Monday, September 19, 2016

CONGRATULATIONS URA!

This week tax collector Uganda Revenue Authority (URA) celebrated 25 years of its existence, a laudable milestone not only because of the passing of the years but of how the institution has developed over the years.

After years of decay the old revenue office at the finance ministry had collapsed and would have been unable to meet the challenges of a society in urgent need of funds to for recovery. That being said it still had some human resource many of whom continued into URA and formed the initial backbone of the now autonomous tax collector.

The atmosphere at the time was a new government trying to find its feet.

The tussle between the command economists – mostly bush war veterans and the liberal economists – mostly technocrats in the finance ministry and central bank had only just been decided in the latter’s favour.

"Among many urgent reforms needed – breaking up government monopolies, liberalising the markets in everything from produce to currencies, was the urgent need to collect revenues...

The tax man has never been a popular member of society. It did not help that improved revenue collection was a condition for engagement for the donors especially the World Bank and IMF – the favourite punching bag for the post-colonial administrations on the continent.

As a condition for support it made sense to insist on better revenue collections, otherwise how would the donors get their money back?

In its first year of operation they collected sh180b or just under $180m, which figure is up to sh11.2 trillion in the last financial year or about $3.4b.

"The more than 60-fold jump in collection during the period is laudable in itself and reflects not only the growth in the economy but the increasing effectiveness and efficiency of the Authority....

Interesting too is  how we in those 25 years we have shifted away from reliance on taxes from external trade to domestically generated revenue. Can you believe that coffee exports were our biggest source of revenue at one time?

These improvements have not come without sweat, tears and even blood. Tax payers have fought the URA on the introduction of VAT, resisted the paying of road licenses and continue to weave and dodge against paying any number of taxes.

While there is cause for chest thumping about how much more tax we collect as ratio to GDP, which comes in at 13 percent, it below the Sub Saharan Africa average of 13.8 percent, and well behind Kenya at 18.4 percent, Mauritius 19 percent and South Africa 26.9 percent.

Increased revenue collection is critical to finance infrastructure, health and social services. But more importantly to wean us off aid, allowing us to determine and follow up on our own priorities.

"A need to collect more domestic resources will also improve our politics. As it has been because government was being financed externally – at one time more than eight in every ten shillings in our budget was from donor assistance, they did not have to negotiate with the population raise revenues. ..

As long as you could tick off some perfunctory targets like reducing the number of people living on a dollar day the aid taps would continue to flow. But to raise taxes there has to be a negotiation with the locals and they need to see some return on their money before they willingly pay up, that takes greater negotiation skills than is needed with dealing with donors, which leads to democracy.

So clearly URA is at the center of determining the future of this country.

Of course URA has little leverage over what goes into the tax code and is often criticised for doing their work in the classic case of shooting the messenger. There is really little scope for introducing new taxes, future progress will be determined by how effective URA is in roping more and more people into the tax net.


Despite some unwelcome sounds from our political elite it is safe to say that URA’s foundations are solid enough that it is possible they will be here to celebrate their golden Jubilee in 2041.

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