Divisions in Finance over URA money

Top officials clash over budget deficits, new administrative units

Kampala, Uganda | JULIUS BUSINGE | The Uganda Revenue Authority (URA) is having a hard time meeting its targets and the fall-out is leading to fights between the tax body, Ministry of Finance technocrats and their political supervisors.

The key issues of disagreement are budget deficits and creation of new administrative political units.

The two issues are critical because they impact service delivery and performance of the economy.

Last fiscal year, URA had a revenue collection target of Shs16.3 trillion but collected Shs16.6 trillion; approx. Shs300billion extra. This year, the target is Shs20 trillion but after six months, URA has an 8% deficit.

The cause of the deficit has sparked disagreements between URA Commissioner General Doris Akol, Secretary to the Treasury Keith Muhakanizi and Minister of State for Finance David Bahati, which were on public display before Parliament’s Finance Committee which is finalising the 2020/21 budget.

A tough-talking Keith Muhakanizi was the first to tiff on Jan.09 when he appeared before the Committee to respond to among other things the reasons behind Uganda’s continuous recording of budget deficits.

Instead of taking blame, Muhakanizi played victim.

“When you create permanent structures like cities, we can’t cry over something you have created,” he told the MPs.

“These things are created without my knowledge,” he added, “When you increase wages, that is cabinet and president, remember these are powerful people. How can I manage when powerful people aren’t respecting my advice?”

Muhakanizi who led a team of top finance technocrats spoke as the Minister of State for Finance, David Bahati, looked on.

“When I go naked, ministers get angry,” he said but continued. He explained that the current system of the Ministry of Finance makes the secretary to treasury a powerful person yet they should not be because they are not in position to question certain actions.

But when Doris Akol, the Commissioner General of URA appeared before the same Committee on Jan. 14 to explain why she had missed the target by 8%, she blamed Ministry of Finance officials.

She told the Committee that URA could fail to hit its collection target of Shs20.3 trillion partly because it is “unsupported” and imposed by the Ministry of Finance which supervises URA.

Akol said the Medium Term Expenditure Framework; the blueprint for the current financial year planning had projected a target of Shs18.3 trillion and not the Shs20.3trillion ‘imposed’ by the Ministry. She said the Ministry had made subsequent additions to reach the Shs20.3 trillion which is unsupported in the economic assumptions of this year’s revenue target. Akol said that the normal increment in revenue target has always been Shs1.5 trillion per year which is in line with the year GDP growth.

She added that the target was revised by the Ministry because there are new expenditure requirements which have to be financed through revenue collection.

Akol presented a summary of revenue collected for the half year (July – December) and said gross revenue collection to target was 92.97% (Approx.9.2 trillion) – out of which domestic tax was Shs5.6 trillion and international/customs tax was Shs3.5 trillion. Net cumulative revenue from July – December grew at 11.21% to Shs9.0trillion in FY2019/20 compared to Shs8.1trillion in FY2018/19.

Akol told the committee that an unregulated informal sector and under declaration of rental income were negatively impacting revenue collection.

She admitted that many corporate entities that own rental properties avoid paying rental tax because of a policy design loophole which allows them to expense expenditure against their rental income.

Akol said big rental earners, usually corporate entities who are supposed to pay most rental income, do not pay because the policy allows them to expense all their deductions against all the incomes that they earn.