As a result of the sluggishness in economic growth along with significantly low volumes in imported items, Uganda Revenue Authority (URA) registered a revenue shortfall of Shs457bn in the 2016/17 financial year, the Commissioner General Doris Akol said on Monday.
A sum of Shs236bn was lost in revenue following a downward revision in GDP growth to 3.9% from an earlier projection of 5%.
In its annual press briefing held on Monday, less than a month into the new financial year, URA revealed that Shs12.7 trillion was collected in 2016/17 representing a 13.26% growth.
Speaking at the briefing, Doris Akol the URA Commissioner General, said that volumes of imported wheat, petroleum, electrical apparatus and footwear reduced significantly. Consequently, a total of Shs388.1bn was lost in customs revenue.
“Only 26% of the goods imported pay revenue. Wet imports (petroleum) saw a significant drop in volumes from a projected growth of 9% to 1.5%, yet this is our highest revenue earner,” Akol told the press.
She said that an estimated Shs68bn was lost in wheat imports largely due to the VAT (Value Added Tax) exemption on imported wheat, while another Shs80bn was lost in items like electrical apparatus, footwear and ethyl alcohol.
Constrained aggregate demand in the economy affected investment decisions by many wholesale/retail and manufacturing sectors.
Traders warehoused their goods while others re-exported them; further affecting customs. Re-exported goods registered a growth of 11.37% in 2016/17 compared to a decline of 3.88% in the year before.
But Dickson Kateshumba, the URA Commissioner for Customs said that the reinstatement of VAT on wheat imports in the new tax regime will boost imports.
This financial year, wheat imports are projected to grow by 5% earning Shs75bn.
In the same year, projected domestic revenue was equally not met since firms couldn’t remit their corporation tax due to low private sector credit. Low demand for credit affected trade volumes especially in the manufacturing, construction, wholesale and retail sectors.
“Since most of the companies and businesses depend on credit to conduct business and pay taxes, reduction in private sector credit affected their profitability leading to the shortfall of Shs197bn in corporation tax,” Akol added.
Tax to budget ratio dropped by negative 4.54% from 66.79% in 2015/16 to 62.2% in 2016/17 financial year.
Nevertheless, the Commissioner General said that some achievements were posted, including the percentage of tax to GDP which rose by 1.72% from 12.3% in the 2014/15.
Uganda’s tax register also increased by 14% to 1,029,542 tax payers in the last financial year.