Prior to 1991, tax revenues remained significantly low and were inadequate to support the financing of government programs.
The tax base was narrow and the tax to GDP ratio was only 4 percent by 1989 and the composition of tax revenue was predominantly imports dependent. Over 60 percent of the total tax revenue was collected from taxes on imports with domestic taxes contributing less than 40 percent.
This state of affairs was attributed to a number of factors, mostly policy related like a small taxable component of GDP. The public sector then was much bigger than the private sector and yet contributed very little to the tax base. The private sector which was dominated by subsistence agriculture (about 60% of GDP) had low revenue productivity.
In addition, the commercial sector was largely informal and difficult to tax. Tax laws were characterized by wide ranging exemptions which further eroded the tax base. The tax laws also provided extensive discretionary powers to the Minister of Finance to grant specific exemptions, rendering the system highly vulnerable to tax avoidance schemes.
On the other hand, tax rates and tariffs were generally high and prohibitive to taxpayers. This weakness in the laws fueled corruption in tax administration because of the subjectivity in the provisions regarding tax administration. In a bid to mitigate all these challenges and to improve revenue performance, URA was formed.
Revenue collections since then increased from UGX 180.46 billion in the FY 1991/92 to UGX 1,075.15 billion in the FY 2000/01. On average, revenue grew by 24.04% annually in the period 1991 to 2000. The Tax to GDP increased from 6.83% in the FY 1991/92 to 10.44% in 2000/01. After stagnating between 11% and 12% for the previous 20 years from 2001 to 2021, as a nation we are at 13% of our tax to GDP which is not enough.
For us to develop we need to at least collect 20% of our GDP and with the right technologies, initiatives, tax education, simplification of tax processes.
This is progressing. URA has currently instituted a number of measures to ease compliance of taxpayers. Some of these include; Automation of tax services; processes including registration, filing tax returns and payments with the intention of simplifying tax compliance, improving staff integrity, strengthening information management and increasing on revenue collections.
Customs processes are also automated in the Automated System for Customs Data (ASYCUDA) World. Various tax payment platforms such as banks, mobile money, point of sale machines, Payway, Visa have also been implemented.
Adoption through the use of mobile tax offices (the Tujenge bus) to increase the accessibility of our services in areas where we do not have a permanent office. In addition to the bus, we have also developed and published tax content, conducted stakeholder engagements, serialized tax drama, radio and television awareness, tax clinics, schools and university outreaches so as to bridge the tax gap.
We have created more tax offices in all major towns and 44 OneStop Shops to take our services closer to the people we serve. Through technology, URA has intensified intelligence guided operations leveraging the use of Non-Intrusive Inspection technology at the border points and field intelligence enforcement operations. We have deployed scanners at the different border points to improve business efficiencies and combat revenue leakage in international trade.
With the increase in automation of services, staff have the ability to handle tasks and serve taxpayers better. They are regularly equipped with skills and knowledge in systems effectiveness and customer care. Currently our focus is also on the improvement of key technologies such as the eTax System (core tax administration system), Electronic Fiscal Receipting & Invoicing Solution (EFRIS), Digital Tracking Solution (DTS), Bonded Warehouse Information Management System (BWIMS), use of scanners at border points to improve business efficiencies and combat revenue leakage.
As an institution, we have rolled out a needs-based taxpayer education strategy to equip taxpayers with the relevant knowledge of their responsibilities, rights, obligations to tax, and the importance of business formalization. In many of our engagements with taxpayers, we have realized that most of them are willing to pay but lack basic tax knowledge like which tax head to register and how it is computed.
URA also leveraged on partnerships with key stakeholders, especially in information exchange and third-party data integration and analysis, to identify unregistered persons to expand our taxpayer register and assess tax accurately. Despite continuous tax education and automation of processes, there is still low contribution to our budget. We only contribute 50 % and source the other half from borrowing, which usually comes with many unfavorable conditions, including a significant burden of interest.
The low morale among taxpayers is partly attributed to; low levels of trust in government, corruption, poor spending practices, unfair taxation where some are not paying their share because of their connections to or roles in government. Challenges notwithstanding; all Ugandans have a civic duty to perform to help fund critical aspects of Uganda ‘s social amenities ranging from schools, roads, hospitals and the nation ‘s military. However, this can only be made possible with an improved social contract between the taxman and taxpayers for improved revenue collected.
According to the Poverty status report, Uganda has also witnessed significant economic growth in the past years and this is visible in the vibrant economic activity in our major urban and peri- urban areas. The results of improved livelihoods of our people are also visible in the number of people living below the poverty line.
Therefore, it is incumbent on all Ugandans to comply with their tax obligations especially those who are engaged in profitable economic activities that are key to supporting Government‘s expenditure programs and priorities. This way, our country will be delivered from dependence and borrowing.