The Uganda Revenue Authority (URA) collected sh3.376 trillion against a target of sh3.551 trillion for the first period of the financial year 2012/2013, registering a deficit of sh175.48b.
This was a result of shortfalls on corporation tax, PAYE, VAT and Excise Duty on beer, coupled with low fuel volumes and the decline in the importation of high tax yielding items such as motorcycles, telephone equipment, sugar and beer made from malt.
"The implication of the tax deficit is that the Government has less money to spend because it operates a cash budget," said Sarah Banage, the URA assistant commissioner for public and corporate affairs.
Banage, however, revealed that compared to the period from July to December 2011, there was a growth in net revenue of 15.32% at sh449.13b.
The highlights of the first half of the financial year saw international trade taxes perform at 88.30%, domestic taxes at 100.9%, direct domestic taxes at 99.70% and indirect domestic taxes at 104.14%, while fees and licenses perform at 85.77%.
Domestic taxes collections in that period were sh1.991 trillion against a target of sh1.972 trillion, a surplus of sh19.13b. However, there was a 26.55% growth in collections compared to July-December 2011.
International trade taxes failed to hit the target of sh1.670 trillion as only sh1.474 trillion could be realised, registering a deficit of sh195.34b.
Domestic taxes performed at 100.97%, boosted by VAT from the electricity sub-sector that recorded a sh50b surplus.
"This performance is attributed to the reduction of government subsidies to the electricity subsector, increased enforcement actions to collect arrears and the commissioning of Bujagali dam that pays an average of sh4b per month," said Banage.
The increase in the issuance of Treasury bills and bonds and increase in yields realised withholding tax on bank interest to a surplus of sh40.69b.
"Treasury bills have become a very attractive asset mainly because they are risk free and had an interest growth rate from an average of 7% in 2011 to 17% in 2012. This increment of 10% has positively influenced withholding tax performance," Banage said.
She attributed the sh5.41b surplus performance of VAT on phone talk time and the improved compliance of players in the telecom sub-sector.
Corporation tax experienced a sh13.53b shortfall due to lower than expected banks' performance caused by low borrowing despite decline in interest rates.
The striking off of 5,332 names from the public service payroll as a result of the cleanup exercise led to a reduction of PAYE from an average of sh22b to an average of sh17b per month. Coupled with the increase in thresholds and the keeping of tax bands constant, a sh31.02b shortfall in PAYE was registered.
VAT on beer experienced a shortfall of sh6.46b due to a 9% decline of sales between July and November 2012 compared to the same period in 2011. Excise duty on beer showed a sh5.81b shortfall.
Decline was also registered in the importation of high tax yielding items such as motorcycles, telephone equipment, sugar and beer made from malt.
Revenues for motorcycles registered a decline of 50%, from sh31.35b in July-December 2011 to sh15.34b in the same period in 2012 due to the transition to online Motor Vehicle Registration System, which affected the clearance of motorcycles. The system favours individual clearing. Motorcycles were hitherto cleared in bulk.
Strategies to bridge revenue gap:
In a bid to wipe out the shortfalls in the next half of the financial year, the tax collectors have put in place corrective measures.
"We are going to follow up on recovery of arrears. An average of sh15b per month is projected to be collected through the use of agency notices," said Banage.
The revenue authority is also looking to expanding the taxpayer register by 30%, especially the small taxpayer segment.
To increase information audits on suppliers to the Government, URA has identified 70 companies and sh23b is expected. The tax body also vows to crack down on noncompliant players in the tourism industry.