Summary:

• URA in Uganda faces its third consecutive tax collection shortfall, with domestic revenue falling short by Shs. 148.12 billion in February 2024. Both tax and non-tax revenues missed targets, with taxes on international trade and indirect domestic taxes underperforming

The Uganda Revenue Authority (URA) has recorded its third consecutive shortfall in tax collections. In February 2024, domestic revenue amounted to Shs. 2,102.53 billion, falling short by Shs. 148.12 billion against the target of Shs. 2,250.65 billion.

According to Uganda’s Performance of the Economy report for February, both tax and non-tax revenues were below their targets for the month. Tax revenue fell short by Shs. 75.38 billion, attributed to underperformance in taxes on international trade and indirect domestic taxes. Specifically, taxes on international trade suffered from lower than expected Value Added Tax (VAT) on imports.

Additionally, indirect domestic taxes were 10.0% below target, with shortfalls in local excise duty and VAT. However, direct domestic taxes exceeded the target for the month by Shs. 69.76 billion, primarily due to contributions from PAYE, corporate tax, withholding tax, and taxes on interest earnings.

Despite URA contributing 47% of the national budget, total annual revenues only account for 14.3% of the Gross Domestic Product (GDP), lower than the African average of 18%. This low collection level continues to necessitate Uganda’s heavy reliance on external budget support, exacerbating the debt burden.

According to the State of the Economy report by the Bank of Uganda in December 2023, debt obligations consume a significant portion of tax revenues, limiting resources available for essential services.