a comparative study of uganda with selected east african countries ...

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5.6.1 QUALITY MANAGEMENT SYSTEM (QMS) . ..... passengers whose tickets are issued in. Tanzania. Fuel Levy ... ROAD FUND for maintenance and.
TAX TO GDP RATIO: A COMPARATIVE STUDY OF UGANDA WITH SELECTED EAST AFRICAN COUNTRIES AND SOUTH AFRICA

Tax to GDP Ratio: Comparative Study-2013

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RESEARCH TEAM 1. Mr. Ronald Nyenje Makumbi-Manager Research, Statistics and Policy Analysis-URA 2. Ms. Justine Nanziri Makumbi-Supervisor Research& Policy Analysis-URA 3. Mr. Robert Ssuuna-Supervisor Research, Statistics & Policy Analysis-URA 4. Mr. John Njawuzi-Supervisor Business Policy-URA 5. Mr. Godfrey Byamukama-Ag. Senior Economist MOFPED 6. Mr. Isaac Arinaitwe-Economist MOFPED

Tax to GDP Ratio: Comparative Study-2013

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TABLE OF CONTENTS TABLE OF CONTENTS ........................................................................................... iii ACKNOWLEDGEMENT ........................................................................................... v ABBREVIATIONS AND ACRONYMS ....................................................................... vi LIST OF FIGURES................................................................................................. vii LIST OF TABLES.................................................................................................. viii EXECUTIVE SUMMARY ......................................................................................... ix 1

INTRODUCTION ............................................................................................... 1 1.1

PURPOSE OF THE STUDY ......................................................................... 2

1.2

SPECIFIC OBJECTIVES ............................................................................. 3

1.3

METHODOLOGY ........................................................................................ 3

ANALYSIS AND DISCUSSION OF FINDINGS ........................................................... 4 2

TAX TO GDP CALCULATION METHODS ........................................................... 5

3

EXCEPTIONAL TAX HANDLES ......................................................................... 6

4

TAX STRUCTURES ......................................................................................... 11 4.1

COMPOSITION OF REVENUE BY TAX TYPE ............................................ 11

4.1.1 4.2

VAT COLLECTIONS AS A PERCENTAGE OF GDP .................................... 14

4.3

VAT PRODUCTIVITY ................................................................................ 15

4.4

VAT BASE COVERAGE ............................................................................ 16

4.5

VAT THRESHOLD .................................................................................... 18

4.5.1

5

VALUE ADDED TAX (VAT) ................................................................. 13

IMPLICATIONS OF UGANDA’S VAT THRESHOLD .............................. 18

4.2

PERSONAL INCOME TAX (PIT) .............................................................. 21

4.3

CORPORATION INCOME TAX (CIT) ....................................................... 29

TAX ADMINISTRATION INITIATIVES .............................................................. 43 5.1

ORGANIZATIONAL STRUCTURE & DESIGN ............................................. 43

5.2

STRATEGY MANAGEMENT PRACTICES ................................................... 46

5.3

AUTOMATION .......................................................................................... 47

5.4

TAXPAYER REGISTRATION FUNCTION: .................................................. 48

5.4.1

COMPLIANCE MANAGEMENT ........................................................... 49

5.4.2

COLLECTION ENFORCEMENT .......................................................... 50

5.5

THE TAX AUDITING FUNCTION ............................................................... 50

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5.6

SPECIAL PROGRAMS ............................................................................... 54

5.6.1

QUALITY MANAGEMENT SYSTEM (QMS) .......................................... 54

5.6.2

CLIENT RELATION MANAGEMENT (CRM) FUNCTION ....................... 54

5.6.3

TAXPAYER SERVICE FUNCTIONS. .................................................... 55

5.6.4

SECTOR MANAGEMENT.................................................................... 55

6

ECONOMIC STRUCTURES ............................................................................. 57

7

CONCLUSION................................................................................................. 69

RECOMMENDATIONS ............................................................................................ 70 8

POLICY RECOMMENDATIONS ....................................................................... 71 8.1

VAT THRESHOLD .................................................................................... 71

8.2

VAT ZERO-RATED SUPPLIES .................................................................. 74

8.3

VAT EXEMPTIONS ................................................................................... 75

8.4 INTRODUCTION OF 18% VAT ON FEES & COMMISSIONS CHARGED BY FINANCIAL INSTITUTIONS ................................................................................ 76 8.5

CARRIED FORWARD LOSSES ................................................................. 78

8.6 TREATMENT OF GOVERNMENT TAXES & NON TAX REVENUES IN THE COMPUTATION OF TAX TO GDP ....................................................................... 82 9

ADMINISTRATIVE RECOMMMENDATIONS .................................................... 82 9.1 STRENGTHEN THE TRAINING COMPONENT OF THE HUMAN RESOURCE FUNCTION......................................................................................................... 83 9.2

TAX PAYER REGISTRATION FUNCTION .................................................. 83

9.3

AUDIT FUNCTION .................................................................................... 84

9.4

SECTOR BASED PROJECTS .................................................................... 84

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ACKNOWLEDGEMENT The Uganda Revenue Authority Research team would like to extend their special thanks to the Commissioner Generals of Kenya Revenue Authority (KRA), Rwanda Revenue Authority (RRA) and Tanzania Revenue Authority (TRA) and the Commissioner of South African Revenue Services (SARS) who gave us an opportunity to engage the different teams at these revenue agencies during the process of gathering data. We especially thank Mr. Yahya Kailembo, Research and Policy specialist with support from the Director of Research and Policy at TRA, Mr. Denis Mukama, Research and Planning specialist with support from the Deputy Commissioner of Research and Planning Mrs. Agnes Kanyengayo at RRA, Mr. Kennedy Onyonyi, Senior Deputy Commissioner of Marketing and Communication at KRA and Ms. Seboya Mogoba, Ms. Francy Mpulampula and Mr.Wisani Dzivhani International relations specialists with support from

Mr.

Brandley

Ngcobo,

Senior

Manager

Capacity

development,

International relations at SARS who coordinated our visits with these revenue agencies. We’re very grateful to all officers at the different revenue Agencies who prepared and provided their valuable expertise during the different engagements. We are highly grateful to Mrs. Allen Kagina the

Commissioner General

Uganda Revenue Authority and Mr. Moses Kaggwa the Commissioner Tax Policy

Department

Ministry

of

Finance,

Planning

and

Economic

Development who entrusted with us this kind of study and whose supervision and guidance helped us to accomplish this task.

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ABBREVIATIONS AND ACRONYMS Acronyms ADT BMS CG CIT CRM DCG GDP HSCODE IFC ISO KCCA KRA LTD LTO MOFPED MTO NSSF PIT QMS RRA SARS SDL SME TRA TIN TREP URA USD VAT

Definitions Air Departure Tax Block Management System Commissioner General Corporate Income Tax Client Relationship Management Deputy Commissioner General Gross Domestic Product Harmonized System Code International Finance Corporation International Standard Organization Kampala City Council Authority Kenya Revenue Authority Large Taxpayer Department Large Taxpayer Office Ministry of Finance, Planning and Economic Development Medium Tax Office National Social Security Fund Personal Income Tax Quality Management System Rwanda Revenue Authority South African Revenue Services Skill Development Levy Small and Medium Enterprises Tanzania Revenue Authority Tax Identification Number Taxpayer Registration and Expansion Project Uganda Revenue Authority United States Dollar Value Added Tax

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LIST OF FIGURES Figure 1: Trends of tax to GDP ratios .................................................................................... 2 Figure 4.0 Share of Revenue by Country, FY 2012/13 ............................................... 12 Figure 4.1.1: VAT contribution to total Revenue ......................................................... 13 Figure 4.1.3: VAT collections as a percentage of GDP ................................................. 14 Figure 4.1.4: VAT Productivity ............................................................................................... 15 Figure 4.1.7: VAT payable by Turnover .............................................................................. 19 Figure 4.1.8: Effective VAT rate............................................................................................. 20 Figure 4.2.1: PIT Contribution to total Revenue............................................................ 21 Figure 4.2.2: PIT Collections as a percentage of GDP .................................................. 24 Figure 4.2.3: PIT Productivity ................................................................................................ 25 Figure 4.3.1: Performance of CIT .......................................................................................... 29 Figure 4.3.2 CIT Productivity ................................................................................................. 29 Figure: 4.3.3 CIT Volatility in South Africa ...................................................................... 30

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LIST OF TABLES Table 2.1 Total revenue Treatment in Tax to GDP calculations ...................... 5 Table 4.0: Share of Revenue by Country, FY 2012/13 ..................................... 11 Table 4.1.2: Summary of the key VAT performance indicators........................ 14 Table 4.1.5: Key Features of a Modern VAT ...................................................... 16 Table 4.1.6: Comparative VAT Threshold .......................................................... 18 Table 4.2.1: PIT Structure .................................................................................. 22 Table 4.3.4 Marginal Tax Rates for Corporation Income Tax ........................... 33 Table 4.3.4 WITHHOLDING TAX RATES FOR INDIVIDUALS & CORPORATIONS ............................................................................................................................. 34 Table 6.1: Presumptive Tax structure in Uganda .............................................. 62 Table 6.2: The Presumptive Income Tax Regime in Tanzania .......................... 64 Table 6.3: Presumptive tax rates for Micro enterprises .................................... 67 Table 7.1: Financial Institutions in Uganda, 2012 ............................................ 76 Table 7.2: Estimated revenue from the Minimum Alternative tax of 1%. ....... 80 Table 7.3: Impact on Competitiveness of Uganda’s Investment Regime in the Region ................................................................................................................. 80 Table 7.4: Contribution of Government Taxes and Non Tax Revenues ............ 82

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EXECUTIVE SUMMARY Uganda

has

made

significant

progress

in

transforming

and

modernizing her tax system over the last 18 years. The most significant developments include the introduction of Value Added Tax (VAT) in 1997, restructuring the Income tax Act to make it more competitive in 1997, restructuring Uganda Revenue Authority to make it more efficient and effective in 2005 and implementation of a robust Integrated Tax system which has fundamentally changed the way taxpayers register for tax purposes, file returns and pay taxes. However, Uganda's average tax to GDP ratio has stabilized at 12.63% and it is considerably low compared to most of the countries in the Sub-Saharan region like Kenya, Tanzania, Rwanda and South Africa which have taken similar measures. The major differences between Uganda’s tax to GDP ratio and other selected countries lie in how other countries calculate the ratios (methodologies), exceptional tax handles to generate more revenue, design of some major tax handles like VAT, PIT and CIT to enhance their productivity, economic structures in countries which are more formal and unique administrative initiatives in some countries which enhance the effectiveness of tax administration. In Uganda, Government taxes on its procurements are treated as non-resources and all non-tax revenues collected by URA on behalf of the Government are excluded from calculation of the GDP ratios which is not the case in other countries. This policy action keeps off an average of 0.3 1percentage points from the Tax to GDP ratio.

1

The government taxes included in this particular case are only on Imports. VAT exemptions in sectors where government spends about 60% of its budget are not included.

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Exceptional tax handles (e.g Pay roll taxes, property taxes, Air Departure taxes) in countries like Tanzania, Rwanda and South Africa generate on average additional percentage points of 1.3, 0.56, and 1.9 to tax to GDP ratios respective. The design of the VAT structure in Uganda has a much narrower tax base than in other countries included in this study due to generous exemptions. Further, the VAT threshold is much lower in Uganda affecting VAT administration due to non-value adding taxpayers on the VAT register. The PIT structure in Uganda is more competitive internationally for investment attraction. However, it is less productive in revenue generation compared to PIT structures of countries like Rwanda Kenya and South Africa. The CIT structures are almost similar in all the five countries studied. However, countries like Kenya, Rwanda and Tanzania have introduced clauses in the tax laws to control tax planning. Such clauses are designed to cap carry forward losses and also “ring fence” rental income. Countries with large informal sectors like Rwanda, Tanzania and Uganda have relatively lower tax to GDP ratios. Tanzania has put up an effective strategy to tax the informal sector right from policy design to compatible tax administration initiatives. The east African countries have adopted presumptive regimes to tax the informal sector. However, the design of such regimes differs.

The current presumptive regime in Uganda can only

collect a maximum of UGX 450,000/= from any business whose annual turnover is just below UGX 50,000,000 whereas an individual who earns a gross income of UGX 50,000,000/= annually pays UGX 13,824,000/= in taxes. This demonstrates Tax to GDP Ratio: Comparative Study-2013

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how the regime is restrictive, regressive, with a high degree of inequity and low productivity As a way to improve Uganda’s tax to GDP ratios in comparison to

countries

in

the

Sub

Saharan

region,

the

following

recommendations are proposed. POLICY RECOMMENDATIONS  Since Government consumption and Investments are included in the GDP numbers, it is appropriate to include government taxes in the revenue base. Therefore all Government procurements should be tax inclusive and tax budgets for such procurements should be provided. Tax collections from Government projects can be ring fenced and rechanneled back to government projects.  Since URA is using its resources to collect non tax revenues, non-tax revenues collected by URA should be included in calculations of Tax to GDP ratios as other countries do. Controlling Tax Planning:  Allow Carried Forward Losses to 5years beyond which the taxpayer incurs 1% of his gross turnover as the Minimum Alternative Tax. OR  Allow 50% of the net taxable Income to offset Carry forward losses each year. This could guarantee 50% of the chargeable income to be available for tax purposes.  Ring fence Rental income to allow taxation on rental income separately from Business income.

VAT Structure Adjustments  Raise the VAT threshold to UGX 125Million to improve administrative efficiency. This will help URA deploy its resources more strategically. Tax to GDP Ratio: Comparative Study-2013

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 “Ring fence” voluntary VAT registration: By end FY2012/13, 47% of VAT payers had annual turnover below UGX 50 million and we had paid them a net refund of UGX 70 billion through offsets.  Standard rate the following items: o New computers, desktop printers, compute parts and accessories, the supply of milk, including milk preserved in any way to preserve and educational materials and printing services for educational materials,  Introduce VAT at 18% on Fees and Commissions charged by Financial Institutions. Taxing the informal sector Uganda should adopt a presumptive regime that has features of both the occupational & sector –specific Standard assessment system and lump sum minimum plus a percentage of gross receipts system. This will help to capture all existing and emerging sectors in the informal sector and also ease tax administration. TAX 

ADMINISTRATION

Recruit full time facilitators who will have time to develop relevant and well researched programs and provide the required training to staff.



Implement the bio-metric figure registration process to control issuance of multiple TINs to an individual and company mutation.



Provide enough resources in terms of Human and financial resources to ensure that tax jurisdictions are well covered and newly registered taxpayers are well supported.



Provide on-the-job sector/Industry specialist training to the Auditors

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Enter into collaboration with leading Revenue Agencies to transfer Audit skills to URA and possibly conduct joint Audits for complex cases that share tax jurisdictions.



Given the level of investments in Automation and data management, building robust risk engines is appropriate and balance it with the required number of tax Auditors.



There should be a deliberate effort to retain the highly skilled tax auditors with specialized skills through a separate retention package.



Implement sector based projects and the following criteria can be used to select sectors; o Sectors

that

contribution

have but

lagged have

behind

the

in

potential

terms and

of

revenue

contributing

substantially to GDP. o Major Government projects.

