ü  Collaborative research (URA , External researcher&

ICTD)

ü  Supported by ICTD /IDS and Milly I. Nalukwago

ü  Phase I&II

ü  Team: Ronald Waiswa (URA), Patrick Lumala

( U R A ) , S u s a n N a k a t o ( U R A ) & J a l i a

Kangave(External)

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ü  Low tax collections (Uganda has 12.92% tax to GDP ratio compared to 30

-40 % in developed economies).

ü  Poor countries collect very little from the rich.

ü  Capital rich countries (2009) - UK (top 0.5%: 17% ); Germany (top 0.1%:

8%); USA (top 1%: 40% );

ü  Personal income taxes remain largely un tapped in Uganda (Less than 1% in

Domestic taxes annually) .

ü  Income taxes mostly target corporate entities.

ü  They have the potential to contribute significantly to total tax revenue.

ü  These individuals often engage in complex commercial transactions,

ü  The compliance behavior of this group of taxpayers is bound to have a

bearing on the integrity of the tax system as a whole.

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i.  Defining, categorizing and identifying potential HNWIs in Uganda;

ii.  Analyzing the legal and URA administrative strengths and weaknesses in taxing this segment of taxpayers; The second phase will aim at:

iii.  Establishing a threshold that distinguishes these individuals from other taxpayers;

iv.  Developing a comprehensive compliance behavior monitoring plan for this group of taxpayers.

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1.  Interviews. ü  URA officials; Kampala Capital City

Authority; Ministry of finance, Bank of Uganda, Audit Firms, commercial bank, academician in the law school of Makerere University

2. Data matching and analysis, External data & Internal URA data for FY 2011/2012 – 2014/2015; ü  Taxpayer registration details as at January

2015; ü  Tax payments data for 2011/2012 –

2013/2014; ü  Stamp duty payments on land transfers

2012; ü  Audit data 2011/2012 – 2013/2014. ü  KCCA Property register

3. Textual analysis, ü  Domestic laws; ü  Parliament hansards; ü  Academic articles; ü  URA reports; ü  Budget speeches; ü  Newspaper articles; ü  Lifestyle magazines

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Wednesday,February10,16 6

1) There are potential HNWIs in Uganda. These are in all sectors of the economy both private and public. Have multiple directorships (16 directorship in more than 5 top tax paying companies). •  Majority are in whole sale and retail sector but those

with the highest potential are in; •  Financial and insurance services, •  Real estate sector,(88.52 % individuals purchased land of

above 500Mn but paid no income taxes in 3 financial years.) •  Professional and technical services (3 of the 11 billionaires

in the CEO magazine were professionals, 2 lawyers & 1 doctor). •  Manufacturing, •  Construction, •  Public sectors (Accountants, procurement officials)

Sectors No. of taxpayers

Total income tax (Bns)

Average Revenue (Bn)

K-Financial and insurance activities 3 2.17 0.72

L-Real estate activities 4 1.68 0.42 M-Professional, scientific activities 7 2.71 0.39

C-Manufacturing 2 0.67 0.33

F-Construction 1 0.30 0.30

N-Administrative and support service 2 0.46 0.23

J-Information and communication 1 0.15 0.15

S-Other service activities 4 0.21 0.05

G-Wholesale and retail trade; 50 0.92 0.02

H-Transportation and storage 2 0.03 0.02

I-Accommodation activities 2 0.02 0.01 7

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2.) The huge informal sector (49% of the economy) The missing aspect in the definition of informal sector To what extent are large commercial enterprises informal? There is a large informal sector within the formal sector. 3) The politics ( pure economic elites, civil servants, politicians) ü  Politicians and civil servants as business people: schools, hotels,

media houses and land ; Out of 71 officials studied, only one remitted income tax. Companies they are associated with also largely non-compliant; 4) Little aggressive tax planning but massive tax evasion

StrongLegalFrameworkTaxation of Individuals: §  Propertied individuals – rental

tax; §  Professionals – taxation of

directors and partners; §  O f f s h o r e i n v e s t m e n t s :

residence based taxation; §  Additional 10% tax for income

in excess of UGX 120m annually

Legalframework…§  A n t i - a v o i d a n c e r u l e s

( t r a n s a c t i o n s b e t w e e n associates)

§  Penalty regime: non-filing, underpayment of taxes, false or misleading statements and failure to keep proper records;

§  Politically exposed persons: Anti-Money Laundering Act - suspicious transactions and illicit financial flows

Administra6veStrengths•  HNWI segment operationalized

in September 2015 (5 staff); •  52 HNWIs: 11.22Bn •  LTO: top 50 individuals based

on tax contribution and all individuals paying more than UGX 4 billion per year;

•  VIP Taxpayer Segment (1 July 2015): powerful government officials and individuals with potential to influence large masses

Administra6veStrengths…•  Rental Project (July 2014): As

at 2 January 2015, it had added 9,606 properties to the property register BUT still only 14.1% of KCCA register.

•  Ta x p a y e r R e g i s t r a t i o n Expansion Project: By June 2015, TREP had added 47,647 taxpayers to the URA Taxpayer Register;

•  E-Tax System (2009): almost all the tax is collected through e-tax;

Taxation of Individuals: §  Individuals account for 92.5% of taxpayer register;

§  68% employees; 15% business income; 1% rental income and 16% other income;

§  Registration doesn’t necessarily translate into tax payment. In FY

2013/2014, with the exception of employees, only 13% of the remaining individuals on tax register paid taxes;

§  Mismatch between customs duties(8%) and income taxes(<1%). FY 2013/2014: four individuals paid over UGX 1 billion in customs duties but only two paid income taxes. Twelve individuals paid over UGX 500m in customs duties but none remitted income taxes;

§  Enforcement of requirement of directors to file returns (2013). FY 2013/2014 – only 5% directors remitted taxes, some as low as USD $5.38 despite directorship in top taxpaying companies;

§  Sample of top 60 lawyers in the country (International

Financial Law Review). For each of the three financial years studied, less than a third of the lawyers were remitting taxes;

§  Allowances as part of employment income are misused for the

public sector;(funded projects allowances, meetings etc)

§  Relaxation of rules relating to TINs to allow faster system implementation e.g. e-tax requirement for businesses to include TINs of all their employees before using system; However, URA has started with all government workers having TINs

§  Tax clearance certificates for transfers of funds in excess of 2500

currency points outside Uganda; §  Difficulty in implementing provisions relating to taxation of trusts

(largely informal sector).

Mechanisms §  E-tax, ASYCUDA and Sun

Systems; §  Joint Compliance Committee; §  MOUs with other government

agencies and some revenue authorities;

§  Sharing of information under DTAs.

Hiccups §  Silo mentality within URA; §  Limitations on use of systems

within URA departments; §  Third party information: utilization

of information from commercial banks;

§  Different levels of automation – other government agencies;

§  Lack of central management system for MOUs;

§  Accuracy and comprehensiveness of data;

§  Ability and capacity to analyse data

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Targeted at taxpayers

§  Encouraging quasi-voluntary compliance; tax bargains

§  Dealing with non compliance.

Tax education & amnesties; §  Deal with deliberate non

compl iance; consumption taxes, taxing corruption.

URA & Government §  Prioritize individual taxpayers

§  Building tax morale; (account for the tax, equality in taxation, fight corruption)

§  Tackling the problem of the informal sector; Strengthen T R E P, m i n i m i s e c a s h transactions

§  Strengthening the capacity of URA officials (Audit & Analysis)

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Thank you!!!!!!

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