Uganda Revenue Authority Research Articles

Technology and the state: Building capacity to tax via text

The ability of the state to collect tax revenue is a crucial indicator in the process of economic development, yet the functioning of tax compliance in low-capacity countries remains poorly understood. Using a randomized evaluation, I study a simple text message reminder scheme implemented by the Uganda Revenue Authority, which increases tax compliance by 7%. This average effect masks substantial treatment effect heterogeneity by an index of the presence of public services, measured via a granular, nationwide dataset on government service provision. The finding that the treatment was most effective where the state is least present shows how digital technology can extend beyond the brick-and-mortar presence of the government, expanding the reach of the state.

Tax Education and Income Tax Filing Compliance among Small Taxpayers in Mbarara City

Purpose: This study aimed at establishing the relationship between tax education and income tax filing compliance among small taxpayers in Mbarara city. The study was driven by the fact that despite Uganda Revenue Authority’s efforts to improve tax compliance, income tax filing compliance is still low among small taxpayers in Uganda in general and Mbarara city in particular.
 Materials and Methods: A cross-sectional study design was used to collect data from 33,979 small taxpayers in Mbarara city out of which 31,324 were individual taxpayers while 2,655 were non-individual taxpayers. The sample size included 380 respondents out of which 350 were individual taxpayers while 30 were non-individual taxpayers. Systematic random sampling was used to select respondents from each of the six divisions of Mbarara city. Data was analyzed using SPSS version 26.0 where correlation coefficients were generated and presented in a table.
 Findings: The correlation analysis revealed that tax education was positively and significantly related to taxpayers’ income tax filing compliance (r=.631, p<0.05). Based on the findings, the study concludes that tax education plays a crucial role in improving income tax filing compliance among small taxpayers.
 Implications to Theory, Practice and Policy: The study recommends a need for the government and tax authorities, in this case, Uganda Revenue Authority to put in place strategies and programs aimed at improving awareness about income tax filing. Some of these strategies include intensifying tax education and outreach services of the mobile tax office ‘Tujenge Bus Services’ to all locations; introducing basic tax education at earlier stages of formal education such that citizens are informed about their future obligations to file income tax returns; translating all information about income tax filing in different local languages and publishing the same in print format for easy understanding. The study contributed significantly to the Theory of Reasoned Action by highlighting the role of education and sensitization in increasing taxpayer awareness about tax and improving voluntary income tax filing compliance. This will help the government to put in place policies that should be implemented by Uganda Revenue Authority to improve income tax filing compliance.

Taxpayer Perception and Income Tax Filing Compliance among Small Taxpayers in Mbarara City

Purpose: This study is about establishing the relationship between taxpayer perception and income tax filing compliance among small taxpayers in Mbarara city. The study is driven by the fact that despite Uganda Revenue Authority’s efforts to improve tax compliance, income tax filing compliance is still low among small taxpayers in Uganda in general and Mbarara city in particular.
 Materials and Methods: A cross-sectional study design was used to collect data from 33,979 small taxpayers in Mbarara city out of which 31,324 were individual taxpayers while 2,655 were non-individual taxpayers. The sample size included 380 respondents out of which 350 were individual taxpayers while 30 were non-individual taxpayers. Systematic random sampling was used to select respondents from each of the six divisions of Mbarara city. A questionnaire method was employed in data collection where self-administered 5-point Likert type questionnaire with a Content Validity Index (CVI) of .91 and a Cronbach’s alpha (α) of .86 was used in data collection. Data was analyzed using SPSS version 26.0 where correlation coefficients were generated and presented in a table.
 Findings: Results from the correlation analysis revealed that taxpayer perception was positively and significantly related to income tax filing compliance (r=.715**, p<0.05). The study concludes that efforts aimed at improving taxpayer perceptions play a significant role in improving income tax filing compliance.
 Implications to Theory, Practice and Policy: The study recommends a need for the government and tax authorities, in this case, Uganda Revenue Authority to put in place strategies and programs aimed at changing individual perceptions, social understanding and personal motivations regarding income tax filing. Some of these strategies include intensifying tax education and outreach services of the mobile tax office ‘Tujenge Bus Services’ to all locations; introducing basic tax education at earlier stages of formal education such that citizens are informed about their future obligations to file income tax returns; translating all information about income tax filing in different local languages and publishing the same in print format for public access at no cost; and recruiting more tax agents within Mbarara city who can assist small taxpayers in income tax filing at a reasonable fee. The assumptions of the Motivational Posturing Theory could also be relevant in assisting the tax authorities to change the personal and societal perceptions about income tax filing and motivate them to willingly comply with their filing obligations. The study has significant implications for policy making as it identifies a need for government and tax authorities to establish policies and offer incentives and motivational postures that prioritize voluntary compliance rather than introducing sanctions to enforce income tax filing compliance.