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Tax to GDP Ratio: Comparative Study-2013

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1 INTRODUCTION The government of Uganda has initiated a number of Tax reforms over time geared towards transforming the tax structure to make it more competitive internationally and make tax administration more efficient and effective. The major reforms started in 1991/92 by separating tax administration functions from the main civil service to form a semi-autonomous Agency, followed by the scrapping of Sales Tax and replacing it with Value Added Tax (VAT) which has fewer distortions and a broader base in 1997, restructuring the Income tax Act to make it more competitive in 1997 and restructuring Uganda Revenue Authority to make it more efficient and effective in 2005. Over the last two decades, Uganda has registered impressive real GDP growth rates averaging about 7% year on year.

This performance is

stronger compared to what was posted in Kenya (3.8%) and slightly in line with that of Tanzania (6.78%) and Rwanda (7.63%). The inflation which normally has adverse effects on compliance averaged at 12.44% which again has been lower than what Kenya (15.22%) posted but higher than that of Tanzania (8.54%) and Rwanda (9.54%). Despite these significant achievements, it is noted that the translation of these reforms into tax effort is slower as indicated by the Tax to GDP ratio which has moved from 6.8% recorded in 1991/92 to only 13.07% as recorded in 2012/13. The ratio is low by regional and international standards. Whereas some countries in the Sub-Saharan region took similar route for reforms the translation of these reforms into tax effort gained more momentum than what Uganda has been posting (See Figure 1). In the East African region, the average Uganda’s tax to GDP ratio(12.57%) for the last five (5) years remained the lowest Kenya (21.92%), Tanzania (15.50%) and Rwanda (14.35%) and below the sub Saharan average rate of

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18% and the potential rate of 23% for the region recommended by both IMF and World Bank. Figure 1: Trends of tax to GDP ratios

The relatively low tax ratio for Uganda has increasingly become a major concern for both policy makers and implementers. The basic argument is why Uganda’s tax ratio has lagged behind than that of its neighbors with presumably similar economic conditions and reform objectives. 1.1 PURPOSE OF THE STUDY This study analyses Uganda’s tax structure, economic characteristics and tax administration capabilities in relation to selected countries namely Kenya, Tanzania, Rwanda and South Africa to identify potential inhibitors to raising Uganda’s tax to GDP ratio and recommendations on what must be done to address them.

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1.2 SPECIFIC OBJECTIVES 

Document the methodologies used to calculate the Tax to GDP ratios In EAC and South Africa



Identify the revenue source components and compare the nature of the tax bases and the application of tax rate structure



Identify the economic structures of

EAC countries and examine how

they’re taxed and implications of such structures on Tax to GDP ratios 

Compare effectiveness of Uganda Tax administration with EAC countries and South Africa



Suggest possible options for reform to broaden the tax-base in relation to economic structure, tax policy and tax administration effectiveness to raise the tax to GDP ratio in Uganda

1.3 METHODOLOGY The study applied a mixture of both benchmarking methodology where a set of comparators was developed together with a comparative analysis methodology where data on economic variables, tax administration capabilities and tax structures was obtained to identify key differences that could help explain the causes of Uganda’s comparatively low tax-to-GDP ratio. These were applied to assess the breadth of Uganda’s tax structure, tax administration effectiveness and efficiency and healthy of the economy. Information was gathered from studies on aspects of the tax systems of selected countries and through engagements with research and Business teams in revenue agencies of the selected countries. South Africa is considered in this case because it is more developed with a higher tax to GDP ratio. Therefore special features of the South African tax system will guide the development of the required reforms in tax policies and tax administration. Tax to GDP Ratio: Comparative Study-2013

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ANALYSIS AND DISCUSSION OF FINDINGS

It is important to note that country’s tax-to-GDP ratio will largely be influenced by three major factors i.e. tax policy regime; efficiency of the tax administration and the structure of the economy. Differences in any of these factors across countries may result into significant differences in tax-to-GDP ratios. The study looked at four key areas for analysis and discussion; 1.

Tax to GDP calculation methods

2.

Exceptional Tax Handles

3.

Tax Structures and design of key revenue lines like VAT, PIT and CIT.

4.

Tax administration Initiatives

5.

Economic structures

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2

TAX TO GDP CALCULATION METHODS

One of the most widely used measures of the efficiency of a country’s tax system is the Tax-to-GDP ratio. The tax-to- GDP ratio is simply a reflection of how much of a country’s output goes to government in form of tax receipts. It would follow therefore that a country that is willing and able to mobilize a higher ratio of its output in tax revenues should have more resources to finance its recurrent and development programs. Whereas this is the case, treatment of total revenue while calculating tax to GDP ratio differs from country to country. For countries included in this study Table 2.1 depicts treatment of total revenue. Table 2.1 Country

Total revenue Treatment in Tax to GDP calculations Total revenue

Uganda

= Gross revenue- Govt. taxes – Tax refunds- Non tax revenue2

Kenya

= Gross revenue – Tax refunds

Tanzania

=Gross revenue – Tax refunds

Rwanda

=Gross revenue – Tax refunds – Govt. taxes

South Africa =Gross revenue – Tax refunds Whereas Uganda and Rwanda exclude government taxes while calculating tax to GDP ratios, Kenya, Tanzania and South Africa argue that government taxes are part of Government consumption which is included in total GDP. Therefore it is non-beneficial for these taxes to be excluded while calculating the tax to GDP Key Points to Note:  

The methods used to compute Tax to GDP Ratios are not the same across the countries under comparison in this study Exclusion of Government Taxes and Non Tax Revenues for Uganda’s case leads to a lower value of net taxes as compared to other Countries hence the low tax to GDP Ratio

ratio.

2

In Uganda selected Non tax revenues which should have been collected by Government ministries, Departments or Agencies are collected by Uganda revenue Authority.

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3

EXCEPTIONAL TAX HANDLES

Whereas all the five countries implement the traditional tax systems, there some countries that introduced exceptional tax handles to generate additional revenue resulting into additional percentage points to Tax to GDP ratio.

Kenya’s Exceptional Tax Handles Tax Handle

Description

Taxation of NSSF benefit in

Kenya

excess of 60,000Kshs on

contributions

withdraw

beneficiaries are receiving them after retiring

taxes

or

the at

for

social

the any

time other

security when

the

reason

as

provided in the law. The tax law exempts Kshs.600,000 (Approx. UGX 18,000,000) Excise

Duty

on

Financial

Services

This

policy

was

introduced

in

FY

2012/13 where fees charged by banks, money

transfer

agencies

and

other

financial service providers attract excise duty at a rate of 10%.

Advantage of Taxing Pension at retirement By the time the beneficiary receives the social security benefits, the taxable base is wider due to a longer period of savings and the interest earned over time. More people are taxable than at the time of contributing to their savings.

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Excise Duty on Financial Services in Kenya is faced with the following challenges i) Some firms are offering financial services yet they are not registered as financial institutions and thus contesting the levy. ii) Insurance companies and banks are contesting charging excise tax on interest earned and processing fee charged on their customers. The same issue has been raised by SACCOs. iii) High end account holders who enjoy preferential treatment in financial institutions with no readily available data on their transactions are hard to rope.

Tanzania’s Exceptional Tax Handles Tax Handle

Description

Skills Development Levy (SDL)

This is payroll tax payable by employers that are registered for employees’ tax purposes. The rate is 1% of the company’s total payroll.

Air Departure Tax (ADT)

Is a tax imposed on international air travel for passengers

whose

tickets

are

issued

Tanzania. Fuel Levy

Fuel Levy is collected by TRA on behalf of ROAD FUND for maintenance and construction of roads; It replaced the ROAD TOLL fee that was collected in the check points earlier.

Excise Duty on Imported Furniture

15%excise duty rate imposed on imported furniture under HS Code 94.03

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in

Rwanda’s Exceptional Tax Handles Tax Handle

Description

Fuel Levy

This is paid as part of the fuel prices per litre as a contribution to the Road Maintenance Fund

Road Toll

The Road Toll Fees are levied on both locally registered and foreign registered vehicles

paid

to

facilitate

road

maintenance and works.

South Africa Tax Handle

Description

VAT on selected Financial services

All fees, commissions, merchant’s discount and similar fee-based charges relating to financial services, are subject to VAT. Banks and other suppliers of financial services do apportion their input tax where goods or services acquired cannot be directly and wholly attributed to either taxable or exempt supplies. Where the financial service is supplied to a non-resident who is not in South Africa at the time that the service is rendered, the zero rate will apply instead of the exemption.

Skills Development Levy

This is payroll tax payable by employers that are registered for employees’ tax purposes. The rate is 1% of the company’s total payroll.

Air Departure Tax

Is a tax imposed on international air travel. As

from

1

October

2011

fee‐paying

passengers departing on international flights pay a tax of R190 per passenger. Passengers flying to Botswana, Lesotho, Namibia and Tax to GDP Ratio: Comparative Study-2013

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Swaziland (BLNS countries) pay R100 per passenger Fuel Levy

It is a specific excise tax imposed on refined fuel as it leaves refinery plants located in South Africa. Relief is available through a diesel refund system for farming activities, forestry, mining, offshore vessels, harbor vessels, locomotives used for rail freight, and large electricity generation plants

Electricity levy

This is a levy applied to electricity generated from

non‐renewable

and

nuclear

energy

sources at 2.5c/kW. Taxes on property [Donation tax, estates duty, security transfer tax, Transfer duties] Donation Tax

This tax Is levied at a flat rate of 20% on the value of the donation. The first R100 000 donated in each year by a natural person is exempt from donations tax. In the case of a taxpayer who is not a natural person, the exempt donations are limited to casual gifts not exceeding R10 000 per year in total. Dispositions between spouses and donations to certain public benefit organizations are exempt from donations tax.

Estate Duty

Is calculated at a rate of 20% on the dutiable amount of the estate. Certain admissible deductions from the total value of the estate are allowed

Security Transfer Tax

Is a tax levied on every transfer of a security and is levied at a rate of 0.25%.

In South Africa, these other sources of revenue add an average of 1.9 percentage points to Tax to GDP each year while in Tanzania, additional 1.3

Tax to GDP Ratio: Comparative Study-2013

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percentage points are posted.

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4

TAX STRUCTURES

Tax structures mainly cover the composition of the revenue by tax type and design of the tax type.

4.1 COMPOSITION OF REVENUE BY TAX TYPE Uganda’s tax system is largely comparable with other East African countries and South Africa. The major tax headings include direct domestic taxes (Personal Income tax (PIT), Corporate Income Tax (CIT), withholding taxes, Rental Income), indirect domestic taxes (VAT and Excise duty) and international trade taxes. Whereas composition of the revenue by type is relatively similar, the contributions of these major tax headings to total revenue collection and their ratios to GDP differ. In Uganda, both direct domestic and indirect domestic tax headings accounted for 58.2 percent while in Tanzania, Kenya, Rwanda and South Africa accounted for 63.0 percent, 72.68 percent, 73.3 percent and 77.6 percent respectively as at the end of FY 2012/13 (See Table 4.0 and Figure 4) Table 4.0: Share of Revenue by Country, FY 2012/13 Uganda

Tanzania

Kenya

Rwanda

SARS

Domestic Tax Revenue

58.20%

63.00%

72.68%

73.27%

77.61%

Direct Domestic Taxes

33.13%

39.2% 48.3%

42.8%

48.0%

Indirect Domestic Taxes

23.57%

21.4% 17.9%

26.6%

28.2%

7.0% 5.5%

7.6%

0.6%

17.41%

14.4% 12.4%

19.0%

25.4%

1.50%

2.4% 6.5&

3.8%

1.4%

26.7%

22.4%

6.15%

Excise duty: Value Added Tax:

Other revenue Taxes on International Trade

41.80%

37.0% 27.3%

Source: Authors’ calculations using data provided by countries’ authorities.

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This suggests that the tax structures of the countries under this study have shifted from higher dependence on international trade taxes to domestic tax revenues as illustrated in Fig 4 below. Figure 4.0 Share of Revenue by Country, FY 2012/13

100% 90%

80% 70%

58.20%

72.68%

63.00%

73.27%

77.61%

26.73%

22.39%

60% 50%

40% 30% 20%

41.80% 27.32%

37.00%

10%

0% Uganda

Kenya

Tanzania

Taxes on International Trade

Rwanda

South Africa

Domestic Tax Revenue

The sub sections ahead entail a deeper analysis and comparison of the three tax heads; Value Added Tax (VAT), Personal Income Tax (PIT) and Corporation Income Tax (CIT).

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4.1.1

Value Added Tax (VAT)

VAT is one of the most recent developments in the taxation discipline and today over 150 countries have adopted it replacing sales tax. VAT is an indirect tax charged at each stage of production and distribution chain up to the retail stage of goods and services. VAT is also charged on imported taxable goods and services. VAT contributes significantly to total revenue and in all the five country case studies as illustrated in figure 4.1.1 Uganda has the highest contribution of VAT to total revenue followed by Rwanda. Figure 4.1.1: VAT contribution to total Revenue

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Table 4.1.2: Summary of the key VAT performance indicators Country

VAT rate (%)

% Net

VAT

VAT

Domestic VAT

VAT of

Productivity

contribution to

as a % of

total Revenue

total VAT

(%)

collections

GDP Kenya

16

5.59

0.35

22.89

51.72

Rwanda

18

4.23

0.23

30.63

62.02

South Africa 14

6.52

0.47

26.42

68.51

Tanzania

18

4.64

0.25

27.62

48.77

Uganda

18

4.07

0.23

31.70

50.49

4.2 VAT COLLECTIONS AS A PERCENTAGE OF GDP From the VAT to GDP ratio perspective, Uganda’s VAT to GDP ratio is the lowest compared to other four country case studies (See Figure 4.1.3). This suggests that our VAT-base is narrower which can be explained by both the policy environment, economic structure and Administrative environment. Countries like South Africa and Kenya with more formal economies have higher ratios than Tanzania, Rwanda and Uganda who economies have substantial informal structures. Figure 4.1.3: VAT collections as a percentage of GDP

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4.3 VAT PRODUCTIVITY Related to VAT as a percentage of GDP, VAT performance can also be measured using the VAT productivity indictor. VAT productivity measures a country’s performance in collecting VAT revenue taking into account the specific features of that tax in that country. Figure 4.1.4 illustrates VAT collection productivity of the five country case studies. Figure 4.1.4: VAT Productivity

It is noted that South Africa and Kenya have higher VAT productivity ratios than other countries in this study. There is a visible mismatch between tax rate and ultimate revenue generated for VAT. Uganda Rwanda and Tanzania, whose VAT rates are higher, have similar and lower VAT productivity while South Africa and Kenya whose VAT rates are lower post higher VAT productivity. This suggests that VAT bases in both South Africa and Kenya are broader in relation to existing bases in Uganda, Rwanda and Tanzania. The VAT bases are largely defined by how best the VAT is designed taking into account its size and composition.

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International best practices followed when designing VAT require that VAT structure should have one standard rate with very few exemptions and zero rate only exports. VAT structures with many exemptions break the value addition chain; a phenomenon that results into breakdown of revenue generation and many standard rates make the VAT more complex in design and its administration is more burdened. However, the alternatives for reducing the absolute burden on the poor and regressively must also be considered. Table 4.1.5 displays the key features of a modern VAT system. Table 4.1.5: Key Features of a Modern VAT Traditional VAT Modern VAT 1

Limited coverage (only manufacturers Broad

coverage

(

extended

and Importers)

wholesalers, retailers and services)

2

Several standard rates

Single standard rate

3

Low threshold

High Threshold

to

Source: The Modern VAT

4.4 VAT BASE COVERAGE Uganda and other EAC countries have VAT system whose coverage extends to Wholesaler and retailer stages. This is also true with South Africa. However, the major differences lie in provisions of exemptions and zero rated items and economic structures. In the zero rated regimes, all the five country case studies zero rate exports, which is best practice as it makes exports more competitive internationally. In addition to Exports, Rwanda zero rates only donor funded projects. In the Health sector it is only Uganda and Tanzania that zero rate the supply of drugs and medicines and Tanzania limits it to only locally manufactured drugs and medicines.

