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REVENUE MOBILIZATION AND CHALLENGES

REVENUE MOBILIZATION AND CHALLENGES. Ministry of Finance, Planning and Economic Development September, 2016. Outline. Objective of Taxation Domestic Revenue Performance Measures to enhance Domestic Revenue Mobilization Obligations by Local Government

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REVENUE MOBILIZATION AND CHALLENGES

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  1. REVENUE MOBILIZATION AND CHALLENGES Ministry of Finance, Planning and Economic Development September, 2016

  2. Outline • Objective of Taxation • Domestic Revenue Performance • Measures to enhance Domestic Revenue Mobilization • Obligations by Local Government • Taxation and Petroleum Sector • Conclusion 2

  3. Objective of Taxation • Domestic Resource Mobilization Taxation is a source of financing Government re-current and development expenditure. i.e. :- • Payment of salaries for civil servants • Funding long term projects • Construction of Roads: e.g. Atiak-Nimule (35Km), Maracha and Koboko Town Roads (6.9Km), Kamwenge-Fort Portal (65Km), Kafu-Kiryandongo(43Km), Bundibugyo Town Roads (6Km), and Rwentobo-Kabala-KatunaRoad (65Km). • Schools (about 500 schools have been constructed in Uganda) • Construction and equipping of Hospitals & Health Centers.

  4. Objectives .. Cont’d • To encourage investment • To protect society from undesirable or harmful products • Protect local industries from foreign competition • To promote equality in the distribution of wealth and income

  5. Resource Envelope for FY 2016/17 • Total approved budget for FY 2016/17 is UShs.26,361 billion; of which:- • UShs.18,407.7 billion is allocated for MDAs and LGs • UShs.4,977.7 billion is for domestic debt refinancing • UShs.169.18 billion is for external debt repayments • UShs.2,022.9 billion is for interest payments • UShs.111 billion is for settlement of domestic arrears • UShs.672 billion is for Appropriation-In-Aid (AIA), which are funds generated by MDAs and authorized to be spent at source by the same institutions.

  6. Domestic Revenue Mobilization • The tax GDP ratio remains low at 13.2% compared to the Sub Saharan Africa average of 17% • Domestic revenues are projected at Shs.12,914.3 billion in FY 2016/17 up from Shs.11,598 billion in FY 2015/16. • This is to be achieved through improving efficiency in tax administration, strengthening enforcement of collections, reducing the size of the informal sector and increasing investment in tax collection infrastructure. • In FY 2016/17, total external financing of the budget amounts to Shs.6,524.5 billion (loans and grants), which is equivalent to about 25% of the national budget. • The above comprise of Shs.2,520.8 billion in concessional loans, Shs.2,513.7 billion in non-concessional loans and Shs.1,490 billion in grants. A significant proportion of these funds are for financing critical infrastructure projects.

  7. Projections for FY 2016/17

  8. Measures to Enhance Domestic Revenue Mobilization

  9. Domestic Revenue Mobilization • The informal sector accounts for 43.1% of Uganda’s total economy (source: UBOS) • However, Government revenue collections is not yet at par with GDP growth rates. Our tax to GDP ratio is only 13.2%, and lowest in Sub-Saharan Africa (average: 17%) • This disparity is due to a huge informal sector that continuously escapes regulations, taxation or observation. • It is mostly hidden and the operations are unreported or unknown.

  10. TAXPAYER REGISTER EXPANSION PROGRAMME (TREP)

  11. Taxpayer Register Expansion Programme (TREP) • TREP is an initiative by MFPED to build synergies with other key stakeholder institutions, including; URA, URSB, KCCA and Local Governments to widen the tax base through formalization of the informal sector.

  12. How TREP Works • The framework is aimed at streamlining and speeding up the process of business registration from URSB, Tax Identification Number (TIN) from URA and application for Trading License from KCCA all at one stop shop. • To register a business, one first carries out a name search with URSB. • Then continues to register the business name and obtains certificate of registration within three days. • The taxpayer then applies for a TIN which is processed to completion within two days on submission of all documents. • Thereafter KCCA assess the client and issues a trading license within one day.