The Mediating Effect of Taxpayer Perception in the Relationship between Tax Education and Income Tax Filing Compliance among Small Taxpayers in Mbarara City

Purpose: This study is about establishing the mediating role of taxpayer perception in the relationship between tax education and income tax filing compliance among small taxpayers in Mbarara city.
 Materials and Methods: The study used cross-sectional research design on a study population of 33,979 small taxpayers with a sample size of 380 respondents in Mbarara city. Systematic random sampling was used to select respondents while data was collected using a questionnaire tool whose validity (Content Validity Index) and reliability (Cronbach’s Alpha) were ascertained before data collection and found to be above 0.70. The collected data was analyzed with the aid of SPSS version 26.0 to generate regression coefficients which were exported to an Online Medgraph Calculator to determine mediation effect, significance and path analysis. 
 Findings: The regression analysis results revealed that taxpayer perception had a significant partial mediating effect (βmd=.366, p<0.05) on the relationship between tax education and income tax filing compliance among small taxpayers in Mbarara city. Based on the findings, the study concludes that efforts aimed at improving taxpayer perceptions play a significant role in strengthening the relationship between tax and income tax filing compliance.
 Implications to Theory, Practice and Policy: The study recommends a need for the government and tax authorities, in this case, Uganda Revenue Authority to put in place strategies and programs aimed at changing individual perceptions, social understanding and personal motivations regarding income tax filing. Some of these strategies include intensifying tax education and outreach services of the mobile tax office ‘Tujenge Bus Services’ to all locations; introducing basic tax education at earlier stages of formal education such that citizens are informed about their future obligations to file income tax returns; translating all information about income tax filing in different local languages and publishing the same in print format for public access at no cost; and recruiting more tax agents within Mbarara city who can assist small taxpayers in income tax filing at a reasonable fee. The assumptions of the Theory of Reasoned Action, Social Influence Theory and Motivational Posturing Theory could also be relevant in assisting the tax authorities to change the personal and societal perceptions about income tax filing and motivate them to willingly comply with their filing obligations. The study has significant implications for policy making as it identifies a need for government and tax authorities to establish policies and offer incentives and motivational postures that prioritize voluntary compliance rather than introducing sanctions to enforce income tax filing compliance.

How to improve tax compliance by wealthy individuals? Evidence from Uganda

AbstractMotivationAppropriately taxing the richest is a priority for African governments, which need tax revenues to invest and pay for public services. In Uganda, the revenue authority launched a unit in 2015 to monitor the tax affairs of high‐net‐worth individuals (HNWIs) and very important persons (VIPs), 393 individuals in all. The unit combined persuasion, assistance, and enforcement.PurposeTo establish the extent to which the unit was able to improve tax compliance by the rich.Methods and approachIn collaboration with the Uganda Revenue Authority, this study builds on taxpayer‐level data on tax filing and payment. The analysis employs a standard difference‐in‐difference framework, exploiting the timing of the launch of the unit (September 2015). It also makes use of the existence of the target group of 393 wealthy individuals and a group of another 1,731 potentially wealthy individuals who have been identified but never included in the unit's operations owing to limited resources. We match the groups using a propensity score algorithm.FindingsThe unit has been only partially successful. While the unit increased the probability of filing a return, especially by VIPs, taxpayers declared less on different measures, with no impacts on tax liability. On tax payments, only a small and significant positive impact was found, again due to complex offsetting responses across tax categories. This study also measures the spillover effect on companies controlled by the richest—again documenting complex compensating reactions and no meaningful impacts on tax take. Lastly, while deterrence is more effective for HNWIs, taxpayer assistance and public shaming are more relevant for VIPs.Policy implicationsThis case shows that the rich can be identified and their tax monitored. It also shows the limits of what can be achieved. The Uganda unit lacked staff; it needed twice as many people to monitor the tax of wealthy persons adequately. Moreover, it was hamstrung by the difficulties of sharing data between different departments of the Tax Authority, among government agencies, and between government and key agents such as banks. Ultimately, the unit did not have the staff and data to challenge the tax avoidance schemes deployed by wealthy people and the companies they own.

