The Uganda Revenue Authority lost a customer data war against commercial banks last week in a dispute sparked by the taxman’s demand for all customer bank details covering 2016 and 2017.

On Monday, the Cabinet shot down URA’s order and suggested it explores alternative ways of accessing bank customer details.

A March 16 letter from URA to commercial banks directed all industry players to submit details of their customers for purposes of effective tax assessment, a move that left banks concerned about possible fallout on customer trust, financial inclusion initiatives and legal battles with aggrieved clients.

A response from the Uganda Bankers Association (UBA), an industry lobby group, showed reluctance to comply with URA’s demands in respect of pending legal guidance from Bank of Uganda (BoU).

This confrontation was moved to the courts via a case filed by commercial banks against URA on April 9, challenging its move to obtain blanket access to client information.

Tax collection

Rising tax collection targets, a surging revenue collection deficit experienced in the 2017/18 financial year and challenges faced in mobilising income taxes from individuals have been blamed for URA’s disclosure demands targeted at banks.

Government’s revenue collection target for this financial year stands at Ush15 trillion ($4 billion) compared with Ush13 trillion ($3.5 billion) for 2016/17.

Whereas URA collected Ush10 trillion ($2.6 billion) between July 2017 and February 2018, the cumulative revenue deficit is estimated at Ush400 billion ($107.8 million) to date, according to BoU data.

This partly translates into a Ush5 trillion ($1.35 billion) revenue collection target over a four month period that is equivalent to a monthly target of roughly Ush1.3 trillion ($350 million) — a glaringly tall order for the tax agency under harsh economic conditions.

“There are many people out there who are under-declaring their incomes and those that are paying zero income tax. We thought getting access to people’s bank accounts would help us fill huge gaps that lie between one’s bank balances and business financial statements and this in turn, would enable us issue more accurate income tax assessments,” said a junior URA auditor, who requested.

A tax expert at Deloitte Uganda who requested anonymity termed the taxman’s bid as “extreme.”

“URA has tried pushing wealthy people by tracking land transactions but failed due to political interference. But going after customer details is extreme and uncalled for because it kills the spirit of financial inclusion,” the source said.

However Charles Katongole, Head of Treasury at Standard Chartered Bank Uganda Ltd said banks are willing to give specific client information for purposes of tax audits within the law.