Economists and tax experts in Uganda and Rwanda have projected shortfalls in revenue collections due to sluggish growth in some sectors of the economies.

Government economists in Kampala are making a cautious tax revenue forecast this financial year, based on weak projections for July collections and continued weaknesses in the banking and telecom sector.

Weak performance in the banking and telecommunications sectors, which account for more than half of Uganda’s corporate tax and VAT collections, caused a deficit of Ush304.75 billion ($113.9 million) against a target of Ush791.38 billion ($296 million) during the 2013/14 financial year.

READ: Uganda tax body to miss targets as collection drops

While officials at the Treasury have hinted at a deficit in tax collections registered last month, verified figures were not available by press time due to delayed filing of tax returns by some taxpayers.

But observers project a shortfall of more than Ush30 billion ($11.3 million) in July due to delays in company budgeting processes and the adverse impact of new tax measures announced in this year’s budget.

“We experienced a revenue deficit in July but the numbers have not been fully verified. We have also registered gradual improvements in exports of consumer goods to South Sudan, which have risen towards pre-war levels over the past three months.

"The acquisition of Warid’s operations by Airtel in 2013 will eventually pay off as the latter recovers from restructuring related costs and subsequently contributes more in taxes. As a result, we anticipate tax collections to match targets at the end of 2014/15,” said Lawrence Kiiza, director for economic affairs at Uganda’s Ministry of Finance.

In Rwanda, the taxman has suffered a major setback in its efforts to wean the country off aid after it failed to collect enough taxes to meet its revenue targets.

Throughout the 2013/2014 fiscal year, the Rwanda Revenue Authority (RRA) has been struggling to meet its quarterly targets mainly due to economic slowdown experienced last year as a result of the impact of aid suspension in 2012.

READ: Hard times ahead for Rwanda as taxman misses revenue target again

Plaxeda Namirimu, tax director at PwC Uganda said: “Corporation taxes are likely to remain weak because of delayed company budgeting activities experienced during the first quarter of the financial year and business shocks from new tax measures.

Tax exemptions

However, VAT and excise duties may perform better than last financial year due to removal of tax exemptions in the agricultural sector and introduction of excise duty on mobile money transactions and bank charges.

However, many sectors continued to struggle as consequences of low consumer demand, reduced government spending and slow resumption of aid flows, analysts warn.

Richard Tusabe, Commissioner General of RRA, announced that the authority collected Rwf769 billion ($1.09 billion) against the targeted Rwf793.2 billion ($1.1 billion).

He attributed the shortfall to a slowdown in economic activity.

“When economic activity is slow like last year, the revenue collections are also bound to suffer because we tax businesses,” said Mr Tusabe said.

Apart from Sweden, which announced renewed aid commitments worth $200 million last month after suspending assistance in protest over the anti-gay law, many donors are yet to approve new funding arrangements for Uganda.

However, tax experts predict that revenue collections will grow modestly but remain below target due to declining profits experienced by several firms and increased impact of high taxes previously levied on beer and cigarettes during 2013/14.

Report by Bernard Busuulwa and Alex Ngarambe