Implementation Success of Automated Systems for Customs Data in Developing Countries. An Empirical Evidence of Uganda Revenue Authority

Implementation Success of Automated Systems for Customs Data in Developing Countries. An Empirical Evidence of Uganda Revenue Authority

Factors That Affect Tax Audit Effectiveness: a Case Study of Uganda Revenue Authority

Factors That Affect Tax Audit Effectiveness: a Case Study of Uganda Revenue Authority

Implementation success of automated systems for customs data in developing countries: empirical evidence of Uganda revenue authority

Implementation success of automated systems for customs data in developing countries: empirical evidence of Uganda revenue authority

Gross turnover assessment and tax compliance in Uganda’s small businesses: a deep inquiry on the certainty of presumptive tax law

PurposeThis study aims to investigate the certainty of small business (SB) taxpayers about the presumptive tax law concerning the assessment of income tax based on gross turnover and how this impacts their income tax compliance.Design/methodology/approachThe study adopted the exploratory research design. The saturation point was attained upon interviewing nine owners of SB enterprises, eight tax officers from the Uganda Revenue Authority and eight tax consultants. Themes were identified and explained using verbatim texts from the various interviews. Data were analyzed using the content analysis technique.FindingsThe findings indicate that SB taxpayers are uncertain about the nature of the presumptive tax, that it is assessed based on annual sales, indicators used to determine gross turnover and their actual tax liability. This has occasioned resistance to the tax system and inhibited voluntary compliance. SB taxpayers thus opt to wait for the tax officers to make tax assessments. However, they have used this opportunity to bribe or bargain with tax officers to pay low amounts in tax or no tax at all. Thus, policymakers and revenue authorities ought to concentrate on creating massive sensitization of the law on presumptive tax, in this case, the existing tax base on which the tax is imposed and its elements to improve income tax compliance of SBs.Research limitations/implicationsThese results are relevant to policymakers and Revenue authorities in developing countries, especially in Africa, in improving income tax compliance of SBs.Originality/valueThis study examines the contribution of certainty of the income tax law on the tax base (gross turnover) on which presumptive tax is imposed to income tax compliance of SBs, which has hardly been covered in previous studies.

Tax on Tech Giants for Electronic Services

The Uganda Revenue Authority has started collecting VAT from non-resident companies providing electronic services to non-taxable persons in the Ugandan economy, effective 1 July 2022. This article highlights the measures Uganda is set to take in ensuring that there is effective control of base erosion and profit shifting by tech giants whose services are being enjoyed and utilized in Uganda.

Mitigating the cost impact of ICT system failures in tax agencies: lessons from Uganda

Tax administrations that have adopted information and communication technology (ICT) face the challenge of system failures. Exhaustive literature exists on the causes and nature of such downtime or failures. This study investigated the cost of downtime in a tax administration, taking the case of the Uganda Revenue Authority (URA) as a case study, and reviewing and analysing system performance reports and interviews with staff on downtime. The study found that while automation enabled tax compliance, it was vulnerable to system downtime, which affected process efficiencies, reduced revenue yield, lowered staff productivity and raised ICT maintenance costs. Existing systems must therefore be continuously monitored with clear system performance levels in light of any future ICT hiccups. The study concluded by recommending alternative manual processes when ICT processes suffer downtime while prioritising compliance support systems uptime ( for example, payment systems) to other systems during downtime. Overall, the tax administrations must have a business continuity strategy with tested downtime safeguards.

