11 December 2012

Uganda: Paye Best Performing Tax

Kampala — Pay as you earn - (PAYE) is the best performing Domestic Tax head since the inception of URA in 1992; figures from the Research Planning and Business Development Division of the authority have shown.

PAYE collections for June 2012 for instance surpassed the target of UGX 83.56Bn by UGX 23.28Bn; compared to June 2011there was an increase by 28.09%.

PAYE is withheld at source; that is one's employer. Pay as you earn is a withholding tax directly pegged onto one's income. The Income Tax law defines Employment Income as earnings that accrue to individuals owing to employment - past, present or in future. It includes the value of any benefit, advantage or facility granted to an employee.

Employment income includes wages, salary, leave pay, payment in lieu of leave - i.e. one decides to work during their leave and earns salary, overtime pay, fees, commission, gratuity, bonus and allowances (entertainment, duty, utility, welfare, housing or any other allowance).

Also included are retirement benefits, to name but a few. It is from the summation of the earnings above that employers are expected to deduct PAYE monthly.

Although the tax head has registered significant growth rates over the years, the recent clamp down on ghost employees on the government pay roll and delayed payment of salaries; posted a 15bn PAYE deficit in the October 2012 revenue collections. PAYE figures for October excluded those from the government payroll. There was also the unanticipated reduction in the government payroll by 5, 232 employees due to the clean up exercise.

Moses Kajubi, the Commissioner Domestic Taxes, also attributed the poor PAYE performance in October to non -filing by Non Government Organizations and schools.

"The increase in the threshold from 130,000/= to 235,000/= removed a number of employees from the tax bracket affecting collections because most of them are government workers," he notes.

Kajubi also notes that some employers withhold the tax but do not remit it to URA as required by law.

Non-compliance under this tax head is usually manifested by employers/designated withholding agents who;

•Are not registered for PAYE.

•Do not file PAYE returns.

•Make false or misleading statements through the exclusion of

A.Foreign salaries paid to expatriates in addition to local allowances received from their monthly PAYE Computation.

B.Leave pay, payment in lieu of leave, overtime pay, fees, commission, gratuity, bonus, or the amount of travelling, entertainment, utilities, and cost of living, medical, housing, or other allowance from PAYE computation.

C.Benefits provided by an employer that consist of the use or availability for use, of a Motor Vehicle wholly or partly for the private purposes of the employee.

D.Benefits that include the provision of a housekeeper, chauffeur, gardener or other domestic assistants.

E.Benefits that include the provision of utilities in respect of the employee's place of residence.

F.Benefit provided by an employer to an employee consisting of a loan or loans in total exceeding one million shillings at a rate of interest below the statutory rate.

However, despite these challenges, the PAYE tax head contributes significant revenue to the government coffers. July- September 2012, PAYE collections amounted to UGX, 33867857.14Bn. URA has embarked on its first compliance campaign targeting employers to enable them self-correct on tax matters applicable. The campaign that started in October will run until December 2012.

Other initiatives to improve compliance in PAYE include sharing data with other key partnerships like NSSF to access conclusive information on the number of employees in the country, Sarah Birungi Banage the authority's spokes person has said.

Employers/designated withholding agents who fail to comply become liable to pay the tax along with any penalties and interests. URA accounts for all collections on a daily and monthly basis to the Ministry of Finance, and every year, the Public and Corporate Affairs Division publishes an accountability brochure to highlight what the tax shillings has done. Banage adds that the intensive tax education campaigns which are not only limited to PAYE will inform and empower taxpayers into voluntary compliance.

The writer works with the Media team in the Commissioner General's Office.

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