information about the assets and income of its residents held in foreign jurisdictions. For taxpayers, this means greater scrutiny from tax authorities, who will now have access to comprehensive financial details from over 120 countries.
The new framework enhances tax administration and monitoring, making it easier for the URA to identify potential tax evaders and bring them into compliance.
Just like other countries, URA introduced a Voluntary Disclosure Program to offer taxpayers an opportunity to declare previously undisclosed foreign assets and income without facing penalties or prosecution.
This programme is now open until September 2025, and provides a unique window for taxpayers to come clean about their financial holdings abroad and avoid the harsh consequences that would otherwise follow the implementation of AEOI.
The programme encourages transparency by offering waivers on penalties and interest, as well as immunity from legal action, giving taxpayers a chance to rectify their tax affairs before the full weight of AEOI takes effect.
It is prudent now that taxpayers ensure full compliance with both domestic and international tax laws by declaring all foreign income and assets accurately to avoid potential legal repercussions.
The new transparency measures are not only designed to catch tax evaders but also to foster a culture of honesty and accountability in tax reporting.
Failure to disclose foreign assets and income could lead to significant penalties and even criminal charges as tax authorities gain unprecedented access to cross-border financial information.
This move towards enhanced tax transparency through the AEOI is a major milestone in the fight against tax evasion and financial secrecy. This is an opportunity for many developing economies Uganda inclusive to build a fairer and more equitable tax system, where taxpayers contribute their fair share to the nation’s development.
However, this also comes with a responsibility for individuals and businesses to ensure that their financial dealings are in order by taking proactive steps in understanding their obligations. There is also a need to review all foreign accounts and assets as the first step toward ensuring compliance.
The time to act is now! Tax transparency is not just a global imperative but also a moral obligation that can lead to a more just and prosperous society for all. The writer is a certified Tax Accountant and an International Tax Advisor