How the Uganda Revenue Authority is responding to COVID-19 shocks

The Uganda Revenue Authority is facing a significant revenue shortfall as the fiscal year comes to a close, with reports indicating a deficit of approximately $775.5 million. The impact of the COVID-19 pandemic has been cited as a major contributing factor to this shortfall, but it is not the first time tax revenues have fallen short of expectations in the country. CNBC Africa recently spoke to Vincent Seruma, the Head of Public and Corporate Affairs for the Uganda Revenue Authority, to gain insights into the challenges faced and the measures being implemented to address the revenue shortfall. Seruma highlighted the disruptive effects of the COVID-19 pandemic on various aspects of the economy in Uganda. The international supply chain has been severely disrupted, leading to delays in cargo arrivals from international shipping lines. This has resulted in a decrease in the volume and value of imports, with a notable 20% decline in imports from countries like China. On the local front, businesses have faced reduced sales, particularly in sectors such as tourism, hospitality, and entertainment, leading to challenges in meeting tax obligations. Layoffs and salary cuts have also contributed to a decline in tax revenues, especially in income tax and pay as you earn. The Uganda government unveiled a 45 trillion-shilling budget for the 2021 fiscal year, with domestic taxes expected to finance between 60 to 70% of the budget. Tax revenue is projected to contribute over 50% of the total budget, with an estimated collection target of 21.8 trillion shillings. However, with the current economic challenges brought about by the pandemic, there are concerns about meeting these revenue targets. To address the revenue shortfall and stimulate the economy, Uganda is focusing on initiatives to support businesses and preserve jobs. The Bank of Uganda has lowered credit rates to promote credit uptake, while tax payment deadlines for COVID-affected businesses have been extended to provide cash flow relief. Thresholds for tax payments by small and medium enterprises have been reduced, and penalties and fines have been waived to ease the burden on taxpayers. The Uganda Revenue Authority is also implementing strategic efficiency measures for the financial year 2021, including expanding the scope of goods subject to digital tracking solutions. This initiative aims to monitor production of goods like alcohol, sugar, and cement to enhance transparency and combat illicit trade. By enhancing monitoring and enforcement mechanisms, the authority hopes to improve revenue collection and support legitimate businesses in the market. Reflecting on the previous year's financial results, Seruma noted that the revenue target was set at 20.3 trillion shillings, with a revenue growth rate of approximately 70% as of the current period. With revenue collection standing at around 16.8 trillion shillings, the authority has achieved over 70% of its targets, indicating a performance slightly below expectations. As the Uganda Revenue Authority navigates the challenges posed by the COVID-19 pandemic and works towards addressing the revenue shortfall, stakeholders will be closely monitoring the efficacy of the implemented measures and the overall economic recovery in the country.