The Moderating Effect of Corruption on Deterrent and Socio- Psychological Factors for Tax Compliance: A Conceptual Model for Small and Medium Enterprises in Uganda

Tax compliance is the desire for every nation world over. Although investigations have been done into the effects of deterrent and social psychological factors on tax compliance, inconsistent results have been reported, suggesting that a moderator might explain the mixed results. Intrinsically, the main aim of this research is to propose the addition of the perceptions of corruption as having a role to play in moderating the relationships between first, deterrent factors and tax compliance and second, the social psychological factors and tax compliance behaviour among SMEs in Uganda. Once validated, the proposed model will be valuable to government in policy formulations and evaluation, Uganda Revenue Authority and other regulatory bodies, and practitioners. Keywords: corruption, Uganda, tax compliance, deterrent factors, trust, social factors, SMEs DOI: 10.7176/EJBM/12-22-07 Publication date: August 31 st 2020

Margaret Akiiki Rwaheru v Uganda Revenue Authority

AbstractValue Added Tax (VAT) is a tax on the value added at each stage of the production and distribution process and on the importation of goods. VAT registered importers in Uganda are charged the statutory VAT rate of 18 per cent, however, importers that are not VAT registered are charged both the 18 per cent and an additional 15 per cent, which is designated “Domestic VAT”. The statutory basis of the 15 per cent is unclear. Domestic VAT appears to be a tax created by the Uganda Revenue Authority in a bid to raise revenue from a largely non-compliant base. The legality of the tax was challenged inMargaret Akiiki Rwaheru and 13,945 Others v Uganda Revenue Authority. The court ruled that Domestic VAT was irregular when applied to importers who qualified to register for VAT but had not registered, but was illegal when applied to importers who did not qualify to register for VAT. Despite this ruling, the URA has continued to charge all importers Domestic VAT, regardless of whether they qualify to register for VAT. This article seeks to re-examine the legality of Domestic VAT.

Fuel Efficiency Vehicle Adoption and Carbon Emissions in a Country Context

The paper aimed at establishing the relationship between age, engine capacity, fuel type and fuel efficiency and carbon emissions. The relationship was obtained using panel data on newly imported registered vehicle stock obtained from Uganda Revenue Authority. This involved collecting data on imported vehicle inventory into Uganda for the period from 2013 to 2017 which was later analysed using the stata software. The findings indicated a positive relationship between a vehicles age, engine capacity, vehicle category (Light Duty Vehicles, Medium Duty Vehicles and Heavy Duty Vehicles) and fuel efficiency and carbon emissions. A comparison with the global fuel efficiency targets indicated that more fuel was being consumed in Uganda compared to non-OECD countries. A reduction in fuel consumption and emissions was observed in petrol vehicles while diesel vehicles had increased carbon emissions and fuel consumptions due to an increase in engine capacities. The findings imply that government should develop policy options that promote vehicle fuel efficiency, transport system operators may undergo training in fuel efficiency issues that will result in an attitudinal change while academicians need to carry out more research comparing the effect of transport systems operators ages, level education and income on carbon emissions and fuel efficiency. The majority of research on fuel efficiency and carbon emissions uses survey data rather than panel data. Further, previous research is focused on vehicles that are already on the road rather than focusing on the effect of age, engine capacity, fuel type on fuel efficiency and carbon emissions.

