Uganda Revenue Authority – Prime Time Communications

Out to Lunch

#OutToLunch: High temperatures and what districts could learn from Buganda

By Denis Jjuuko Kampala used to be known as the city of seven hills but that was long ago. As the city expanded, so were the hills. If you get a chance to stand at the top of some of these hills, you will see many more hills in now what is considered the greater Kampala metropolitan area. Many people are increasingly settling onto these hills. It can be spectacular and probably a future source of tourism revenue for enterprising business people. All they need is a good high-rise structure on which telescopes could be mounted for people to see what Kampala has got to offer. The problem though is that some of these hills may end up embarrassing us. Take the example of a hill that you face when driving from Masaka to Kampala. Around Maya, you will face the Nsangi hill, full of houses that explain our lack of proper planning. One house faces this side, another faces the other side. One is multi-floors and another is the size of a poor man’s single room hut. But they all have one thing in common— a lack of trees. At least the original seven hills that formed Kampala have lots of trees. The ‘new’ ones? Something needs to be done. They were all originally well treed. Then land entrepreneurs showed up with graders. Cut down the trees and subdivided the hills into plots measuring 50×100 feet in size or less. They heavily advertised them as “organised” housing estates. Kampala’s middle class rushed to acquire them and started competing on who puts up the ugliest structure. Some built houses almost the size of the entire plot leaving absolutely no space to plant a tree or even some grass. The hills have ended up of what one once called a concrete jungle! Outside Kampala, forests were cut down for timber and charcoal and we didn’t think much of replacing the trees. Certainly, we had never heard of sustainable logging. Deplete everything and blame some faceless mafia. The trick works on the masses. That perhaps explains the high temperatures we are experiencing in Kampala and across the country today. If you drive through the countryside where the significant majority of the population depends on rainfed agriculture, a hunger crisis looms even though this is expected to be the dry season. Although harsh weather events or even changes in the climate that affect Ugandans can’t be entirely blamable on Ugandans, there is much that we can do ourselves. One of the easiest things to do is planting trees, many of which wouldn’t require much effort to grow. Perhaps the tree should be one that offers benefits to people regularly such as fruit trees from which income could be derived. The people at the helm of Buganda Kingdom understood this and initiated a tree planting plan at every betrothment (kwanjula) and last funeral rites ceremonies and this could further be escalated by the district local governments. At least in urban areas, everyone who builds a house is supposed to have an approved architectural plan. Urban planners should ensure that each plan presented for approval has trees as part of it. And before occupation permits are issued, there must be trees already planted. When urban authorities visit rental properties to determine and/or collect property service tax, they should check whether the trees exist and if not, a penalty could be administered. The Uganda Revenue Authority could do the same when collecting rental income tax. Where commercial building in the city can’t have trees, they can commit to maintaining trees on the streets on which they are located or a nearby public park. Failure to do so, they would receive a penalty. Real estate dealers who subdivide land into the so-called organised housing estates would be required to plant trees along the main roads within that estate as part of their license and this could be done well before the land is sold. No trees planted; no land titles issued. The land registry would have to work with the district local governments on this. Those who buy the land would be required not to temper with the trees. They can only maintain them. Enforceable penalties for those who fail to adhere to this. Of course, for this to work, the districts and urban authorities would have to be intentional with supervision to ensure compliance. It should not be too difficult to enforce. The writer is a communication and visibility consultant. djjuuko@gmail.com

March 27, 2025

Out to Lunch

#OutToLunch: Reintroduction of annual car license is counterproductive

By Denis Jjuuko There are new tax proposals for the next financial year that have caught the eyes of many. One is the introduction of a 12% tax on internet bundles. Apparently, the Over The Top (OTT) tax charged on social media isn’t that successful. Either the number of people who use social media had been exaggerated before the tax was introduced or there are many people using Virtual Private Networks (VPNs) to bypass the tax. But I guess everyone who is in the business of tax collection knows that for one to realize significant revenues, it must be easy for people to collect the tax in the first place. Once a tax is cumbersome to collect, the collector will face serious hurdles in doing their work. Also, people will naturally use such hurdles to dodge paying the tax. Yet the proposal to scrap the OTT tax I thought had taught our tax collectors some important lessons. In the same documents seeking to scrap the OTT tax, there is a re-introduction of the annual vehicle license. Many years ago, the tax collector rightly argued that collecting annual license fees from motorists was cumbersome and there were many loopholes. The right thing, the argument at the time went, was to put this tax on fuel. So every time you fueled the vehicle, you paid your annual license fee. This tax was easy to collect. It was cheap to do so as well. Instead of putting road blocks to check if cars had valid annual licenses, the tax collector simply ensured that petroleum companies remitted the money. There are fewer petroleum companies than vehicle owners and they risked being banned and their assets sold if they didn’t comply. Previously, many annual license certificates were made on Nasser Road while some people comfortably bribed those manning the road blocks. Although there is technology now to ascertain whether a license is genuine or not, I believe that Uganda doesn’t have the resources to enforce this kind of tax collection at the moment. Many vehicles on Ugandan roads aren’t road worthy or don’t even have the proper paper work like third party insurance but they freely move on the road. Many people in Uganda don’t have driver’s licenses. The police simply can’t fully enforce this. Uganda Revenue Authority’s law enforcement won’t be able to monitor the roads for valid annual road licenses. So if collecting OTT where technology can easily be deployed to enforce it has failed, how will the annual vehicle license be collected? Will the levy on fuel be scrapped? Or it is a case of double taxation? What has really changed over the last few years since it was scrapped that now it is important to put it back? How much will the government spend on collecting this tax? There was a time when telecoms charged monthly service fees. They realized that this was a barrier to entry for many users and scrapped them. They still charge us service fees but we don’t notice it as it is embedded in the airtime fees we pay. That way, they have been able to significantly grow the number of users. There aren’t very many vehicles in Uganda. There are less than 500,000 units. Outside a 100km radius of Kampala, you hardly see any cars on the road. The reason Kampala has a lot of vehicular traffic is because we don’t have public transport to write home about. The roads are potholed and narrow creating an impression that there are many cars in Uganda. On average each private car in Kampala carries only two people. Transport is a key factor that facilitates economic growth. The re-introduction of annual vehicle licenses will increase the cost of doing business thereby impeding other areas that URA should be keen to tax. When the cost of doing business is high, there are reductions in the income taxes that URA will be able to collect. Workers’ earnings will be cut thereby creating low purchasing power. With low purchasing power, the economy will shrink and the tax collectors will realize less taxes. The government’s efforts, therefore, should be on growing the economy and widening the tax base not to overtax the same things such as vehicles. Government should be interested in seeing that we have an effective urban public transport system that can reduce the expenses of workers so they can spend their savings elsewhere on stuff that keep factories running and shops open. The writer is a communication and visibility consultant. djjuuko@gmail.com