  13. TREP…. Cont’d • TREP will generate a rich pool of data which is captured centrally and shared by all the collaborating agencies. • The exercise has an on-spot advantage, given it takes services closer to the business premises. • TREP is an avenue for collaborating agencies to sensitize business people on their rights and obligations and advantages of having a legally registered business • Under TREP, business persons are saved from the exaggerated costs of obtaining through agents and fraud. • It is expected to result into complete turnaround in business growth, minimize the cost of doing business and improve voluntary compliance.

  14. TREP…. Cont’d • The programme was piloted by 34 Urban Municipal Local Governments following the signing of a Memorandum of Understanding between MFPED, KCCA, URA and URSB. • So far nine (9) one-stop shops are being operationalized under KCCA • There is continued education and sensitization of the public on their rights and obligations

  15. TAX OBLIGATIONS

  16. LGs Obligations • Local Governments should comply with the tax laws (Sec 116, Sec 119 & 124 of ITA) and URA procedures with respect to remitting the applicable taxes. • Once taxes are withheld, LGs should promptly remit them to URA in line with the legal requirements • LGs are also reminded of the obligation to budget for taxes under work plans and procurement plans in a timely manner to affect revenue performance.

  17. Budgeting for Taxes • Taxes should be budgeted for and remitted as follows:- • Value Added Tax (VAT) should have first call on the resources and must be adequately budgeted for, except for items exempted under the VAT Act. • PAYE withheld from employees must be remitted to URA promptly as stipulated under the law. • Import duty must be paid on procurement of imports by LGs; and • Withholding tax should be remitted as soon as withheld at source.

  18. Filling of Returns • On several occasions, Uganda Revenue Authority has reported non-filing of PAYE and Withholding tax returns by a number of LGs. • Failure to file returns and remit the appropriate tax to Uganda Revenue Authority hinders public service delivery. • Returns must be submitted by due date to avoid penalties for late filing for each tax period as well as any estimated assessments that arise out of non submission of returns.

  19. PETROLEUM SECTOR

  20. Petroleum Revenue • Government‘s objective is to ensure appropriate collection of revenues and use them to create ever lasting value for the entire nation. • Revenues from Oil & Gas include both tax and non-tax revenues such as royalties, signature bonuses and surface rental fees, among others. • In order to promote social cohesion and accountability, the PFMA, 2015 provides for a prescribed sharing of royalty revenues between Central Government and Local Governments where the natural resources are discovered. • Government aim is to ensure equity, openness and transparency in utilisation of the revenues, taking into account the interests of LGs and other stakeholders.

  21. Petroleum .. Cont’d • The sector presents another opportunity for Uganda to generate revenue flow to finance the budget. • Estimated oil in place is 6.5 billion barrels of which 1.4-1.7 billion barrels is expected to be recovered. • Oil recovered is shared between the Government and licensees. • We are expected to start the development phase which requires investment of about USD 20bn. • Government is in advanced stages of issuing exploration licenses to four companies. • This will also increase activities in oil and gas sector.

  22. Petroleum .. Cont’d • Eight (8) production licenses have been granted to Tullow and Total E&P. • Production is expected to start in the year 2020 • The sector requires specialized and certified goods and services • Need for strategies to benefit from sector, such as:- • Building capacity, • Sensitizing local community to do projects like poultry faming, growing of crops (i.e. beans, peas, cassava, millet, potatoes, maize, ground nuts cabbages, fruits), livestock and fish farming to supply the sector.

  23. Petroleum .. Cont’d • For registered companies, there is an opportunity to partner with international oil companies and service providers in a number of areas, such as:- • Supply goods and services: exploration, drilling, logistics, waste management and warehousing, refinery and pipeline. • Processed goods: beverages, food, construction materials, shall have market in the sector. • Accommodation services: hotels and lodges, camps.

  24. Conclusion • The Ministry attaches great importance on the Local Government budget consultations, in view of enhancing domestic revenue mobilization . • As key stakeholders, LGs are encouraged to support Central Government in ensuring tax compliance as well as value for money in public expenditure management. • In the same way, the petroleum industry presents many opportunities and benefits. • Government is thus committed to managing petroleum revenues in order to provide ever lasting benefits to the society.

  25. THANK YOU! Q & A

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