Tax compliance behaviour of small business enterprises in Uganda

PurposeThis study aims to investigate the extent to which the theory of reasoned action (TRA) can be used to explain tax compliance among small business enterprises (SBEs) in Uganda and extends the application and relevance of the theory to a new area of tax compliance. It contributes the TRA, as a predictor of tax compliance in a developing country context.Design/methodology/approachA cross-sectional survey targeting different categories of SBEs was carried out using interviewer-administered questionnaires. A sample of 384 SBEs was used in the study.FindingsThe TRA contributes critical insights on the tax compliance behaviour of small businesses in developing economies. It influences tax compliance behaviour. The study illustrates evidence about the negative attitudes SBEs have on intentions to comply with tax regulations and the extent to which these attitudes influence their compliance behaviour. Subjective norms positively influence tax compliance intentions in a positive manner. Overall, the appearance of these intentions shows a negative effect on tax compliance behaviour. These findings also imply that Uganda Revenue Authority needs to understand the social psychology of taxpayers and tailor these in their policies and efforts to increase compliance.Research limitations/implicationsThe TRA has been used to explain behaviour in numerous situations in psychology. The study used this theory in a new geographical, economic and administrative environment; Uganda. This theory has proved relevant in explaining psychological, sociological and economic behaviour; specifically tax compliance. The TRA was revised to include a new construct of perceived behavioural control, which turned into the theory of planned behaviour. This could not be studied due to time and logistic constraints. Therefore, there is a need to investigate if this revised theory can explain tax compliance behaviour better.Practical implicationsThe paper suggests that tax administration efforts and policies should consider the social-psychology aspects of the taxpayers to improve tax compliance.Originality/valueThis study adds a new arena of explaining tax compliance from a theory commonly used in psychology to a new setting in finance.

Corporate Governance and the Remuneration of Executives of State Owned Entities: Lessons from the Presidential Handshakee in Uganda

This article was written evaluating a bonus payment (the Presidential Handshake) granted by the President of Uganda to executives of the Uganda Revenue Authority and other officials of the government of Uganda, considering whether or not it conformed with corporate governance principles for the remuneration of executives of State Owned Entities. The bonus was for an unprecedented success in local and international legal battles against Heritage Oil and Co. Ltd for capital gains tax for the sale of its oil blocks in Uganda. The evaluation was made against the yardstick of corporate governance principles for the remuneration of executives of State Owned Entities. Also a comparative analysis was made drawing on examples from other jurisdictions in Africa, Europe and America. It was found that although the officials may have been entitled to some form of reward for their roles on the whole, the principles of remuneration for company executives were not followed. Key areas identified included failure to follow the company policy of linking pay to performance, over payment, conflict of interest arising from beneficiaries determining their own pay, lack of transparency, failure to follow the prescribed law providing for remuneration of executives, and disregard of stakeholders’ interests. Recommendations for reforms on provisions for remuneration of executives of State Owned Entities are made. However, the research drew mainly on qualitative research methods, but did not seek a more empirical approach like conducting interviews amongst the relevant stakeholders for their opinions. The implementation of recommendations shall contribute to better resource utilization and contribute to a culture of transparency and accountability in the public sector. It shall also contribute to the fight against corruption, and better public governance. The proposed reforms shall also contribute to the restoration of trust in the government, as it advocates for a culture of transparency and accountability. Finally, it shall contribute to better services to the citizens of Uganda because resources shall be better utilized. The research is unique as it covers remuneration of executives of State Owned Entities in Uganda, and covers related issues arising in the context of African jurisdictions.

Taxing the Virtual Economy: Tax Implications of E-Commerce in Uganda

Information technology advancements have been challenging many traditional concepts and approaches and tax authorities have been faced with a problematic, or rather challenging scenario because of the development of electronic commerce. E-commerce presents a radical transformation of the nature of commercial activities, creating significant challenges to regulations and tax formulas that are not specifically directed towards the “virtual” commercial world. The design of tax policies in the face of e-commerce is now a tall order. Like in many developing and even developed countries, Uganda Revenue Authority (URA) has not implemented effective strategies to tax these online transactions. The purpose of this study was to obtain insights into the e-commerce category of potential taxpayers that will enable their inclusion into the tax bracket. Specifically, it was intended to get a clear understanding of the nature of operation of the e-commerce business in Uganda; identify the major products/ services traded through e-commerce; assess the revenue potential of e-commerce businesses and to assess the capacity of URA (policy, legal and administrative frameworks) to effectively tax e-commerce. This research employed both a qualitative and quantitative approach. It involved discussions with officials from various government agencies, Ministry of Finance, IT experts and App developers and some textual analysis of the existing academic articles, periodical reports from UCC and legal documents. The study also benefited from URA registration and compliance data. The study established that the sector is steadily growing in Uganda manifesting in almost all sectors of the economy. The e-commerce scope in Uganda includes but not limited to online marketing, sports betting, professional services, online retailing among others. These are greatly supported by the telecom and financial sectors that provides them the operating and payment platforms. Majority of the players were revealed highly non-compliant with their tax matters. There is very weak regulation of the sector in Uganda and the current tax laws were found inadequate to tax the sector players. On the administrative side, the study recommends that URA should assign staff to register these players, hire experts in this sector, benchmark from other countries and understand the relationship between telecoms and financial institutions. On the legal side, the residence and place of supply rules need to be amended to cater for e-commerce; URA should also introduce a withholding tax on all bank transactions originating from outside the country among others.

