18 May 2017

Uganda: URA Likely to Miss Target As Economy Bites

Photo: Daily Monitor
A person counting Ugandan shillings (file photo).

Kampala — Government will be forced to get other forms of raising revenue to match its expenditure as Uganda Revenue Authority (URA) is projecting that it will miss the revenue collection target.

According to Ms Doris Akol, the Commissioner General URA, the tax collector is already faced with a deficit of Shs240b in the first nine months to March 2017 of the Financial Year 2016/17. She revealed to reporters yesterday that the tax body is unlikely to meet the collection target of Shs13.4 trillion at the end of the financial year due to a weak economy and low import volumes.

"In the next three months to the end of the financial year, we anticipate collecting Shs2 trillion. However, we may actually be short of the revenue collection targets. This is because the assumptions we made may not be met," she told reporters at a media briefing.

URA in the first nine months (three-quarters of the FY 2016/17) collected net revenues of Shs9.2 trillion against a target of Shs9.4 trillion. The assumptions made at the start of the financial, according to Ms Akol, were the projected economic growth of 5 per cent.

However, twice the Bank of Uganda (BoU) had revised this figure to 4.5 per cent and then later noted that even that may not be achieved. On Tuesday, the International Monetary Fund (IMF), meanwhile, projected that growth will be between 3.5 per cent and 4 per cent, dampening any hopes of better growth figures.

Ms Akol noted that weak economic stance, "... affected the level of economic activity and revenue collections from key performing sectors. The expected impact of this to revenue mobilisation is a shortfall of Shs131.17b." The manufacturing, financial services and insurance and construction sectors have all registered declines in tax contributions because the low aggregate demandreduced production and slow credit uptake. Manufacturing, trade, construction, and real-estate - contribute at least 50 per cent of all revenue - registered negative growth in the nine months to March 2017.

"This thus explains the current plight of customs revenue performance given the dismal performance of trade and the manufacturing subsectors, which are key contributors to the international trade taxes," Ms Akol noted.

International trade taxes have continued to underperform in the current financial year as import volumes continue to decline. Mr Dicksons Kateshumbwa, the commissioner customs at URA told reporters at the same event that international trade volumes were on the decline because there was in part a rise in non-taxable goods like plant and machinery, leading to a decline in excise duty.

For the three-quarters of 2016/17, there has not been a single one where international trade taxes have recorded a surplus or been within the target.

Improved performance

URA will, however, collect more taxes than it did in 2015/16 but it will be below the given collection target.

Domestic borrowing to exceed Shs1 trillion with expenditure expected to rise, the money required to avert the drought and projected supplementary requests, URA revenues will not be able to meet this expenditure.

The option, according to BoU, will be for the government to issue Treasury bill and bonds. This could see the domestic borrowing surpass the Shs1 trillion mark, contrary to what the government had projected.

Already, the government had increased the amount to Shs912b from Shs612b due to revenue shortfalls in the first half of 2016/17.

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