In

Kenya,

the

zero

rate

regime

covers

only

International

transportation, supply of natural water and transfer of Business as a going concern. In the education sector it is only Uganda that zero rates educational materials and the supply of printing services for educational materials. In the VAT exemption regime, similar exemptions provided in all countries under this study include; Education services; financial services (selected for South Africa); Transport services and the supply of unimproved land. Uganda provides Tax to GDP Ratio: Comparative Study-2013

Page 16

exemptions across most of the economic sectors while South Africa provides exemptions to selected financial services, supply of education services, supply of lodging services by employers or local authorities for the benefit of employees or non- profit benefit and leasing of land. Box 4.1: Key features of the VAT bases. South Africa: 

South Africa is the only country of the five country case studies applying VAT on selected financial services. All fees, commissions, merchant’s discount and similar fee-based charges relating to financial services, are subject to VAT. Banks and other suppliers of financial services must apportion their input tax where goods or services acquired cannot be directly and wholly attributed to either taxable or exempt supplies. This helped South Africa to penetrate financial sector and hence expand the VAT base.



Where the financial service is supplied to a non-resident who is not in the country at the time that the service is rendered, the zero rate will apply instead of the exemption



Whereas there few agricultural products and farm inputs zero rated, there are no exempted goods in the Agriculture sector.

Kenya: 

Kenya zero rates only four items namely; Exports, International related Transport services; natural water and Transfer of Business as going concern.

Rwanda: 

Rwanda zero rates only Exports and Donor funded projects

Uganda: 

The most notable and exclusive exemption in Uganda is the supply of specialized vehicles, Plant and Machinery, feasibility studies, engineering designs, consultancy services and civic works related to hydro-electric power, roads and bridges construction, public water works, agriculture, education and health sectors. This exemption virtually excludes Government expenditure from taxation which is part of the GDP.



It is only Uganda that zero rates the supply of educational materials and the supply of printing services for educational materials.

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4.5 VAT THRESHOLD The level of threshold is very important in the design of a VAT regime. Low thresholds capture small value businesses which are difficult to manage and in most cases lead tax administrations to misallocate resources which in the end result into poor compliance, high compliance and administrative costs. Uganda’s VAT threshold is the lowest amongst the countries under comparison at USD 19,871 while South Africa has the highest threshold. This has been the same threshold since VAT was introduced in 1997.

Table 4.1.6: Comparative VAT Threshold COUNTRY Thresholds (USD) Thresholds (UGX) Uganda

19,871

50,000,000

Kenya

59,613

150,000,000

Tanzania

24,914

62,689,354

Rwanda

33,333

83,873,495

101,010

254,164,392

South Africa Source: Computations by the Authors.

4.5.1 Implications of Uganda’s VAT Threshold

Figure 4.1.7 displays the VAT collected by annual Turnover vis-à-vis number of taxpayers. By the end of the FY 2012-13 there were just over 14,000 businesses registered for VAT and 53 percent of the VAT register were above the Threshold.

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Figure 4.1.7: VAT payable by Turnover

The most appropriate threshold would at the point where VAT paid interchanges with the number of VAT payers. Below this point there more taxpayers generating less revenue resulting into excess costs to both administration and taxpayers. On the side of the Taxpayers, VAT management demands keeping proper books of accounts and necessary business records and in most cases taxpayers who do not have the capacity to do so hire tax consultants to do the work for them. On the side of Tax administration, resources are deployed to manage many taxpayers who are generating less revenue. This suggests that the most appropriate threshold for Uganda would be UGX 250,000,000. At this point Uganda is able to generate adequate revenue without excessive burden. Figure 4.1.8 illustrates the effective VAT rate for the different Annual Turnover brackets. According to figure 5, businesses with higher annual turnover pay less VAT suggesting that small businesses are more burdened and there is a possibility of VAT evasion for businesses with high annual Turnover. This further justifies the need to increase the threshold to allow tax administration deal with tax evasion within VAT payers with larger turnover and provide relief to small businesses. Tax to GDP Ratio: Comparative Study-2013

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Figure 4.1.8: Effective VAT rate

Value Added Tax Key Highlights Among Countries covered in the study;    

Uganda has the largest share of VAT to Total Revenue at 31.7% but the lowest net VAT contribution to GDP standing at 4.07% South Africa has the lowest VAT rate at 14% but with the highest productivity at 0.47 South Africa is the only country which imposes VAT on selected financial services Uganda has the lowest VAT threshold at USD 19,871

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4.2

PERSONAL INCOME TAX (PIT)

Personal Income Tax (PIT) is a direct tax levied on income of a person. PIT is a combination of Pay as You Earn (PAYE) and Individual Income tax. PIT contributes significantly to total revenue and in the five countries, South Africa has the highest contribution to total revenue as illustrated in figure 4.2.1.

Figure 4.2.1: PIT Contribution to total Revenue

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PIT Structure

A good PIT system is progressive in nature and has the capacity to capture all income. Table 4.2.1 below presents the different tax bands and applicable rates in each country.

Table 4.2.1: PIT Structure Uganda Tax Bands

Kenya Tax

Tax Bands

Rate

0- 2,820,000

2,820,001-

0

10

4,020,000

4,020,001 -

Tanzania Tax rate

0 - 3,537,072

3,537,101 -

10

15

6,869,520

20

4,920,000

Tax Bands

6,869,549 -

Rwanda Ta x

0 - 3,264,000

3,264,019 -

10,201,968

6,912,019.2 -

Tax

Ta

Tax

Tax

Bands

x

Bands

Rate

0-

18

Ra

Ra

te

te

0

14

6,912,000

20

SARS

20

10,368,000

0-

0

1,260,00

37,500,

0

000

1,260,04

20

37,500,

2-

250 -

4,200,00

58,750,

0

000

>

30

58,750,

4,200,00

250 -

0

81,250,

25

30

000 >4,920,001

30

10,201,997 -

25

13,534,416

10,368,019.2 -

25

13,824,000

Casual laborers

15

81,250,

35

250 113,750 ,000

Sur Tax for

10

>13,534,416

30

>13,824,000

30

113,750

Earnings

,250 -

above

145,000

120,000,000

,000 >145,00 0,250

Tax to GDP Ratio: Comparative Study-2013

Page 22

38

40

4.2: Analysis of the PIT Structures Rwanda’s PIT structure which exhibits a low threshold with a few bands suggests that it has the capacity to capture more income earners who are taxed at higher rates. This can improve PIT productivity provided tax administration is able to identify all taxable individuals. Further, the relief provided to causal workers at 15% for amounts in excess of an equivalent of UGX 105,000 is an incentive for voluntary declaration of income earnings of such people. Administration

of

the

policy

is

done

by

ensuring

that

all

employers/contractors are required to declare to Rwanda Development Board and Rwanda Revenue Authority the total number of employees to be hired.

South Africa and Kenya PIT structures do not have thresholds but provide tax reliefs to taxpayers and are more progressive with more taxable bands. This policy is aimed at providing an incentive to the taxpayer for paying tax and as a way of the government confirming to the taxpayer that his PAYE has been deducted and received.

However, the South African structure has relatively

high rates, which helps it to be more productive. We also note that, all employees in Kenya and South Africa are required to submit monthly returns. The South African structure has the highest marginal tax rate of 40% while Tanzania has the lowest marginal rate of 25%. The PIT structures in Uganda, Kenya and Rwanda have similar marginal tax rate of 30%. However, Uganda imposes a surtax of 10% for individuals who earn more than UGX. 120 MILLION Per year. The PIT band structures of South Africa suggest that there are wealthier individuals in South Africa than any other country under this study.

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Given the high income levels in South Africa mixed with the progressivity of the PIT structure and higher rates, the PIT structure in South Africa has capacity to generate more revenue than any other country in this study. The Kenyan PIT structure is similar to that of South Africa though the rates are lower and the income levels in Kenya are relatively higher than in Uganda, Tanzania and Rwanda. Overall in terms of Investment attraction, the Uganda’s PIT structure is more competitive since labor costs are relatively low.

PIT collections as a percentage of GDP Uganda’s PIT to GDP is the lowest compared to other four countries case studies as illustrated in Figure 4.2.2. South Africa and Kenya have a high PIT to GDP ratio because their structures have no exempt income. All income is captured which broadens the tax base in these two countries. Figure 4.2.2: PIT Collections as a percentage of GDP

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PIT Productivity PIT productivity measures a country’s performance in collecting PIT taking into account the specific features of that tax in that country. Figure 4.2.3 below shows PIT productivity of the five country case studies. Figure 4.2.3: PIT Productivity

It is noted that South Africa and Kenya have higher PIT productivity ratios and consequently high PIT to GDP ratios than other countries in this study. This partly because their economic structures are more robust with high income per-capita and no exemption of official employment income is granted to any individual in the tax laws. All income is captured which broadens the tax base in these two countries.

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Mapping PAYE Tax Structure In the scenarios provided below, we produce an analysis of different PAYE structures to ascertain their productivity under different employment income streams. Assuming no deductions on employment income we map a fixed employment income amount across rates of PAYE in the different structures to establish how much revenue can be generated. a) Uganda Shillings 200,000 For and individual earning UGX 200,000 per month we would get the following PAYE from the different tax structures of the 5 countries under study. Country

Rate

PAYE

Uganda

0%

0

Kenya

10%

20,000

Tanzania

0%

-

Rwanda

20%

18,999

18%

36,000

South Africa

With UGX 200,000, the South African structure yields the most with UGX 36,000 followed by Kenya with UGX 20,000 then Rwanda with UGX.18, 999. This is because South Africa and Kenya have no exempt income. UGX.200, 000 in Rwanda is charged at 20%. The Ugandan and Tanzanian structure yields zero since UGX. 200,000 lies within the 0% band.

Tax to GDP Ratio: Comparative Study-2013

Page 26

b) Uganda Shillings 300,000

Rate

PAYE

Uganda

10%

6,499.90

Kenya

15%

30,261

Tanzania

14%

3,920

Rwanda

20%

38,999

18%

54,000

South Africa

The South African structure yields the most with UGX 54,000 charged at 18% band, followed by Rwanda with UGX 38,999 charged at 20% band and then Kenya with UGX 30,261 charged at 15% band. The Ugandan and Tanzanian structure yield the least with UGX 6,499.90 and UGX 3,920 respectively. c) Uganda Shillings 400,000

Rate

PAYE

Uganda

20%

23,000

Kenya

15%

45,261

Tanzania

14%

17,920

Rwanda

30%

63,999

18%

72,000

South Africa

The South African structure still yields the most with UGX 72,000, followed by Rwanda with UGX 63,999 then Kenya with UGX 45,261. The Ugandan and

Tax to GDP Ratio: Comparative Study-2013

Page 27

Tanzanian structure yields the least with UGX 23,000 and UGX 17,920 respectively. Uganda Shillings 400,000 lies within Rwanda’s highest band attracting a rate of 30%. d) Uganda Shillings 500, 000 Rate

PAYE

Uganda

30%

41,999

Kenya

15%

60,261

Tanzania

14%

31,919.78

Rwanda

30%

93,999

South Africa

18%

90,000

With UGX 500,000, the Rwanda’s structure yields the most with UGX 93,999, followed by South Africa with UGX 90,000 then Kenya with UGX 60,261. The Ugandan and Tanzanian structure yields the least with UGX 41,999 and UGX 31,919 respectively. PAYE Structure Highlights Among Countries covered in the study;  

 

South Africa has the highest Marginal Tax Rate at 40% South Africa and Kenya implement Tax Reliefs/Rebates for some levels of Income and categories of individuals that are revised based on the state of the Economy in a given financial year. Rwanda has a stricter but broader PAYE structure with a very low threshold at USD 44.0 and only 3 bands. In Kenya and South Africa , it is mandatory for all employees to submit PAYE returns as opposed to other countries where the employer files returns on behalf of his employees

Tax to GDP Ratio: Comparative Study-2013

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4.3

CORPORATION INCOME TAX (CIT)

Figure 4.3.1: Performance of CIT

Figure 4.3.2 CIT Productivity

Tax to GDP Ratio: Comparative Study-2013

Page 29

Uganda

exhibits

an

irregular

disproportionate

pattern

of

Income

Tax

Collections vis-à-vis contribution to GDP, a sharp proportionate growth for Kenya, a moderate growth for Tanzania, steady growth for Rwanda and very slow responsiveness for South Africa as shown above. Overall, the trends in CIT’s contribution to GDP are irregular across countries. Uganda’s CIT productivity just like the rest of the countries under comparison registered no remarkable improvements for the last five years. South Africa’s CIT contribution to GDP registered a remarkable steady growth from 2005/06 until 2008/2009. The sharp decline for South Africa in the year 2010/11 is explained by the after math of the 2008/2009 global recession. The sectors largely affected by the financial crisis were financial intermediation, insurance, real estate & business services followed by Manufacturing. The trend is further explained by response of CIT to international business cycles depicted in the fig 4.3.3. For instance the Eurozone forms 19.3% of South Africa’s total trade, it is eminent that changes in the Eurozone affect the performance of CIT. Analyses have been conducted at SARs to observe volatility of CIT as shown below. Figure: 4.3.3 CIT Volatility in South Africa

Source: SARs databases

Tax to GDP Ratio: Comparative Study-2013

Page 30

Modelling corporate income tax using conditional volatility in South Africa shows that periods of macroeconomic uncertainty coincided with volatility in corporate income tax collections. As such, Corporate Income Tax Collections do not exhibit constant variance overtime. The study findings and other conventional methods of economics analysis attribute patterns of CIT growth and contribution to GDP to; sectoral composition of the economy, its openness to international markets, marginal tax rates, the size of the informal sector, tax incentives, capital deductions and other economic incentives, and the ability of tax administration to detect or deter evasion and avoidance schemes as explained below.

a) Sector composition of the Economy & the Tax Base: Whereas Uganda and other EAC countries under comparison post more than half of their revenue collections from services, South Africa has a larger share of Industrial production contributing 50.7% of tax revenue from over 2.2 million companies registered for income tax, this presents a fertile ground for CIT productivity volatility notwithstanding.

The analyses

conducted identified unique differences in the income tax base for Uganda highlighted below. Treatment of Rental Income In Uganda, rental tax a separate income tax charged on the rental income of individuals, it is segregated from other chargeable income and charged to tax as though it were a sole source of income for the taxpayer. The individual is allowed 20% deduction on gross rental income and no other expenditure and loss allowed. From the remaining 80% of the gross income, the first UGX: 1,560,000==USD624 is not taxable; and the balance is taxed at a rate of 20%.

Tax to GDP Ratio: Comparative Study-2013

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Allowing 20% as a ceiling for expenses for rental income is meant to facilitate individuals who have limited abilities in keeping records, this approach not only reduces the cost of compliance but also limits exaggeration of expenses for tax purposes. In case of resident companies, the rent is aggregated with other income and taxed at a corporation tax rate of 30% Non-residents are taxed on rental income derived from Ugandan sources by way of withholding tax of 15% subject to the provision of Double Taxation Agreement entered between Uganda and another country. This model of treatment of rental income is only unique to Uganda, other countries’ tax systems studied indicate ring-fencing of income earned by corporations from renting operations. Findings from this study indicate that , this model makes it easy to establish and monitor the companies’ sources of income under one single window given that it’s a requirement under the income tax act for companies to keep proper books of accounts.