E-procurement implementation: analysing the applicability of the EPOS method on the efficiency of public sector organisations - a comparative study

This article analyses the differences in the use or applicability of the electronic procurement organisational suitability (EPOS) method between Uganda Revenue Authority (URA) and Ministry of Water and Environment (MOWE). Specifically, the paper examines the differences in organisational e-willingness, e-readiness, and the level of efficiency between URA and MOWE. To ascertain this, the researchers employed a quantitative paradigm that used descriptive and case study research designs. Means were used to measure the extent of applicability for the EPOS method and levels of efficiency among the two organisations. The independent t-test on the other hand, was devised to determine variations among the study variables. Findings revealed a high extent of using the EPOS method (average mean = 4.37) with negligible differences in its applicability (F value 12%, and sig. 0.021). However, high differences in favour of MOWE were noted in areas of e-readiness (F value = 58% and sig. 0.019) though the e-willingness dimension remained with low levels of variation (F value of 4%, and sig. 0.041) between the two organisations. In view of this, the researchers conclude and recommend a balanced approach in the implementation of any e-solution if effective results are to be realised.

E-procurement implementation: analysing the applicability of the EPOS method on the efficiency of public sector organisations - a comparative study

This article analyses the differences in the use or applicability of the electronic procurement organisational suitability (EPOS) method between Uganda Revenue Authority (URA) and Ministry of Water and Environment (MOWE). Specifically, the paper examines the differences in organisational e-willingness, e-readiness, and the level of efficiency between URA and MOWE. To ascertain this, the researchers employed a quantitative paradigm that used descriptive and case study research designs. Means were used to measure the extent of applicability for the EPOS method and levels of efficiency among the two organisations. The independent t-test on the other hand, was devised to determine variations among the study variables. Findings revealed a high extent of using the EPOS method (average mean = 4.37) with negligible differences in its applicability (F value 12%, and sig. 0.021). However, high differences in favour of MOWE were noted in areas of e-readiness (F value = 58% and sig. 0.019) though the e-willingness dimension remained with low levels of variation (F value of 4%, and sig. 0.041) between the two organisations. In view of this, the researchers conclude and recommend a balanced approach in the implementation of any e-solution if effective results are to be realised.

Boosting Revenue Collection through Taxing High Net Worth Individuals: The Case of Uganda

For over a decade Uganda’s tax-to-GDP ratio hovered between 12 per cent and 13 per cent, despite various amendments to tax laws and reforms in tax administration. Part of the low revenue contribution can be attributed to factors external to the Uganda Revenue Authority (URA), such as the structure of the economy – particularly the prevalence of the informal sector and the ubiquity of cash transactions. Another explanation is that poor revenue collection is a result of factors internal to the URA. One of these factors is that the URA’s enforcement efforts have concentrated on taxing corporate entities at the expense of individuals. With the exception of employees, very few individuals comply with their tax obligations outside those incurred at points of importation. Specifically, many wealthy individuals in the private and public sector either do not pay taxes or grossly under-declare their income. The consequence is that very little tax is being collected from this category of taxpayers. This paper explores the potential for increasing tax revenue by taxing High Net Worth Individuals (HNWIs) through various lenses, including examining the legislative and administrative framework governing the taxation of individuals, collaborative efforts between the URA and other government agencies to improve tax administration, and mechanisms in place to support the sharing of taxpayer information both within the URA and with third parties. We highlight the strengths and weaknesses in the legal and administrative frameworks, with the underlying aim of designing an approach for taxing HNWIs. This paper discusses the findings of phase one of a two-phase project. The second phase will conduct a comparative study on taxation of HNWIs in other jurisdictions, with the aim of developing guiding principles for taxing Uganda’s HNWIs.