6 December 2012

Uganda Tax Regime Second to Rwanda in the Region

Uganda is second only to Rwanda in the East African Community in the latest edition of the Paying Taxes Index.The index generated by the accounting firm, PwC and the World Bank, measures the average taxes paid by companies and how easy it is to comply. In its eighth year, the index is also used as a measure of how easy it is to do business.

Uganda was ranked 93rd out of the 185 countries polled, while Rwanda was ranked 25th, Tanzania 133rd, Burundi 137th and Kenya 164th.

"The reforms implemented by the Government have been positive and as a consequence, it is hoped that next year's results will reflect this trend by showing some improvement in the number of hours and the payments indicator," PwC senior partner Francis Kamulegeya said during the release of the report last week.

Reforms include the electronic filing that the Uganda Revenue Authority (URA) piloted in 2009 and has been rolling out.

On the section on Uganda, the report does not foresee a removal of any taxes, given the ever increasing targets the Government sets for URA.

"The Government is looking to collect 68% of its funding requirements for the financial year 2013 from domestic sources, with tax revenue contributing 97%," the report said.

According to the report, the total tax rate in Uganda stands at 37.1%, which includes taxes on profit, labour and other taxes companies pay, while it takes 213 hours in a year to comply and involves 31 payments.

Rwanda has 17 tax payments, it takes 134 hour to comply and has a total tax rate of 31.1%.

The United Arab Emirates topped the index, with four tax payments, taking 12 hours to comply with and for a total tax rate of 14.9%.

The PwC study points out that the higher the tax rate and the complexity of paying taxes, the slower the economy grows.

"In economies where action was taken to reduce complexity in tax administration ‑ both in terms of the number of payments and the time taken to deal with tax matters - have registered a positive change in economic growth," the report read.

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