Tax to GDP Ratio: Comparative Study-2013

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b) Marginal Tax Rates Table 4.3.4 Marginal Tax Rates for Corporation Income Tax Uganda Kenya Tanzania Rwanda SARs Chargeable Income for resident

30%

30%

30%

30%

28%

30%

37.5%

30%

30%

28%

30%

30%

25%

30%

28%

30%

30%

25%

30%

28%

companies Chargeable Income for nonresident companies Newly listed companies on Stock exchange in the first year Income of companies listed on Stock exchange with at-least 30% of the share capital issued to the public

Analyzing differences in income tax rates in a broader sense helps us understand the impact of income tax-rate differentials on generating stimulus for investment in an economy. However, caution needs to be taken in pursuing this approach at a policy level, since these differentials can also generate avenues for potential tax competition amongst countries at the same different levels of economic development. Results show that Uganda’s marginal income tax rate is 2 percentage points above South Africa’s rate of 28%. South Africa’s model is based on the best practice global economic notion of lower marginal income tax rates associated with broader tax bases. Within the region Uganda’s marginal tax rate (30%) is the same as that of Rwanda, Kenya and Tanzania for resident companies. This presents less incentive for tax competition signifying need for other forms of incentives to Tax to GDP Ratio: Comparative Study-2013

Page 33

attract investment and boost production. However, Kenya is the only country with a higher marginal tax rate for non-resident companies as opposed to resident companies at 37.5%. The move is aimed at making resident companies more competitive. Further analysis was conducted to identify major differences in withholding rates amongst countries for Royalties, Dividends and interests. Table 4.3.4 WITHHOLDING TAX RATES FOR INDIVIDUALS & CORPORATIONS Country

Uganda

Residential

R

NA

Kenya

Tanzania

Rwanda

South Africa

N

R

N

R

N

R

N

R

N

15%

5%

20%

15%

15%

15%

15%

12%

Various

status R=Resident N=Non Resident Royalties

depending DTAs Dividends

15%

withholding tax

or

or

10%

9%

Interest

15%

15%

15%

withholding tax

5%

15

5%

15%

5/10

5/10

15%

15%

10%

10%

15%

15%

15%

%

R==Residents NR=Non Residents

The rates for the three categories of withholding taxes are not significantly different, this also minimizes the risk of harmful tax competition amongst countries under comparison since economic rents won’t be a major factor to influence

investment

decisions.

The

observable

difference

is

Kenya’s

withholding tax on dividend standing at a meager 5% for resident companies. Efforts are under way to conduct a comprehensive review of the income tax act. It is also paramount that these rates change depend on the country’s Double Taxation Agreements. c) Tax incentives, Capital Deductions and Allowances

Tax to GDP Ratio: Comparative Study-2013

Page 34

on

In real terms and for purposes of this analysis, expenses incurred to produce income are considered normal for all countries. However anything above such expenses is regarded an incentive which affects the income tax base.

The

scope of analysis mainly focused on the following incentives; Initial allowances and startup costs, Capital Deductions and Exempt Income, scientific research and the treatment of carry forward losses as explained below. i) Initial Allowances Uganda’s policy of granting 50% and 75% initial allowance for eligible property placed into service for the first time depending on a prescribed area provides avenue for promotion of investment in areas outside the main city. The same approach is used by Rwanda which allows 40% and 50% deduction on investment depending on main city and in rural areas locations respectively. Tanzania has a 50% allowance for initial investments regardless of their location. In Kenya, such allowances are granted on basis of the year of establishment of business and the different rates of 75%, 85% and 100% apply accordingly. South Africa does not have such a policy. The uniqueness in Rwanda’s approach compared to other countries is that, in Rwanda, for the taxable person to enjoy an initial investment deduction, the amount invested must be at least RWF 30 million equivalent to USD 50,000. Such a threshold is not provided for in Uganda’s tax laws. Tanzania allows 100% expenditure on agriculture as a deduction, in Uganda this is only limited to 20% on a straight-line basis for capital expenditure incurred in in acquisition or establishment of horticultural farming. In the mining sector, Uganda seems has a more stringent approach of taxation allowing a capital expenditure of 100% limited to searching for, discovery and testing or winning access to deposits of minerals in Uganda. Beyond, these processes the mining sector profits are taxed rates subject to formulae provided for in the act. In Tanzania, investments in mining operations enjoy a more generous treatment of 100% expenditure both capital and revenue. The Kenyan Tax to GDP Ratio: Comparative Study-2013

Page 35

and South African approach is progressive over the years. Kenya’s tax system allows annual allowances on capital expenditure; 1st year 2/5th of the expenditure and each year for the next six years: 1/10th of the expenditure. South Africa grants expenditure on mining operations in progressive rates of 30% for the first year and 20% for the subsequent years.

ii) Startup Costs In Uganda start-up costs are expensed at a rate of 25% for four consecutive years, this approach is different from South Africa’s initiative of granting a one off pre-trade costs at a rate of 100%. Whereas the South African approach presents

a

platform

for

administrative

ease,

based

on

the

level

of

industrialization in Uganda, the progressive annual deductions are ideal for the investment promotion drive. iii) Industrial Building Allowance Uganda and Tanzania provides an industrial building allowance of 5% on a straight-line method for 20 years, this is the same for all countries under comparison except Kenya at 10%. It follows that company in Kenya will only expense expenditure for a maximum of 10 years making it easy for tax administration to assess appropriate taxes due. iv) Wear & Tear Wear and Tear allowance on Plant and machinery is treated based on reducing balance method in all countries. Overall Uganda’s system is more stringent with the lowest rate at 20% and the highest 40%. In Kenya, rates vary from 12.5 % to 37.5% depending on nature of machinery. Tanzania has more generous wear and tear rates ranging from 12.5% to 100%. v) Unique Income Tax incentives

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Rwanda’s tax system has a more unique tax incentive aimed at bolstering employment. A Profit Tax Deduction PTD is granted for companies based on the number of Rwandans employed in their companies as shown in the table below. Profit Tax Deduction

Number of Rwandans employed

2%

between 100 and 200 Rwandans

5%

between 201 and 400 Rwandans

6%

between 401 and 900 Rwandans

7%

more than 900 Rwandans

Rwanda’s model is more consistent with international best practice of administering all incentives within the tax law and minimizing the risk of discretionary tax incentives. Designing a more robust tax incentives regime requires combined efforts between investment agencies and revenue authorities

Tax to GDP Ratio: Comparative Study-2013

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vi) Treatment of Carry Forward Losses Country

Treatment of Carry Forward Losses

Uganda

Indefinite

Kenya

Allowed up to the fourth year of operations, beyond which an extension may be granted by the minister

Tanzania

Allowed up to 5 years after which a Minimum alternative Tax of 3% is charged on gross income of perpetual loss declaring companies

Rwanda

Allowed up to 5 years after which no further carrying forwarded is granted

South

Indefinite

Africa

From the table above, Kenya, Rwanda and Tanzania are more cautious in management of carry forward losses and this facilitates compliance. Rwanda for instance allows no losses carried forward beyond 5years. In, Kenya extension of the period is on case by case basis. The application for extension provides avenues for audit and monitoring. Tanzania has an alternative minimum tax of 3% charged on gross incomes of companies that perpetually carry forward losses beyond 5years. On the other hand, Uganda and South Africa grant companies to carry forward losses indefinitely. Results from this survey attribute South Africa’s success story in maintaining high performance of corporate income taxes yet granting carry forward losses to two major factors, first, given the size of the economy, it is very difficult for a

Tax to GDP Ratio: Comparative Study-2013

Page 38

company to operate below break-even point for an period beyond 5years, two, the revenue agency has developed systems and human capital in the audit function to handle any cases of tax evasion or tax avoidance. Whereas carry forward losses are not evil in themselves since they facilitate investment, the growth in revenue foregone under this incentive if not monitored cautiously can cause distortionary effects in the industrial sector generating unhealthy competition amongst companies. The table below shows a breakdown of revenue foregone due to carry forward losses vii)

Carry Forward Losses reported by Tax payers by Sector (UgxBns)

Main Business Activity

FY2011/12

FY2012/13

Agriculture, Hunting, Forestry

18.4

43.99

Fishing

3.28

0.02

24.02

3.2

276.19

279.76

Electricity, Gas, Water Supply

296.8

271.43

Construction

61.34

93.32

132.01

164

11.01

10.11

514.78

476.74

244.52

617.47

Mining and Quarrying Manufacturing

Wholesale and Retail, Repair of Motor vehicles, Personal and Household goods Hotels, Camping sites, and other provision of short-stay accommodation Transport, Storage and Communication Financial Intermediation

Tax to GDP Ratio: Comparative Study-2013

Page 39

Real Estate, Renting and Business

0.41

6.61

Public Administration and Defense

7.27

1.58

Education

0.53

12.69

15.53

13.65

11.3

4.55

0.07

0.32

4.58

2.81

1,622.03

2,002.27

Activities

Health and Social Work Other Community, Social and Personal service activities Activities of private households such as employers of domestic staff Extra Territorial Organizations and bodies GRAND TOTAL Source: URA E-Tax database

Table (vii) illustrates that the amount of loss incurred and carried forward by the tax payers as at end of FY 2012/13 stood at Ugx 2,002.27Bns. These were mainly from firms in the transport and communication sector (27%), financial intermediation

(24%).

electricity

gas

and

water

supply

(16%)

and

manufacturing (15%). The assessed farming loss incurred by firms in the agricultural sector accounted for 2% of the loss carried forward during the period under review amounting to Ugx 62.39 Bns.

viii) Exempt Corporation Income Tax in Uganda Tax Holidays and Government Tax Expenditures For purposes of this report, tax holidays granted to specific tax payers were classified as discretionary tax exemptions. The tax payers were selected based on the nature of their investments undertaken and the benefits do not extend Tax to GDP Ratio: Comparative Study-2013

Page 40

to all the firms engaged in similar business but are exclusively for the benefit of these selected tax payers. A selected group of tax payers have been granted tax holidays based on the nature of investments. These tax exemptions accrue only to these investors while other tax payers engaged in similar activity are not part of this incentive. This creates an un-level playing field which has an effect on tax compliance. The tax holiday covers a period of 10 to 25 years. Analysis of tax assessed provided an estimate of the tax revenue that would have been collected from these tax payers had this tax holiday not been extended to them. The revenue foregone from the tax payers benefitting from the tax holidays amounted to UGX 10.85 Bn over the period FY 2009/10-2010/12. This was mainly from the tax payers in the manufacturing sector. Several of the tax payers benefitting from this incentive do not file returns. This makes it difficult to establish the benefit of this incentive to the tax payers and assess their tax potential after the period of the tax holiday. It was also observed that despite the existence of the benefit of the tax holiday, the beneficiaries are also entitled to the general allowances and deductions

Corporation Income Tax (CIT) Key Highlights  

 



South Africa has the lowest Marginal Tax Rate for CIT at 28% , the rest of the countries implement a 30% Marginal Tax Rate for resident companies Whereas other counties have same Marginal Tax rates for both Resident and Non-resident companies, Kenya has the highest unique Marginal Tax rate for Non-resident Companies at 37.5% Rwanda has a unique tax exemption where a reduction in profit tax is allowed depending on the number of Rwanda nationals employed by the company South Africa and Uganda grant companies to carry forward losses indefinitely while Kenya caps carried forward losses to 4years beyond which the extension may be granted by the Minister and Tanzania has a Minimum Alternative Tax Policy for companies that perpetually carry losses forward beyond 5years Tanzania implements the most generous initial allowances regime granting 100% capital expenditure on investment in agriculture improvement/research and development. Mining exploration and Development in Tanzania enjoys the same incentive.

Tax to GDP Ratio: Comparative Study-2013  

Page 41

provided for in the Income Tax Act.

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5 TAX ADMINISTRATION INITIATIVES Tax administration reforms have been at the center of tax reforms in most countries to ensure that policy changes are compatible with administrative capability. In all the countries covered in this study, the administrative reforms were motivated by the desire to improve efficiency and effectiveness of revenue services and management. The reforms started by created semiAutonomous revenue agencies3 followed by modernization programs which vary from country to country to improve internal capacities.

5.1

Organizational Structure & Design

In the five countries studied there are no significant variations in the organizational structures of revenue bodies. It is important to note that most tax administrations around the world are mainly organized around three traditional models namely; Tax type model (arranged along tax lines like Income tax, VAT), taxpayer type model (arranged along large businesses, medium and small businesses) and functional type model (arranged along functions like taxpayer registration, collections and compliance monitoring, tax audits) Each model has its advantages and disadvantages. All the five countries have migrated to Hybrid organizational structure model where both functional and taxpayer models are engrossed in broader terms. The hybrid model has the capability to facilitate and monitor compliance and also deal with noncompliance more efficiently and effectively if supported with efficient processes and automation. The key differences in five countries lie in how the core and support functions are clustered and the number of administrative layers to facilitate supervision, decision making and communication. Uganda Revenue Authority (URA), a semi-autonomous collects both domestic tax and Customs revenue on behalf of the Government. The core 3

Both Domestic taxes and Customs taxes are collected under the same management

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functions

are

Investigations

management department

under

three

(Tax-Fraud

departments

investigations);

namely

Tax

Domestic

Tax

department (taxpayer registration, taxpayer services, tax audits, taxpayer objections and appeal, and collection of taxes and arrears) and Customs department

(customs

collections,

customs

post

audits

and

bonded

warehousing controls). Domestic tax department is arranged under Service management and Compliance management themes in addition to the three taxpayer segments including Large taxpayers, Medium Taxpayers and Small & micro taxpayers. The support functions are managed under three departments

namely;

Corporate

services

department

(Information

technology, Human resources, Budgeting and Financial administration, facilities and administrative services), Internal Audit Department (Internal audit and Integrity investigations) and legal services & Board Affairs department

(Litigation,

monitoring

performance

Commissioner

General’s

Policy

and

Prosecution).

evaluation Office.

The

functions number

Research, reside

of

direct

Planning,

under

the

reports

to

Commissioner General (CG), the head of URA is 8. The organization has seven administrative layers which make it flatter enough to facilitate effective supervision, decision making and communication. Kenya Revenue Authority (KRA) started implementing a new structure started in 2012/13. The old structure had 17 departments whose heads were directly reporting the Commissioner General. The new structure provides for 10e departments after consolidating related functions. In Tanzania, TRA structure provides for a Deputy Commissioner General (DCG), where heads of operational departments report directly to Deputy Commissioner General while heads of support departments report directly to the Commissioner General. Operational departments are headed by commissioners and these include Large Taxpayers, Domestic revenue, Tax Investigations and Customs and Excise departments. Support Departments are headed by Directors and these include Research and Policy, Board Secretariat and Legal services, Taxpayers Services and Education, Internal Tax to GDP Ratio: Comparative Study-2013

Page 44

Audit, Human resources and Administration, Information technology and Finance. A separate office for Planning and modernization programme headed by a Manager also reports directly to the Commissioner General. Rwanda Revenue Authority (RRA) is headed by a Commissioner General deputized by the Deputy Commissioner General who also heads the Customs and Excise department. All support departments are yet to be consolidated and are headed by Deputy Commissioners who report directly to the Commissioner General. Domestic tax department is divided into Large Taxpayers division and Small & Medium division. All Enforcement activities including

investigations

are

under

one

department

called

Revenue

Protection department. Plans are underway to consolidate all support services whose heads will be reporting directly to Deputy Commissioner General. The Customs and Excise department will be distinct and headed by a Commissioner who will be reporting directly to the Commissioner General. South African Revenue Services (SARS) is headed by Commissioner deputized by a Deputy Commissioner. SARS is implementing a new model (in a phased manner) which is based on aligning related and complementary activities within the organization. The new operating model which is designed along three themes namely aims at improving SARS efficiency and productivity by reducing duplications and silos and also optimizing cooperation and coordination. With the new operation model there 7 new operating portfolios namely Operations portfolio, Legal and Policy portfolio, Financial management portfolio, Human resource portfolio, Tax & Customs enforcement and Investigations portfolio, Large Business center portfolio and strategy management portfolio. Strategy management portfolio headed by the Deputy Commissioner.