August 23, 2021

News

#OutToLunch Ongoing URA changes should address SME challenges

By Denis Jjuuko Over the weekend, several senior managers at the Uganda Revenue Authority (URA) tendered in their resignations ostensibly to pursue other careers. Social media as is usually the case went overboard with some people claiming it was a purge that the officers didn’t choose to resign rather forced to do so. URA issued a statement saying the board made recommendations concerning the “reorganization and management” but “some senior officials chose to resign and the board accepted their resignation.” There is nothing new in mass resignations in organisations following an appointment of a new boss. However, what concerned me was the statement, which talked about “reorganization and management of URA” though my concern isn’t merely in the personnel, those can always be replaced. The way URA works is what needs to change and I hope the “reorganization and management” will consider small and medium enterprises (SMEs). There is a need to change or push to change the many taxes that end up strangling small businesses. The income tax rate is at 30%, excise duty at 15%, withholding tax at 6% and VAT at 18%. All these taxes may be fine for large organisations, but for small companies, they are a death sentence. So imagine a company that gets a Shs100m contract, runs to the bank to get a loan to execute the assignment and the loan is granted at 24%. If they pay all those taxes and the interest fee, what do they remain with? But before the company even gets a contract, it must submit a tax clearance certificate (TCC). Some years ago, URA people sat in a boardroom and came up with an ingenious idea —TCC must be issued per a bid. So if you are bidding for work in Company A today, you apply for a TCC that goes to Company A and if tomorrow you need to make another bid to Company B, you apply for another TCC. Never mind that you just got a TCC a day before. The funny thing is that today URA can issue you a TCC and tomorrow they can reject to give you one. I don’t know what makes URA issue a TCC today and refuse to issue another tomorrow. This process of applying a TCC per bid is another cost for SMEs because many rely on external consultants to process these certificates for them. Why doesn’t URA issue a TCC for say six months or one year? If they fear that SMEs will forge them, they can a create verification system. If people can quickly verify in whose name is a vehicle registered at URA, why can’t they verify whether a TCC is genuine or not? Taxes like VAT should also be reformed where SMEs don’t have to pay URA once an invoice is issued rather when they have been paid. I know there is an option for this but its administration is even more complicated than paying URA before a company is paid because you must have paid all your VAT before you allowed this option. Where does an SME get the money to pay taxes for money it is not sure will be paid on top of servicing loans at crazy rates? URA sometime back introduced a very good system where some types of businesses are charged a set rate as income tax. They call it a presumptive tax. Businesses like salons pay this rate instead of self-assessments. The figure payable is set regardless of the profit made. I think this is a very good way of taxing SMEs. However, they left out many businesses that could pay more taxes if they were asked to pay a fixed rate. Self-assessments are cumbersome to both the small taxpayers and URA. The URA needs many staff to look at documents before they accept that the self-assessment is correct. Many times, URA refuses self-assessments and institutes charges that are way above what an SME made in a year. That involves a lot of back and forth before the tax is paid if ever paid. There is a need to widen businesses that pay a presumptive tax rate but also consider the size of business. The other alternative is to have an income limit where, for example, if the business earns less than a certain amount a year is allowed to pay a presumptive tax than going through the cumbersome processes of self-assessment. This will reduce the number of companies filing zero profits and therefore paying nothing in income tax. Also, URA needs to handle SMEs differently. For example, the assessment forms for Withholding Tax exemptions shouldn’t be the same for all taxpayers. A simple form for a small business is sufficient whereas, for the largest taxpayers, they can have a form that fits their size. As URA was issuing statements about its staff resignations, MTN was issuing another regarding a tax case involving Shs326 billion which the telecom giant questioned in court. The assessment came to Shs24 billion but MTN further appealed to the Tax Appeals Tribunal. To cut the long story short, MTN got an interim order against the enforcement of URA notices. MTN as a large company can afford silver-tongued lawyers and appeal even for 20 years but SMEs can’t. A mere lack of a TCC is a disqualification from a potential contract. Excessive assessments from URA simply lead to heart attacks for the owners and closure of the business. URA enforcement officers also love small companies — they quickly attach bank accounts, put padlocks on the premises and such other things. For the big boys, they simply sit on the table or go to court. Changes at URA, therefore, shouldn’t stop at just personnel but the way tax administration is carried out especially for SMEs because they are the majority and employ more people collectively. Customer care is critical if URA is to achieve its tax targets and SMEs can play a critical role if URA invested time and resources to understand them and address

June 4, 2020