Boosting revenue collection from HNWI's in Uganda
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Transcript of Boosting revenue collection from HNWI's in Uganda
ü Collaborative research (URA , External researcher&
ICTD)
ü Supported by ICTD /IDS and Milly I. Nalukwago
ü Phase I&II
ü Team: Ronald Waiswa (URA), Patrick Lumala
( U R A ) , S u s a n N a k a t o ( U R A ) & J a l i a
Kangave(External)
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ü Low tax collections (Uganda has 12.92% tax to GDP ratio compared to 30
-40 % in developed economies).
ü Poor countries collect very little from the rich.
ü Capital rich countries (2009) - UK (top 0.5%: 17% ); Germany (top 0.1%:
8%); USA (top 1%: 40% );
ü Personal income taxes remain largely un tapped in Uganda (Less than 1% in
Domestic taxes annually) .
ü Income taxes mostly target corporate entities.
ü They have the potential to contribute significantly to total tax revenue.
ü These individuals often engage in complex commercial transactions,
ü The compliance behavior of this group of taxpayers is bound to have a
bearing on the integrity of the tax system as a whole.
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i. Defining, categorizing and identifying potential HNWIs in Uganda;
ii. Analyzing the legal and URA administrative strengths and weaknesses in taxing this segment of taxpayers; The second phase will aim at:
iii. Establishing a threshold that distinguishes these individuals from other taxpayers;
iv. Developing a comprehensive compliance behavior monitoring plan for this group of taxpayers.
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1. Interviews. ü URA officials; Kampala Capital City
Authority; Ministry of finance, Bank of Uganda, Audit Firms, commercial bank, academician in the law school of Makerere University
2. Data matching and analysis, External data & Internal URA data for FY 2011/2012 – 2014/2015; ü Taxpayer registration details as at January
2015; ü Tax payments data for 2011/2012 –
2013/2014; ü Stamp duty payments on land transfers
2012; ü Audit data 2011/2012 – 2013/2014. ü KCCA Property register
3. Textual analysis, ü Domestic laws; ü Parliament hansards; ü Academic articles; ü URA reports; ü Budget speeches; ü Newspaper articles; ü Lifestyle magazines
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Wednesday,February10,16 6
1) There are potential HNWIs in Uganda. These are in all sectors of the economy both private and public. Have multiple directorships (16 directorship in more than 5 top tax paying companies). • Majority are in whole sale and retail sector but those
with the highest potential are in; • Financial and insurance services, • Real estate sector,(88.52 % individuals purchased land of
above 500Mn but paid no income taxes in 3 financial years.) • Professional and technical services (3 of the 11 billionaires
in the CEO magazine were professionals, 2 lawyers & 1 doctor). • Manufacturing, • Construction, • Public sectors (Accountants, procurement officials)
Sectors No. of taxpayers
Total income tax (Bns)
Average Revenue (Bn)
K-Financial and insurance activities 3 2.17 0.72
L-Real estate activities 4 1.68 0.42 M-Professional, scientific activities 7 2.71 0.39
C-Manufacturing 2 0.67 0.33
F-Construction 1 0.30 0.30
N-Administrative and support service 2 0.46 0.23
J-Information and communication 1 0.15 0.15
S-Other service activities 4 0.21 0.05
G-Wholesale and retail trade; 50 0.92 0.02
H-Transportation and storage 2 0.03 0.02
I-Accommodation activities 2 0.02 0.01 7
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2.) The huge informal sector (49% of the economy) The missing aspect in the definition of informal sector To what extent are large commercial enterprises informal? There is a large informal sector within the formal sector. 3) The politics ( pure economic elites, civil servants, politicians) ü Politicians and civil servants as business people: schools, hotels,
media houses and land ; Out of 71 officials studied, only one remitted income tax. Companies they are associated with also largely non-compliant; 4) Little aggressive tax planning but massive tax evasion
StrongLegalFrameworkTaxation of Individuals: § Propertied individuals – rental
tax; § Professionals – taxation of
directors and partners; § O f f s h o r e i n v e s t m e n t s :
residence based taxation; § Additional 10% tax for income
in excess of UGX 120m annually
Legalframework…§ A n t i - a v o i d a n c e r u l e s
( t r a n s a c t i o n s b e t w e e n associates)
§ Penalty regime: non-filing, underpayment of taxes, false or misleading statements and failure to keep proper records;
§ Politically exposed persons: Anti-Money Laundering Act - suspicious transactions and illicit financial flows
Administra6veStrengths• HNWI segment operationalized
in September 2015 (5 staff); • 52 HNWIs: 11.22Bn • LTO: top 50 individuals based
on tax contribution and all individuals paying more than UGX 4 billion per year;
• VIP Taxpayer Segment (1 July 2015): powerful government officials and individuals with potential to influence large masses
Administra6veStrengths…• Rental Project (July 2014): As
at 2 January 2015, it had added 9,606 properties to the property register BUT still only 14.1% of KCCA register.
• Ta x p a y e r R e g i s t r a t i o n Expansion Project: By June 2015, TREP had added 47,647 taxpayers to the URA Taxpayer Register;
• E-Tax System (2009): almost all the tax is collected through e-tax;
Taxation of Individuals: § Individuals account for 92.5% of taxpayer register;
§ 68% employees; 15% business income; 1% rental income and 16% other income;
§ Registration doesn’t necessarily translate into tax payment. In FY
2013/2014, with the exception of employees, only 13% of the remaining individuals on tax register paid taxes;
§ Mismatch between customs duties(8%) and income taxes(<1%). FY 2013/2014: four individuals paid over UGX 1 billion in customs duties but only two paid income taxes. Twelve individuals paid over UGX 500m in customs duties but none remitted income taxes;
§ Enforcement of requirement of directors to file returns (2013). FY 2013/2014 – only 5% directors remitted taxes, some as low as USD $5.38 despite directorship in top taxpaying companies;
§ Sample of top 60 lawyers in the country (International
Financial Law Review). For each of the three financial years studied, less than a third of the lawyers were remitting taxes;
§ Allowances as part of employment income are misused for the
public sector;(funded projects allowances, meetings etc)
§ Relaxation of rules relating to TINs to allow faster system implementation e.g. e-tax requirement for businesses to include TINs of all their employees before using system; However, URA has started with all government workers having TINs
§ Tax clearance certificates for transfers of funds in excess of 2500
currency points outside Uganda; § Difficulty in implementing provisions relating to taxation of trusts
(largely informal sector).
Mechanisms § E-tax, ASYCUDA and Sun
Systems; § Joint Compliance Committee; § MOUs with other government
agencies and some revenue authorities;
§ Sharing of information under DTAs.
Hiccups § Silo mentality within URA; § Limitations on use of systems
within URA departments; § Third party information: utilization
of information from commercial banks;
§ Different levels of automation – other government agencies;
§ Lack of central management system for MOUs;
§ Accuracy and comprehensiveness of data;
§ Ability and capacity to analyse data
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Targeted at taxpayers
§ Encouraging quasi-voluntary compliance; tax bargains
§ Dealing with non compliance.
Tax education & amnesties; § Deal with deliberate non
compl iance; consumption taxes, taxing corruption.
URA & Government § Prioritize individual taxpayers
§ Building tax morale; (account for the tax, equality in taxation, fight corruption)
§ Tackling the problem of the informal sector; Strengthen T R E P, m i n i m i s e c a s h transactions
§ Strengthening the capacity of URA officials (Audit & Analysis)
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Thank you!!!!!!
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