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Box 5.1: Key features of organizational structures In URA and RRA, Domestic tax administration is integrated into a single department organized on the basis of function/taxpayer segment while in KRA and TRA domestic tax administration is separated into two on the basis of taxpayer segments, that is , Large Taxpayers Department and Domestic revenue (for medium and small taxpayers) department. In all the five countries studied, Customs administration is organized on the basis of key functions—trade facilitation (trade policy, valuation, classification, advance rulings and international & regional coordination), Customs Audits, enforcement, and field management In all the five countries studied Domestic tax and Customs departments share common revenue administration functions in investigations, taxpayer services and support functions. In URA and SARS, direct reporting to the Commissioner General/Commissioner was reduced by consolidating most related services under one executive. In Kenya, few support services like Research & Planning, legal services and taxpayers are consolidated under one department. In TRA and RRA support services are still distinct whose Heads are directly reporting to the Commissioner General. Consolidating related functions streamlines reporting lines and improves organizational clarity.

5.2 Strategy Management Practices In all the five countries studied, the Revenue Authorities have developed processes and structures to manage the strategy management and development processes.



In KRA and URA, strategy management is consolidated together with Research and modernization programs while at TRA it is consolidated together with modernization. In RRA, strategy management is consolidated together with Research. At RRA and TRA the heads of strategy management are part of Top management teams. This helps

Tax to GDP Ratio: Comparative Study-2013

Page 46

them to fully engage top management in strategy management issues. In SARS the deputy commissioner heads the strategy management process and he is part of the SARS executive committee.



SARS, TRA and URA develop 5-year Strategic corporate plans while KRA and RRA develop 3-year Strategic corporate plans following their own established processes. KRA, SARS, TRA and URA are using the Balanced Scorecard framework when developing the corporate plans.



All the revenues in the five countries have monitoring and evaluations systems in place which differ in application. In TRA the Monitoring is done electronically (using TRA Monitoring and Evaluation Database (TRAMED)) where Heads of Departments populate the system with information on a continuous basis. The evaluation in TRA and KRA is done on a quarterly basis where senior management teams are called to a workshop for a week to assess the performance and redesign a better strategy for better results.

5.3 AUTOMATION As part of tax administration reforms, all five countries initiated programs to automate key processes in tax administration. The systems used in each of these countries differ and choices depend on particular circumstances in each of these countries. URA developed a well-integrated system (e-tax system) which also provides an excellent platform for self service. The system provides a platform for electronic taxpayer registration, electronic filing; electronic payments processing, returns processing, Taxpayer and revenue accounting, Debt management, compliance management and provides the capability to

Tax to GDP Ratio: Comparative Study-2013

Page 47

communicate well with other systems like the Customs ASYCUDA to effect customs duty payments and also share data. TRA developed legacy systems which can fully support Taxpayer registration and Payments processing. These systems can also partially support Taxpayer and revenue accounting and Debt management. However, TRA has initiated a process to procure an integrated system similar to what URA’s Etax system. KRA has started implementing an integrated tax system similar to what URA developed. The system was developed by the same developers of URA’s system. SARS and RRA introduced e-based systems which support tax payers fill and file tax returns and pay out taxes without hassle. In South Africa, the taxpayer registration platform is provided by a private entity whose data is integrated into SARS system.

5.4

TAXPAYER REGISTRATION FUNCTION:

URA developed an integrated electronic system under which a platform for taxpayer registration can be accessed by taxpayers to register and get Tax Identification Numbers (TIN). The above process has been very convenient and effective for the voluntary taxpayers who are now able to apply for tax registration from anywhere in the world. As a way to register all potential Taxpayers who are not will to register voluntarily, URA started implementing a Taxpayer Registration and Expansion Project (TREP) which involves forging strategic partnerships with local authorities like KCCA, private sector associations and Government Agencies like Uganda Registration Services Bureau. SARS changed its registration policy and stipulated that everyone who is formally employed must register as a taxpayer rather than only those who are above the threshold for tax purposes in South Africa. This has helped to increase the number of Individual taxpayers on the register from 5.9 million Tax to GDP Ratio: Comparative Study-2013

Page 48

in the FY 2009/10 to 15.4 million in the 2012/13. This information is marched with all data as provided in the National registration system to ensure that all income earned by individuals through different business activities is well captured in the tax system and taxed accordingly. Further, SARS works closely with Business Associations and municipalities to identify any businesses for tax purposes. KRA, TRA and RRA have implemented a Block management system (BMS) as way of boosting taxpayer registration function. The Block Management System is where tax jurisdictions are divided into blocks and sub-blocks and tax officers are deployed to manage the tax affairs of taxpayers in each block. The specific objective is to register eligible taxpayers, support taxpayers as they meet their tax obligations. The system has been very effective at TRA where approximately 1.6 million taxpayers have been registered. The major activities pursued under the Block Management System include;

5.4.1 Compliance management  Identify and register Maintain Block/Sub-block Taxpayer Registers  Follow up non-fillers and non-payers  Review Presumptive cases.  Examinations of selected returns and follow up recovery of assessed tax.  Nurture Small and Medium taxpayers to become Medium and large taxpayers respectively.  Implement other initiatives approved in the planning process.

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5.4.2 Collection enforcement

 To collect outstanding and overdue tax liabilities  To remind taxpayers about due dates and any other tax obligations  Maintain list of tax arrears  Enforcement action such as issuing immediate demand letters, Agency Notice and distress warrants. 5.5

THE

TAX AUDITING FUNCTION

In all the five country case studies, the tax audit function is considered as a critical process for voluntary tax compliance and have built it using different approaches. TRA is building capacity in terms of having adequate number of tax auditors manning the different taxpayer segments especially large and medium Taxpayers and equipping them with the necessary skills. In the large taxpayer department (LTD), 48 percent of the officers are tax auditors and on average each tax auditor manages 6 taxpayers. In LTD 31 percent of the tax auditors are dedicated to issue audits while 69 percent of the tax auditors are deployed to handle comprehensive audits. Normally 10% of the Audits must be comprehensive audits. This helps LTO to have adequate time for all potential audit candidates and also continually generate revenue from Audits. In the Small and Medium office (Domestic revenue department), tax auditors are placed in regional offices and the number of auditors provided in each regional is based on the target of auditing a taxpayer in three years. As a way of enhancing tax compliance through Audits, Regional offices are required to generate 10% of their revenue Targets from Tax Audits.

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As way of building Tax audit capacity, TRA forged strategic partnerships with U.S Treasury and Norwegian Tax Agency. U.S Treasury provides technical training especially in area of Transfer pricing while Norwegian Tax Agency provides Tax auditors who transfer skills by jointly conducting audits together with auditors at Tanzania Revenue Authority. This in addition to the training provided at the TRA training Institute. KRA Tax auditing function is based on sectors where all major majors sectors are identified and allocated Tax auditors. Each sector is headed by a Senior manager and staff are allocated according to the size of the sector and how complex the sector is. The focus is mainly on large and medium taxpayers. The small taxpayers are helped to keep improving book keeping, filing and tax payment. In the Large Taxpayers’ Office, there are 1,200 taxpayers managed by 132 officers of which 112 are tax Auditors (12 auditors handle Transfer pricing cases. This suggests that for every 1.2 officers in LTO one is a tax Auditor and each Auditor manages approximately 11 taxpayers. In the Medium Tax Office, there are 74 officers of which 30 are tax auditors managing 1,530 taxpayers. This suggests that for every two officers in Medium Tax office (MTO) one is an Auditor and each Auditor manages 51 taxpayers on average. SARS Tax auditing function is premised on the ideology of strengthening compliance by verifying compliance levels amongst taxpayers, deterring noncompliance

and

enforcing

compliance

with

tax

and

customs

laws

administered by SARS. From this background two key goals are pursued by SARS and these include; 1.

Building capacity and capability comprising of highly skilled auditors. The major initiatives under this arrangement include a.Graduate program- Where New and Young graduates are recruited, trained and exposed to the Audit function activities.

Tax to GDP Ratio: Comparative Study-2013

Page 51

b. Recruitment of experienced Auditors especially from the Audit firms and other sectors of the economy. c. Audit professional Development program. This provides a progressive career path with relevant training at different levels and opportunity for appointment for higher levels. 2. Professionalizing Auditing. The major initiatives include; a. Improving skills of Auditors by recruitment of highly skills auditors and retaining skills b. Standardizing policies, procedures and processes c. Acquiring

sophisticated

Audit

Tools

and

forensic

equipment d. Improving operational efficiency by managing work in progress better and effective case management e. Identifying and pursuing high impact Audit cases. The major initiatives that have been introduced by SARS to motivate Tax Auditors and stem their attrition include; 

Annual

Ad-hoc

increases

and

bonuses

for

staff

producing

exceptional results; 

Audit

professional

Development

program

which

provides

a

progressive career path with relevant training at different levels and opportunity for appointment for higher levels.

URA’s Tax Audit function is structured along 12 regional audit centers where Large Taxpayers office and Medium Taxpayers office are treated as independent Audit centers. The compliance team at the Domestic tax headquarters designs audit plans for the audit centers and also provides information to auditing centers to support the audit activities. In the Large Taxpayers’ Office, there are 782 taxpayers managed by 63 officers of which 43 are tax Auditors. This suggests that each tax auditor on average manages approximately 18 taxpayers. Further, a Transfer pricing unit was created with five officers Tax to GDP Ratio: Comparative Study-2013

Page 52

In the Medium Tax Office, there are 58 officers of which 36 are tax auditors managing 1,685 taxpayers. This suggests that each Auditor manages 51 taxpayers on average. On the side of skills development, all tax auditors are required to undergo a Post Graduate Diploma in Taxation and Revenue Administration (PODITRA) lasting 2 years. In addition some Audit centers conduct regular on Job Training Sessions (OJTs) and the compliance HQ division organizes 1-2 days audit refresher workshops or seminars for auditors.

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5.6 SPECIAL PROGRAMS

5.6.1

Quality Management System (QMS)

TRA, KRA and RRA have developed and implemented a Quality Management System (QMS). QMS helps revenue agencies to define their quality objectives expressed as organization structure, policies, procedures and resources needed to implement quality management. In TRA, QMS is coordinated by the head of modernization and planning while at RRA the function is a stand-alone and headed by a Director who reports directly to the Commissioner General The implementation of the Quality Management System (QMS) has helped these revenue agencies to develop standard procedures

that

meet

international

standards

as

defined

by

the

requirements of the ISO 9001:2008 standards. As a requirement, ISO auditors keep auditing the agencies to ensure that the revenue agencies do have procedures that meet the International standards defined by ISO.

5.6.2

Client Relation Management (CRM) Function

SARS introduced a programme called Preferred Trader programme in which it engages with companies in a variety of trade sectors in order to raise levels of compliance. It aims to better understand the operations of these companies and develop service options more closely tailored to their needs.

KRA and URA piloted Client Relation Management function in the Medium Tax office (MTO) where officers are required to make regular reports with regard to the top and least compliant taxpayers in their allocation. Every officer is allocated taxpayers and is responsible for ensuring that the taxpayers understand their rights and tax obligations. Tax to GDP Ratio: Comparative Study-2013

In addition, MTO Page 54

taxpayers are also aware of their relationship managers and often do call on them for clarification and any inquiries regarding tax matters. Officers are required, on a routine basis to either pay courtesy visits or call taxpayers, especially the least compliant or inconsistent taxpayers, to ascertain reason for non-compliance and how they can help them improve on their compliance.

5.6.3

Taxpayer Service functions.

In all the five countries studied, taxpayer service function is at the forefront of improving efficiency and cutting compliance costs. TRA (at Head quarter), RRA (at Head quarter) and SARS (at Alberton, Dooringkloof, Kwazulu-Natal, Bellville (Western Cape)) developed well equipped call centers4 where taxpayers can call for inquiries and help. These centers are equipped with tools that track and provide reports on efficiency of each Agent when providing services to clients. In addition, SARS developed well-structured and facilitated centers where taxpayers walk-in for support.

5.6.4 Sector Management

In all the five countries studied sector management has been embraced as a way of improving revenue collections in all sectors. In KRA and URA audits in Large Taxpayers offices are arranged along sectors. KRA and RRA provide sector specialised training to Auditors. SARS and KRA have initiated sectorbased projects for sectors that are performing poorly in terms of revenue collections. The key objective of these projects is to ensure that revenue collections

improve.

4

SARS has established four regional call centers using the same toll free center but the call will be referred to the right Centre.

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Box 5.2 : Sector Based projects: Key Issues

The sector based projects address the following key issues: 

Is the sector well taxed?



What taxpayers and taxable points do exist in this sector?



Any potential taxpayers could be skipping the tax-net and what could be the reasons for such behaviour?



What structural issues could be a bottleneck to taxation (nature of businesses, tax treatment, record keeping etc)?



What are you doing to resolve the structural issues?



What must we do to improve compliance and revenue collections from the sector?



What is the impact of the initiatives on revenue?

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6 ECONOMIC STRUCTURES The tax base can be defined as the set of economic activities and assets that is taxed. Therefore the state of the economy which is basically the set of economic activities has serious ramifications on revenue mobilization. For all the five countries studied, sizes of the economies and in some cases the structures differ. Kenya Kenya is the second largest economy amongst countries covered under this study with GDP of USD 40.7 Billion. The services sector is the largest accounting for 52.7% percent of the GDP while Industry is the smallest accounting for 17.4 percent. The informal sector accounts for 34.3% of the GDP. The country is generally perceived as Eastern and central Africa's hub for Financial, Communication and Transportation services. Kenya’s volume of exports stood at USD 5.94 Billion by end of 2012/2013. Kenya is the most industrialized country in the East Africa region. Rwanda Rwanda’s economy is the smallest amongst the countries under comparison with GDP at USD 7.3 Billion. The services sector is the largest accounting for 51.1% percent of the GDP while Industry is the smallest accounting for 15.9 percent. The informal sector accounts for 46 percent of the GDP. Rwanda is still heavily dependent on natural resources and commodities. According to the African Development Bank economic outlook for 2013, Agriculture continues to be the largest source of employment, providing jobs to 73% of the workforce, yet only accounts for 36% of output. Commodities make up 77% of Rwanda’s exports.

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South Africa South Africa has the largest Economy among the countries under comparison with GDP of USD 384.3 Bn and accounting for 24% of Africa’s GDP. It is ranked as an upper-middle income economy by the World Bank5. The services sector is the largest accounting for 69 percent of the GDP while Agriculture sector, the smallest accounts for 2.6 percent. The informal sector is small accounting for 7 percent of the total GDP. The country’s volume of exports was USD 101.2Bn as at end of 2012 and major trading partners include China, United States of America, Japan Germany, India and United Kingdom. This suggests South African economy is highly integrated into the global trade. Tanzania Tanzania’s GDP totaled to USD 28.24 billion at the end of 2012 with services sector accounting for 47.4 percent while the Industry sector which is the smallest sector accounting for 25%. Tanzania’s informal sector is significant and its value added as a share of nominal GDP was 48.1 percent.

Uganda Uganda’s Economy has experienced a major transformation since 1994 where agriculture was the dominant sector whose value added as a share of GDP was 49.9 percent. By 2012 the value added for the agriculture sector had reduced to 23.4 percent with service sector becoming the leading sector accounting for 51.2 percent of the nominal GDP while the value added for the Industry accounted for 25.4%. However, Uganda’s informal sector remains substantial and its value added as a share of nominal GDP has been estimated to be 43.1 percent. 5

2012, World Economic Indicators

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Box 6.1: Sectoral Structure shifts

The structure of the economy can be looked at by comparing the share of its major sectors in the country’s total gross domestic product and employment distribution.

In the initial stages of growth Agriculture is a very important

sector and its share usually is bigger. As a country grows, industry takes over as people demand for industrial products due to increase in people’s income and thereafter services sector takes over as people start demanding services like communication, financial, trading and others.

for

All the five

countries included in this study are following the same path but it is the speed of shifts that differs. Figure 6.1 shows that the share of Agriculture in Kenya, Rwanda, Tanzania and Uganda is substantial whereas South Africa’s Agricultural sector is faster shrinking in terms contribution to country’s output. However, South Africa Agricultural sector is more commercialized

Taxation of the informal Sector

Tax to GDP Ratio: Comparative Study-2013

Page 59

The structure of the informal sector has made it very difficult to tax the sector. The term informal sector refers to firms that fail to comply with requirements of registration, taxation and meeting various labor, environmental and other standards. The informal sector is cash based system that leaves no paper trail, making it difficult for tax agencies to estimate how much revenue is earned thus making non-compliance easy for players in this sector. As such countries with huge informal sectors are faced with many challenges that are stifle revenue growth. Figure 6.1 shows the informal sector sizes vis-à-vis tax to GDP ratios.

It can be noted from figure 6.1 that South Africa and Kenya which have lower informal sectors have relatively higher tax to GDP ratios. Rwanda, Tanzania and Uganda whose shares of the informal sector are high have relatively

lower

tax

Tax to GDP Ratio: Comparative Study-2013

to

GDP

ratios.

Page 60

Attempts to Tax the Informal Sector Research has revealed that it is mainly the businesses managed by owners and families that thrive in the informal sector. Most of these businesses fall in the category of sole proprietorship in the business definition sense (URA, 2012). All the five countries in this study have designed different approaches to tax informal sector. From the policy point of view presumptive tax regimes have been adopted though the practice varies. Box 6.2: Presumptive Tax systems 1. Occupational

and

Sector

–specific

Standards

assessment system. This is a fixed lump sum tax payment to be paid by persons or enterprises engaged in certain business or profession. 2. Estimated Lump sum Assessment System: This is an indicator

based

system

where

the

tax

liability

is

estimated on observed features or indicators such as business size, premises, skills and number of employees, location, energy and water bills, service capacity of the business such as restaurants, hotel rooms, number of seats in transport vehicles etc. 3. Lump-sum minimum plus a percentage of gross receipts: This is calculated as a percentage of gross profits, percentage of net assets, paid up capital and turnover, whichever is the highest.

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In Uganda, the estimated lump sum Assessment System is the commonly used approach to tax informal activities. Table 6.1 show the presumptive tax structure used in Uganda. Table 6.1: Presumptive Tax structure in Uganda Annual Turnover (UGX Rate structure Millions) Less than 5

0

5-20

UGX 100,000 or 1% of gross turnover whichever is less

20-30

UGX 250,000 or 1% of the gross turnover whichever is less

30-40

UGX 350,000 or 1% of the gross turnover whichever is less

40-50

UGX 450,000 or 1% of gross the turnover whichever is less

From the tax administration side, URA has implemented two key initiatives to target the informal activities 1. Expanding withholding tax Agents register. The agents withhold from their suppliers based on a given threshold of their supplies. 2. Working together with local authorities6 to identify more informal actors. Uganda Revenue Authority has also launched a Taxpayer Registration Expansion Project (TREP) in collaboration with Kampala City Council Authority and Registration Services Bureau. This project has potential to comprehensively identify and register taxpayers who are operating informally in the greater Kampala Region.

6

It is believed that most informal enterprises pay trading licenses to local authorities in the areas where they operate and therefore it should not be hard to identify them.

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In Kenya, the Turnover Tax (TOT) is applied to any business whose turnover is below Kshs.5 million at a flat rate of 3% of the annual turnover. It is specially designed for small businesses that are unable to keep proper records of accounts, among other complexities associated with regular tax regime. On the tax administration side, KRA implements the Block Management System together with tax stamp system. The Tax Stamp system requires the informal sector operators to purchase an annual tax stamp from the revenue authority representing 3% of their gross turnover payable to Kenya Revenue Authority. Tanzania In Tanzania, both Estimated lump sum Assessment System and lumpsum minimum plus percentage of gross receipts system are applied. The choice depends on the completeness of the business records. Table 6.2 shows the presumptive tax structure used in Tanzania.

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Table 6.2: The Presumptive Income Tax Regime in Tanzania Annual Turnover Tax Payable when Tax Payable

Where turnover does not

records are

when records

incomplete.

are complete.

Nil

Nil

exceed TSHS. 4,000,000 Where

turnover exceeds TSHS. 100,000/=

2% of the

TSHS.

4,000,000

turnover in

but

does not exceed TSHS.

excess of

7,500,000

TSHS. 4,000,000

Where

turnover exceeds TSHS. 212,000/=

70,000+2.5%

TSHS 7,500,000 but does

of the turnover

not

in excess of

exceed

TSHS.

11,500,000

TSHS. 7,500,000

Where

turnover exceeds TSHS. 364,000/=

170,000+3.0%

TSHS

11,500,000

in

but

excess

of

does not exceed TSHS.

TSHS.

16,000,000

11,500,000

Where

turnover exceeds TSHS. 575,000/=

305,000+3.5%

TSHS

16,000,000

in

but

excess

does not exceed TSHS.

TSHS.

20,000,000

16,000,000

of

With tax administration, TRA implements the Block Management System and has been recognized as successful system. For some Tax to GDP Ratio: Comparative Study-2013

Page 64

sectors the tax stamps have been used where products without TRA tax stamps, the products are deemed illegal. For example all music products sold must have TRA tax stamps, without which such products are treated as pirated products and have not been taxed. In the transport sectors, all “special hire” vehicles must have TRA stickers without which such vehicles are illegal and are not allowed operate as special

Tax to GDP Ratio: Comparative Study-2013

hire

vehicles.

Page 65

Box 6.3: Block Management system in Tanzania In 2002, Tanzania introduced a Block Management System (BMS) aimed at promoting compliance and registering all eligible traders within particular sectoral or geographic areas. The BMS is set up so that trading areas are mapped and divided into blocks on the basis of geography, administrative boundaries or a few streets. Each block is mandated to operate all tax functions of identification, registration, assessing and accounting for revenue collected, with the BMS team allocated a team of staff with relevant skills to perform these functions. The BMS team locate themselves in identified Blocks by rotation and intensify their efforts to identify, register, educate and interact with taxpayers, particularly in the informal economy. Door-to-door visits are made to ensure all eligible taxpayers are registered. Each block is set a target for revenue collection, with presumptive taxes used for assessment purposes.

Rwanda Rwanda implements both Estimated lump sum Assessment System and Occupational and Sector specific Standards assessment system to tax operators in the informal sector. Table 6.3 shows the tax rates for the micro enterprises.

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Table 6.3: Presumptive tax rates for Micro enterprises Annual Turnover Million RWF Rates From 2000,000-4,000,000

60,000

From 4000,001-7,000,000

120,000

From 7000,001-10,000,000

210,000

From 10,000.001-12,000,000

300,000

The rate for Small enterprises (whose annual turnover is above RWF 12 million) is a flat rate of 3% of annual turnover per tax period. On the tax administration side, RRA implements Block Management System and works closely with local authorities (local councils) to identify new businesses for tax payment. Further, RRA identifies persons or specific businesses which pay a fixed lump-sum tax. For instance, motorcycle “Boda-Boda” riders pay a fixed amount of tax on a quarterly basis and all employers of casual laborers are required to register them with RRA and pay affixed rate of 15% on their earnings if their earnings are above the threshold. Box 6.4: Taxing the informal Sector It can be observed that countries with large informal sectors like Rwanda, Tanzania and Uganda have relatively lower tax to GDP ratios. Tanzania has put up an effective strategy to tax the informal sector right from policy design to compatible tax administration initiatives. The east African countries have adopted presumptive regimes to tax the informal sector. However, the design of such regimes differs. The current presumptive regime in Uganda can only collect a maximum of UGX 450,000/= from any business whose annual turnover is just below UGX 50,000,000 whereas an individual who earns a gross income of UGX 50,000,000/= annually pays UGX 13,824,000/= in taxes. This demonstrates how the regime is restrictive, regressive, with a high degree of inequity and less productive Tax to GDP Ratio: Comparative Study-2013

Page 67

Tax to GDP Ratio: Comparative Study-2013

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7 CONCLUSION

The study reveals that Uganda’s methodology of calculating the tax to GDP ratio especially the revenue components is different from what other countries do. Some countries introduced exceptional tax handles that yield extra percentage points to tax to GDP ratio. Further, the different structural designs of key revenue lines like VAT and PIT post different productivity results which also impact on the tax to GDP ratios across the region. As a result, Uganda’s tax to GDP will always remain low in comparison to other countries in the region. Tax to GDP ratio can be an appropriate comparator if the methodology used is standard across countries. Otherwise Tax to GDP ratio is not an appropriate parameter for Uganda for international comparison purposes due to non-uniformity in methods used to compute where some revenue components are excluded by design and policy.

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RECOMMENDATIONS

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8 POLICY RECOMMENDATIONS

8.1 VAT THRESHOLD Increase the VAT Threshold from UGX 50 million to UGX 150,000,000 The study recommends increasing of the VAT threshold from UGX 50 Million to UGX 150,000,000 premised on the following reasons: a) East African Comparison The analysis done using Uganda’s VAT data, suggests that the optimal VAT threshold should be UGX 250,000,000. This is the point at which revenue administration incurs the least cost yet obtaining more VAT revenue from a smaller number VAT tax payers.

However, compared to other countries in the region, this

would be the highest. Therefore to remain competitive at regional level in the wake of integration and ensuring equity of the tax system, we propose a threshold of UGX 150,000,000 equivalent to the highest in the region currently implemented in Kenya. b) Depreciation The current threshold has remained the same for the last 16 years and at the time it was set in 1996, it was equivalent to USD 50,000. Currently, the UGX 50 million is equivalent to USD 20,000. This suggests that the threshold has depreciated by 150%. Taking care of the depreciation and the volatility of the Uganda Shilling in the foreign exchange market, the need to raise the threshold is imperative.

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c) VAT Accounting VAT accounting demands proper record keeping and good accounting systems. It is therefore imperative that VAT agents must have proper accounting systems that should help them account for VAT and remit it to Government. On average VAT audit assessments have accounted for 48 percent the total Audit assessments for the last four years. This suggests that some VAT agents have not built the required capacity to account for VAT. Instead they do collect the taxes and use it in their businesses. It is known world over, that large companies have robust accounting systems and therefore managing VAT systems would not be a problem, however tax evasion cannot be ruled out among such VAT agents. Therefore, resources should be deployed

by

tax

administration

to

fight

evasion

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d) Cost of compliance Studies done by the IFC, a branch of the World Bank suggest that on average it costs UGX.3,225,129 for SMEs to account for VAT. On average, taxpayers whose annual turnover is less than 150 million pay UGX. 9,001,554 in VAT. This suggests that on average the cost of compliance for VAT agents whose turnover is less than UGX 150 million is 36%. If the threshold was raised to UGX 150 million, the analysis suggests that about 2780 VAT agents could potentially benefit from not being obliged to register for VAT.

e) Administrative Benefits It is important to note that VAT is collected by Agents who have been authorized by law. In that context, the VAT register captures only Agents who collect tax on behalf of Government NOT taxpayers who pay VAT. The

proposed

increase

in

VAT

Threshold

will

free

up

administration resources for other strategic interventions and also provide more attention to the remaining taxpayers on the VAT register. For instance, reducing the number of VAT agents should enable tax administration effectively build capacity amongst the remaining VAT agents in book keeping hence instilling the culture of compliance. The target in the medium term is to increase the effective VAT rate from the current 2.35 percent to 3.7 percent7. This will raise an additional VAT of UGX.618 billion

7

3.7 percent is currently the effective VAT rate for VAT agents whose turnover is below UGX. 150 million.

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It is also important to note that some of the VAT agents who would be freed from VAT management obligations will now become final consumers in the VAT system. This implies, these VAT vendors will no longer have an opportunity to claim input VAT.

8.2 VAT ZERO-RATED SUPPLIES

The following zero rated supplies be removed from the third schedule of the VAT Act to harmonize with the practice in other countries in the region. a) The supply of processed milk and milk products b) “Supply of milk, including milk treated in any way to preserve it”, This will improve Uganda’s international competitiveness as imports of milk will attract VAT the way exports of Uganda’s milk do after landing in other regional markets.

c) “Supply of educational materials and the supply of printing services for educational materials”,

The VAT Act defines education materials as “materials suitable for use only in public libraries and educational establishments specified in paragraph 2 of second schedule of the VAT act”. Given the informality of the printing services business in Uganda, it is very difficult to clearly distinguish between printing services for educational materials and printing services for other materials. This leaves room for the actors to abuse the zero rated supply and complicates tax administration.

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8.3 VAT EXEMPTIONS

Remove the following exemptions from the second schedule of the VAT Act. a) The supply of new computers, desktop printers, computer parts and accessories

The rationale for introduction of this exemption was to increase the use of ICT in the country by ensuring that computers, desktop printers, computer parts and accessories are cheap and more affordable. It is also important to note that the same items are exempt from import duty. Whereas the VAT exemption policy increases the volume of imports (imports become cheaper), in the long run, it can stifle developments and innovations in the local ICT sector since local producers are not able to claim credit.

b) The supply of specialized vehicles, plant and machinery, feasibility studies, engineering designs, consultancy services and civil works related to hydroelectric power, roads and bridges construction, public water works, agriculture, education and health sectors. In all the five countries studied, only Uganda provides for this exemption in the VAT act. Analyses conducted based on MTEF allocation for the last three years indicate that 60% of the national budget goes into financing projects under this exemption. Whereas it is paramount to have such an exemption to facilitate development of infrastructure in the sectors highlighted according to government priorities, it is imperative to note that this stifles increase in the tax to GDP ratio in comparison with other countries whose tax

regime

provides

for

Tax to GDP Ratio: Comparative Study-2013

taxation

of

the

same

items.

Page 75

It is important to note that since taxes paid to Government by government ministries return back to Government consolidated fund, Government procurements with Tax inclusive will have a neutral effect on costs of projects.

Recommendation:

All

Government

procurements

should

be

VAT

inclusive, and tax budgets for such procurements should be provided. The taxes paid on such procurements should be “ring fenced” and be used to finance such projects again.

8.4 INTRODUCTION OF 18% VAT ON FEES & COMMISSIONS CHARGED BY FINANCIAL INSTITUTIONS a) Broadness The use of the financial services has increased tremendously and continues to be one of the fastest growing sectors in Uganda. The banking penetration in Uganda remains at 15% providing more opportunity for expansion. Table 7.1 shows the number of financial institutions in Uganda as at end of 2012. Most of the financial services attract a fee and any increase in the financial services provides a broader fee base. Table 7.1: Financial Institutions in Uganda, 2012 Financial Institutions Number as at December 2012 Tier I(Commercial Banks)

24

Tier II(Credit Finance Companies)

3

Tier III (Micro finance institutions)

4

Investment Banks & Stock Brokerage Firms

9

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Development Banks

2

Insurance Companies

22

Foreign exchange Bureaus

123

Total

187

Source: Bank of Uganda.

Neutrality and Fairness The Policy will improve fairness of the tax system, since similar charges are already

being

incurred

by

actors

offering

similar

services

in

the

telecommunications sector. The policy will bring fairness to harmonize the differences of burdens incurred by actors in all sectors dealing in similar activities. d) Effectiveness The financial sector is growing very fast in Uganda.

It is noted that all

transactions in the financial sector attract a fee or a charge. For instance, withdrawing money from the banks, paying salaries, paying taxes, other payment

transactions

and

money

transfers

through

the

financial

institutions attract charges. All these transactions form the base for VAT and therefore have the potential to generate VAT. d) Efficiency Since VAT has been in place for many years, the expansion of the VAT base to include fees and charges in the financial sector will not increase administrative costs. The existing administrative structures and procedures and legal frame work require minor amendments.

To implement the policy of VAT on fees and charges in the financial sector the following issues must be addressed.

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i) Estimation of Input VAT: This can be resolved by applying the apportionment rules ii) Managing expectations of Stakeholders Stakeholders need to be sensitized to understand the impact of the policy and who bears the burden. e) International Competitiveness A number of countries in the world are implementing the policy of imposing a tax on fees and charges in the financial sector including Kenya and South Africa from Africa. South Africa imposes VAT at a rate of 18% on selected fees and charges in the financial sector and Kenya imposed an excise duty of 10% on fees and charges in the financial sector. Secondly, the top 3 banking institutions by market share in Uganda originate from South Africa and Kenya where this policy is already in force.

8.5 CARRIED FORWARD LOSSES

OPTION A. Allow the Carry Forward Losses up to 5years and thereafter impose a 1% Minimum Alternative Tax on Gross Income of Companies that perpetually carry forward losses beyond 5years To understand the impact of allowing carry-forward losses in Uganda to a period of Five years we analyze the policy alternative based on five main hallmarks of a good tax system which include Broadness, Neutrality &Fairness, Effectiveness, Efficiency, and International competitiveness. Along these terms, we attempt to answer the following questions: .

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1. Will allowing carry forward losses up to 5 years and impose a 1% on gross turnover thereafter broaden the tax base? 2. Will this change affect all companies and preserve equity? 3. Will the change increase revenue yields in a timely manner? 4. How will the change minimize the cost of compliance and administrative costs? 5. How will the change impact Uganda’s ability to attract investments in the region?

a) Broadness Allowing carry forward losses up to 5years and thereafter impose a 1% Minimum alternative tax on the gross incomes of companies perpetually declaring losses would enlarge total income base subject to tax as more actors will be included in the tax-net.

b) Neutrality& Fairness The policy will bring taxpayers who have been “tax planning” vigorously to skip the tax-net by carrying forward losses into the taxnet. This suggests that all taxpayers in given sectors will able to pay taxes

and

remove

or

minimize

distortions

related

to

unfair

competition.

c) Effectiveness The proposed policy change will increase revenue productivity since taxpayers who have not been paying income tax as a result of carry forward losses will start paying tax. Each year there is an available stock of companies carrying losses forward and this guarantees Tax to GDP Ratio: Comparative Study-2013

Page 79

revenue streams. Table 7.2 shows how much of the tax could have been recovered after imposing the minimum alternative tax of 1%. Table 7.2: Estimated revenue from the Minimum Alternative tax of 1%. Year Amount of carry forward GrossMinimum losses (UGX Bn)

Turnover

Alternative

(UGX Mns)

Tax (1%)

2009/10

353.41

431.507

4.315

2010/11

573.92

534.286

5.343

2011/12

761.21

728.713

7.287

2012/13

962.69

895.596

8.956

Average

662.81

644.77

25.901

Source: E-tax data and authors computations

d) Efficiency Since the policy change is not introducing a new tax, no major administrative costs will be added and the cost of compliance will remain the same. However, continuous improvements in detecting noncompliance will be a requirement to realize the intended benefits of the policy change. e) International Competitiveness The policy change has been proposed cognizant of international trends in taxation and the fact that Uganda is part of the regional EAC block. All countries in the EAC region adopted the policy capping of carry forward losses and Uganda is harmonizing its tax clause to what others in the region have done.

This implies that capping carry forward losses will not

necessarily result into shifting investment from Uganda to other countries in the region. Other factors such as infrastructural development, access to credit and market may come into play to influence investment decisions. Table7.3 shows that Uganda in comparison to other countries in the region has similar investment regime. Table 7.3: Impact on Competitiveness of Uganda’s Investment Regime in the Region Tax to GDP Ratio: Comparative Study-2013

Page 80

Kenya

Tanzania

Uganda

Rwanda

Type of Tax Incentive Income Tax Tax Holiday or Lower rate









Investment Allowances/









Accelerate Depreciation Relief



special deductions









exempted income









WHT where it is a final tax









Exemption from WHT





Tax rebate/credit

 Value Added Tax

VAT zero rating









VAT exemption









Exemption from Import VAT VAT remission/Special Relief

 













Customs Duty Duty Exemption



Excise Tax Exemption



OPTION B. Allow 50% of the net taxable income to offset the carry forward losses for companies that have migrated to profitable status and impose a 1% Minimum Alternative Tax on Gross Income of Companies that perpetually carry forward losses beyond 5years and have remained in the loss making status. The carry forward losses are restricted to 50% of the chargeable income, suggesting that 50% of the taxable income can be available for taxation for companies that have migrated to profitable status but are carrying forward Tax to GDP Ratio: Comparative Study-2013

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losses. However, for companies that have remained in the loss making position and are still carrying forward losses impose a 1% Minimum Alternative tax on the annual turnover. 8.6 TREATMENT OF GOVERNMENT TAXES & NON TAX REVENUES IN THE COMPUTATION OF TAX TO GDP We propose that government taxes or Treasury voucher and Non Tax Revenues be included in the net revenue when calculating the Tax to GDP Ratio as done in other countries under comparison in this study. Since Government Expenditure is part of GDP, it is imperative that government taxes be included in the tax revenue. Implementation Implementation of this policy requires all government procurements to be VAT inclusive. Since URA is already collecting some NTRs using its resources and systems, inclusion of these revenues is appropriate. Up to 0.3 percentage points of Tax to GDP ratio can be redeemed from the inclusion of government taxes on imports and NTRs collected by URA as shown in table 7.4. Table 7.4: Contribution of Government Taxes and Non Tax Revenues YEAR Government Government Taxes Government Taxes

and &

NTR

NTR as % of Taxes & NTR as %

Total Collections

of GDP

2008/09

73.38

1.79

0.24

2009/10

83.81

1.77

0.24

2010/11

120.11

2.24

0.31

2011/12

133.00

2.02

0.27

2012/13

173.46

2.27

0.32

9 ADMINISTRATIVE RECOMMMENDATIONS

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9.1 STRENGTHEN THE TRAINING COMPONENT OF THE HUMAN RESOURCE FUNCTION 

Recruit full time facilitators who will have time to develop relevant and well researched programs and provide the required training to staff.

9.2 TAX PAYER REGISTRATION FUNCTION 

The initiative of working together with Local Authorities and all agencies that issue licenses is excellent. In addition, the following should be considered.



Implement the bio-metric figure registration process to control issuance of multiple TINs to an individual and company mutation.



Provide enough resources in terms of Human and financial resources to ensure that tax jurisdictions are well covered and newly registered taxpayers are well supported.



The portal should be translated into major vernacular languages to ease communication for those who cannot understand English while using the e-tax platform for registration.

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9.3 AUDIT FUNCTION Whereas the ratio tax auditors to total staff at URA meets the international benchmarks, lack of adequate skills, experience and tools for Auditing remains the major challenge: 

Provide on-the-job sector/Industry specialist training to the Auditors



Sign MOUs with leading Revenue Agencies to transfer Audit skills to URA and possibly conduct joint Audits for complex cases that share tax jurisdictions.



Given the level of investments in Automation and data management, building robust risk engines is more appropriate and balance it with the required number of tax Auditors. However, this must be coupled with investment in recruitment of data management professionals



There should be a deliberate effort to retain the highly skilled tax auditors with specialized skills through a separate retention package.

9.4 SECTOR BASED PROJECTS Implement sector based projects and the following criteria can be used to select sectors; 1. Sectors that have lagged behind in terms of revenue contribution but have the potential and contributing substantially to GDP. The projects can run for six months to one year and thereafter the project activities be mainstreamed. 2. Major Government projects.

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ANNEXES

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ANNEX1: ZERO RATING SUPPLIES SECTOR

Exports

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

A supply of goods or

The exportation of goods or

Exportation of goods and

Exports

Exports and re-exports

services

taxable services

services from the United

where

the

goods or services are

Republic

of

Tanzania

exported from Uganda

provided

evidence

as part of the supply;

exportation is produced.

of

The supply of goods or taxable

services

to

export

processing

an zone

business as specified in the Export Processing Zones Act (Cap.517), as being eligible for

duty

and

tax

free

importation. The supply of coffee and tea for export to coffee or tea auction centers. The supply of agricultural produce intended for export by co-operative unions and community based societies

Tax to GDP Ratio: Comparative Study-2013

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

registered with the Tanzania Revenue Authority.

Goods leased to a lessee and exclusively used in an export country Goods used by lessee or other person used exclusively in any commercial,

financial,

industrial, mining, Fishing or professional conducted

concern in

an

export

country Donor funded Transport

The

supply

of

Transportation

of

The supply which comprises

The supply of Transportation

international transport

passengers by air carriers

of the transport of or any

services of passengers and

of goods or passengers

on international flight.

service ancillary to transport

goods

and tickets for their

of or loading, unloading,

transport;

wharfage, shore handling, storage, ware housing and handling,

supplied

in

connection with goods in

Tax to GDP Ratio: Comparative Study-2013

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

transit through the United Republic

of

Tanzania,

whether such services are supplied directly or through an agent to a person who is not a resident of the United Republic of Tanzania. Ship

stores

supplied

to

international sea or air carriers

on

international

voyage or flight. The

supply

of

taxable

services to international sea or

air

international

carriers voyage

on or

flight. The supply of services which comprise

the

handling,

parking, pilotage, salvage or towage of any foreign going ship or aircraft while in Tanzania Mainland.

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

The supply of services which comprise

of

repair,

maintenance,

insuring,

broking or management of any foreign going ship or aircraft. The

supply

including

of

goods,

food

and

beverages, for consumptions or duty free sale on aircraft or ships on journeys to destinations

outside

the

United Republic of Tanzania. Health

The supply of drugs and

The

supply

medicines;

manufacturer medicines,

by

a

of drugs

local human and

equipment which have been approved by the Minister responsible for health upon the recommendation of the Tanzania Food and Drugs Authority;

Tax to GDP Ratio: Comparative Study-2013

(b)

articles

Page 89

SOUTH AFRICA

SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

designed for use by the blind or

disabled;(c)

mosquito

coils;(d) sanitary pads.

The supply of sanitary towels and tampons Education

The

supply

educational and

the

printing

of

materials supply

services

of for

educational materials; Agriculture

The supply of seeds,

The

fertilizers,

manufacturer of fertilizers,

used

pesticides,

&

agricultural, pastoral or other

similar products which are

farming purposes as are set

necessary

forth in Part A of Schedule 2,

pesticides,

and hoes;

supply

by

a

local

insecticides,

for

use

in

agricultural purposes.

the supply is of such goods or

consumed

for

provided such supply is made in

compliance

conditions

as

with may

such be

prescribed in the said Part.

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

(Schedule 2, Part A: Animal feed,

Fertilizer,

Pesticide,

Plants-living

trees,bulbs,

roots

and

cuttings

other

plants used for cultivation. The

supply

by

a

local

manufacturer of veterinary medicines,

drugs

and

equipment which have been approved by the Minister responsible for health upon recommendation

of

the

Tanzania Food and Drugs Authority. The supply of cereals, where the cereals are grown,

milled

or

produced in Uganda; The

supply

of

The

supply

by

a

local

machinery, tools and

manufacturer of tractors for

implements suitable for

agricultural use & other tools

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SECTOR

UGANDA

KENYA

TANZANIA

use only in agriculture;

RWANDA

of a kind used in agriculture, horticulture or forestry.

The supply of milk, including milk treated in any way to preserve it; The supply of natural water, excluding bottled water, by a

National

Government,

County Government, any political subdivision thereof or a person approved by the Cabinet Secretary for the time being responsible for water

development,

for

domestic or for industrial use.

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

the goods consist of such foodstuffs as are set forth in Part B of Schedule 2, but subject to such conditions as may be prescribed in the said Part. (Part B - Brown Bread, Maize meal, Samp, mealie rice,

dried

mealies

silo

screened

for

consumption,

human

dried

beans,

lentils, milk powder, Diary powder,

Rice,

vegetables,

Fruit (not cooked), vegetable oil, Brown wheat, Eggs and Edible legumes. Manufacturing

The

supply

and

installation of Mobilet Toilets, Ekoloo Toilets, and components made from polythene with effect from 1st July 2004; and

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

The transfer of a business

7. The transfer of a business

as a going concern by a

as a going concern by a

registered person to

registered person to another

another registered person.

registered person. The

supply

by

a

local

manufacturer of fishing nets and accessories & outboat engines for fishing. The supply of sacks by local manufacturer of sacks. Financial

the supply is to the South African Reserve Bank, the South African Mint Company (Proprietary) Limited or any bank registered under the Banks Act, 1990 (Act No. 94 of 1990), of gold in the form of bars, blank coins, ingots, buttons, wire, plate or granules or in solution, which has not undergone any manufacturing process other

Tax to GDP Ratio: Comparative Study-2013

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

than the refining thereof or the manufacture or production of such bars, blank coins, ingots, buttons, wire, plate, granules or solution

goods are gold coins supplied as such and which the Reserve Bank has issued in the Republic in accordance with the provisions of section 14 of the South African Reserve Bank Act, 1989(Act No. 90 of 1989), Mining

Goods consist of petroleum oil and oils obtained from bituminous minerals, known as crude

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

the goods consist of illuminating kerosene (marked) intended for use as fuel for illuminating or heating, referred to in Fuel Item Levy number 195.10.13 in Part 5A of Schedule No. 1 to the Customs and Excise Act vendor

supplies

movable

goods, (excluding any ‘motor car’ as defined in section 1), in terms of a sale or instalment credit customs

agreement controlled

to

a area

enterprise or an IDZ operator and those goods are either— by supplier or by a VAT registered cartage contractor whose main activity is that of transporting goods

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

Trading

SOUTH AFRICA

vendor supplies movable goods, (excluding any ‘motor car’ as defined in section 1), in terms of a sale or instalment credit agreement to a customs controlled area enterprise or an IDZ operator and those goods are either— by supplier or by a VAT registered cartage contractor whose main activity is that of transporting goods the goods— (i) are supplied by a vendor to a person who is not a resident of the Republic and not a vendor and who has contracted with that vendor to deliver goods to a recipient, who is vendor in the Republic; and (ii) form part of a supply by the person reffered to in paragraph (i) to

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SECTOR

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

the recipient and are used by the recipient wholly for the purposes of consumption, use or supply in the course of making taxable supplies.

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ANNEX2: EXEMPT SUPPLIES SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

AGRICULTURE,

The supply of

Agricultural, animal husbandry

All agricultural and livestock

The supply of unprocessed

FORESTRY & FISHING

unprocessed

and horticultural services.

products, except processed

foodstuffs, animal, diary &

foodstuffs, including

ones, which are exempted from

agricultural products.

agricultural products

value added tax. However, milk

and livestock;

which is processed in local industries is exempted from this tax;

The supply of

Fish eggs and roes of tariff no.

Agricultural input and other

The supply of services of

unimproved land

0511.91.10.

agricultural and livestock

land prepration, cultivation,

equipments provided by an

planting and harvesting of

Order of the Minister;

crops.

The supply of

Animal semen other than

The supply of agricultural

machinery used for

bovine of tariff no. 0511.99.10.

implements, like

the processing of

tractors,hallows, fertilizer

agricultural or dairy

distributers etc and other

products

tools of a kind, used in agriculture, horticulture or forestry

The supply of feeds

Soya beans, whether or not

The supply of heat insulated

for poultry and

broken of tariff nos.1201.10.00

cooling tanks and aluminum

livestock

and 1201.90.00

jerry cans.

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

The supply of

Groundnuts, not roasted or

The supply of fertilizers,

packaging materials

otherwise cooked, in shell of

pesticides, insectcides and

exclusively used by

tariff no.1202.41.00.

similar products which are

the diary industry for

necessary for use for

packing milk.

agricultural purposes. Groundnuts, not roasted or

The supply of veterinary

otherwise cooked, shelled,

services, veterinary

whether or not broken of tariff

medicines, drugs and

no1202.42.00. 7. Copra of tariff

equipment designed solely

no1203.00.00.

for veterinary use.

Linseed, whether or not broken of tariff no.1204.00.00 Low erucic acid rape or colza seeds of tariff no.1205.10.00. Other rape or colza seeds of tariff no.1205.90.00. Cotton seeds, whether or not broken of tariff nos.1207.21.00 and 1207.29.00. Sesamum seeds, whether or not broken of tariff no.1207.40.00. Safflower seeds, whether or not broken of tariff

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

no.1207.60.00. Other oil seeds and oleaginous fruits, whether or not broken of tariff no.1207.99.00 Pyrethrum flower of tariff no.1211.90.20 Live Animals of chapter 1. Meat and edible meat offals of chapter 2 excluding those of tariff heading 0209 and 0210. Fish and crustaceans, muluscs and other quaticinveterbrates of chapter 3 excluding those of tariff heading 0305, 0306 and 0307. Unprocessed milk. Fresh birds eggs in shell Edible Vegetables and certain roots and tubers of chapter 7, excluding those of tariff heading 0711. Edible fruits and nuts, peal of citrus fruits or melon of

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

chapter 8 excluding, those of tariff heading 0811, 0812, 0813 and 0814. Cereals of chapter 10, excluding seeds of tariff heading 1001,1002 and 1003 Fertilizers of chapter 31. Plants and machinery of chapter 84 and 85. Maize (corn) seed of tariff no.1005.10.00. Taxable supplies, excluding motor vehicles, imported or purchased for direct and exclusive use in the construction of a power generating plant, by a company, to supply electricity to the national grid approved by Cabinet Secretary for National Treasury upon recommendation by the Cabinet Secretary responsible for energy.

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

Tax supplies, excluding motor vehicles, imported or purchased for direct and exclusive use in geothermal, oil or mining prospecting or exploration, by a company granted prospecting or exploration license in accordance with Geothermal Resources Act (No. 12 of 1982), production sharing contracts in accordance with the provisions of Petroleum (Exploration and Production) Act (Cap. 308) or mining license in accordance with the Mining Act (Cap. 306), upon recommendation by the Cabinet Secretary responsible for energy or the Cabinet Secretary responsible for mining, as the case may be Agricultural pest control products. Syringes, with or without

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SOUTH AFRICA

SECTOR

UGANDA

KENYA

RWANDA

TANZANIA

needles of tariff no. 9018.31.00 Disposable plastic syringes of tariff no. 9018.31.10 Other syringes with or without needles of tariff no. 9018.31.90. Tubular metal needles and needles for sutures of tariff no. 9018.32.00 Catheters, cannulae and the like of tariff no. 9018.39.00

Tax to GDP Ratio: Comparative Study-2013

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SOUTH AFRICA

ANNEX3: PAYE EXEMPTIONS UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

TRANSPORT EXPENSES

Passage to or

Passages between

If an employer provides for travel

Travel

from, Uganda

Kenya and any place

costs for the employee, his/her

expenses-

incurred by an

outside Kenya paid for

spouse and up to four children

fixed cost-

employer on

by the employer,

between the place of work and the

business cost

appointment or

provided the employee

place of domicile which is more

claimed

termination, if

is not a Kenyan citizen,

than 20 miles away, this is not

against

the employee is

was recruited outside

included in income from

allowance

not a Ugandan

Kenya, and is in Kenya

employment. For example,

citizen, was

solely for the purpose

employer-provided passage costs to

recruited outside

of his employment

take up employment or to go on

of the country

annual leave for the employee and

and is in Uganda

his/her family are not included

solely for the for the purpose of serving the employer Travel expensesactual business cost Tax to GDP Ratio: Comparative Study-2013

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UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

MEDICAL

Re-imbursement

Medical services or

Medical expenses of the employee,

Medical

EXPENSES

or discharge of

medical insurance

the employee's spouse and up to

expenses

an employee’s

cover provided by an

four children is excluded, so long

medical

employer for a full time

as any allowance is actually used

expenses.

employee or his

either for medical expenses or

beneficiaries , provided

medical insurance and is available

that for non-whole time

on a non-discriminatory basis to

service directors the

all employees of the employer.

value of non-taxable benefit is up to Kshs 1,000,000==USD11,49 4 Medical expenses or medical insurance cover paid by a partnership subject to a limit of Kshs 1,000,000==USD 11,494

Tax to GDP Ratio: Comparative Study-2013

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UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

INSURANCE

Insurance premiums on the life of the employee for his benefit or that of his defendants where the employer is a taxable person

ALLOWANNCE

Any allowance

Any allowance that is solely

Subsistence

given for

reimbursement to the employee of

allowance –

accommodation

expenditure spent wholly and

local

and travel

exclusively in the production of the

expenses or

income of the employer is excluded

meals and

from employment income

refreshment while on duty, as long as it does not exceed the cost actually or likely to be incurred Tax to GDP Ratio: Comparative Study-2013

Page 107

UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

MEALS

Value of meals

On premises cafeteria services

and or

available on a non-discriminatory

refreshments

basis to all employees of an

provided on

employer are not included as a

premises

benefit in kind. Small benefits that

operated by or

are administratively impracticable

on behalf of the

for the employer to account for

employer

according to which employee

provided that it

benefits are also excluded.

is for the benefit of all its full time employees

EDUCATION

Payment by an employer of education fees of an employee’s defendants or relatives

Tax to GDP Ratio: Comparative Study-2013

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UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

if taxed on the employer

The value of a right or option to

Interest income from asset backed securities

acquire shares granted to an CAPITAL MARKETSSHA RES/SECURIT IES & BONDS

employee under an employee share acquisition scheme Interest income from listed bonds with a maturity of atleast 3years used to raise funds for infrastructure and social services

RETIREMENT

Contribution to

Employers contribution

a retirement

to a pension or

fund by an

provident fund or

employer for the

individual retirement

Tax to GDP Ratio: Comparative Study-2013

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UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

benefit of the

fund

employee or his dependants NSSF

The first Kshs. 600,000 ==USD6896 of NSSF benefits

PENSION

Monthly or lump sum

Pension fund

pensions received by

contributions

pensioners aged 65 years or more Total pensions and retirement annuities received by a resident individual from an unregistered pensions fund or scheme or individual retirement fund, the contributions to which have not been deducted and income of which has been taxed

Tax to GDP Ratio: Comparative Study-2013

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UGANDA

KENYA

TANZANIA

RWANDA

SOUTH AFRICA

OTHERS

Benefits where

Benefit from the employer

the aggregate

providing a motor vehicle or use of

value of all

motor vehicle to the employee for

benefits is less

his/her personal use is generally

than

included as a benefit in kind.

10,000Shillings=

However, if the employer does not

=4USD a month

claim a deduction for the costs of

Donations

providing the vehicle, it is excluded from the income of the employee. As Government does not pay income tax and therefore does not claim deductions, this means that Government employees will not pay tax on this benefit. Income protection contributions Depreciation Home office expense

Tax to GDP Ratio: Comparative Study-2013

Page 111

ANNEX4: Names of Tax professionals met at the Revenue Agencies No. Name 1. Mr. Tonedeus Muganyizi

Designation Director- Research & Policy

Department/Division Research and Policy Department

Revenue Agency TRA

2.

Director, Planning and Modernization Director Taxpayer Services and Tax Education Director, Human Resources and Administration Commissioner Deputy Commissioner, Operations Manager, Ilala Tax Region

Planning and Modernization Department Taxpayer Services and Education Department Human Resources and Administration Department Large Taxpayers Department Domestic Revenue Department

TRA

Domestic Revenue Department

TRA

Manager, Kinondoni Tax Region Manager-Debt Management Manager, Macro Economy

Domestic Revenue Department

TRA

Domestic Revenue Department Research & Policy Department

TRA TRA

Assistant Manager- Debt

Domestic Revenue Department

TRA

Research Officer (Public Finance), Deputy Commissioner

Research and Policy Department

TRA

Taxpayer Services

RRA

3. 4. 5. 6.

Mrs. Mary Ngelela Maganga Mr. Richard M. Kayombo Mr. AbuBakar Kunenge

7.

Mrs. Neema Mrema Mrs. Christine Shekidele Mr. Luvanda Ngoloka -

8.

Mr. Haraka M. Mittah -

9. 10.

12.

Ms Matilda Kunenge Mr. Robert Rutajama Manager, Ms Catherine Nkelebe Assistant ManagerDebt Mr. Kailembo, Yahya -

13.

Drocella Mukashyaka

11.

Tax to GDP Ratio: Comparative Study-2013

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TRA TRA TRA TRA

No. 19. 20. 21. 22.

Name James Buyinza Grace Murekeka Alex Guma Seth Muhirwa

Designation Head of Media Division Senior Customers Relations Receptionist Deputy Commissioner

23. 24. 25. 26.

Frank Kamugisha Robert Mugabe Patrick Mwesigye Charles Kabera

27. 28. 29. 30. 31. 32.

Richard Dada Lawrence Gakwaya Claudien Uzabakiliho Agnes Kanyagyeyo Mukama Denis Ronald Mutabazi

33. 34.

Gaudence Uwimana Dr. Thami Madinane

Head of Personnel Division Deputy Commissioner Ag. Commissioner Head of Risk Management Unit DC-SMTO Head of Appeals Division Training Coordinator Deputy Commissioner Head of Research Division Senior Research & Policy Analyst Head of Statistics Division Executive and Chief Economist

35.

Ms. Mamiky Leolo

36.

Mrs. Wynnona Steyn

37.

Mr. Willem Boonzaaier

38. 39. 40. 41. 42.

Mr. Peter Richer Ms. Vihitha Beharee Mr. Jacques Meyer Mr. John Hanssen Ms. Elizabeth Gavin

Tax to GDP Ratio: Comparative Study-2013

Department/Division Taxpayer Services Taxpayer Services Taxpayer Services Human Resource and Administration HR&A Revenue Protection Department Quality Assurance Domestic Taxes Department Small Taxpayer Office Legal Training Planning & Research Planning & Research Planning & Research Planning & Research Strategic Economic Analysis Unit Revenue Planning, Analysis. Reporting and Research Division Revenue Planning, Analysis. Reporting and Research Division Revenue Planning, Analysis. Reporting and Research Division

Revenue Agency RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA RRA SARS SARS SARS SARS SARS SARS SARS SARS SARS

Page 113

No. Name 43. Ms. Lize Odendaal 44. Ms. Mandy Beauty Moyo 45. Mr. Thomas Radzilani 46. Ms. Prineven Moonsamy Tyrone Truter 47. Mr. Maropeng Sebothoma 48. Renier Kriel 49. Mr. Willie Swart 50. Mr. Denzil Gallop 51. Ms. Kiyasha Thambi 52. Mr. Markham Glasenberg 53. Mr. Daniel Nakeng 54. Mr. Martin Malebo 55. Ms. Nthabiseng Matjele 56. Mr. Bhekinkosi Mbambo

Designation

Tax to GDP Ratio: Comparative Study-2013

Department/Division

Revenue Agency SARS SARS SARS SARS SARS SARS SARS SARS SARS SARS SARS SARS SARS SARS

Page 114

REFERENCES

AFRICAN DEVELOPMENT BANK GROUP (2010): Domestic Resource Mobilization for Poverty Reduction in East Africa. South African Case Study. BANK OF UGANDA (2004): The Financial Institutions Act 2004 ERIA HISALI (2010): Tax Revenue Productivity and Determinants in Uganda EBRILL. L, KEEN. M AND SUMMERS. V (2001): The Modern VAT. GIESECKE. J.A AND TRAN HOANGNHI (2010): A General Framework for Measuring VAT compliance rates. Centre of Policy Studies Monash University. GOVINDA. M. RAO AND KAVIATA. R ( ): Trends and Issues in Tax Policy reforms in India. National Institute of Public Finance and Policy. HONG KONG INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS (2007): Broadening Hong Kong’s Tax base. INTERNATIONAL MONETARY FUND (2013): World Economic Outlook 2013; Washington DC INSTITUTE OF ECONOMIC AFFAIRS (2012): Informal Sector Taxation in Kenya INTERNATIONAL TAX DIALOGUE (2010): Revenue Administration in Sub-Saharan Africa. INTERNATIONAL TAX DIALOGUE (2005): Value Added Tax Experiences and Issues; Background Paper ITCD Conference, Rome Italy. JACOBS. A, DR. JAMES WOOSTER, AND LUIS F. PANIAQUA (2012): Status of recent Tax reforms in Jamaica and Benchmarking Tax system performance. KENYA (REV 2010): Income Tax Act Kenya. LUIS FEMANDO WASILEWSKI (2000): The economic development and taxation system. A comparative study of Brazil and Japan. LUKAS R. WALPURGA AND KOHLER T (2011): Austria’s Tax Structure In International Comparison: A Statistical & Economic Analysis; Monetary Policy & Economy-Austrian Institute of Economic Research MARK GALLAGHER (2005): Benchmarking Tax Systems MBILINYI. A AND MUTALEMWA. D (2010): Informal Sector taxation in Tanzania. Policy Brief series No 12-2010. Tax to GDP Ratio: Comparative Study-2013

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PRICE WATER HOUSE COOPERS (2008): Tax Function Effectiveness Best Practice Checklist SOUTH AFRICAN REVENUE SERVICES (2013): Annual Report 2012/13 SOUTH AFRICA (1991): Value Added ACT. TANZANIA REVENUE AUTHORITY (2011): Review of Informal Sector for Taxation Purposes in Tanzania TAX JUSTICE NETWORK (2012): Taxation and the Informal Sector. UGANDA REVENUE AUTHORITY RESEARCH PAPER (2010): Raising the Tax to GDP ratio in Uganda UGANDA (1997) Income Tax Act Uganda VICTORIA. P, GRIGG. J, SHAY. S AND SWISTAK. A (2011): Issues in the changing economy, Uganda. IMF report.

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