Tax collecting agencies in the region are facing tough times as they seek to raise revenues at a time of high inflation and rising government expenditure.

September 5 will mark the 21st anniversary of the Uganda Revenue Authority (URA).

Executives at the tax agency will need to come up with new ways of increasing tax collection. The URA boss Allen Kagina sat down with Bernard Busuulwa and discussed last year’s economic crisis, managing staff turnover and taming small taxpayers.

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What is your perspective on local tax laws like the URA Act, Income Tax Act and Finance Act and their impact on future oil revenues?

The VAT Act and Income Tax Act are robust pieces of legislation but the Excise Act is an old law that is being reviewed. In regard to the Public Finance Act and Petroleum Revenue Bill before parliament, we have made presentations to the Ministry of Justice pointing out that the Petroleum Revenue Bill seems to amend some sections of the Income Tax Act.

In my opinion, it will not lead to loss of revenues but will make administration of oil revenues very difficult.

When you restrict definition of income to provisions of the Income Tax Act and at the same time transfer collection powers for surface rentals, signature bonuses and loyalties to another law, you necessitate another collection agent because URA is not mandated to collect taxes outside the scope of the Income Tax Act.

Our position is that the definition of petroleum revenues under the Income Tax Act should be maintained.

What is the overall impact of donor support on URA’s ability to deliver in recent years?

The first modernisation programme involved $15 million aid from donors and we used it to set up e-tax systems, the Sun Accounting system for revenue collection and refurbishment of upcountry offices.

The second phase of modernisation worth $9 million of aid will be used to install a big disaster recovery site, migration to a higher version of ASYCUDA and a contact centre for addressing client queries.

Donors have been good to us but they only offer support for particular projects that take less than three years to complete.

With a higher collection target of Ush7.1 trillion ($2.9 billion), government has allocated an extra Ush95 billion ($38.2 million) for pending out reach activities.

Tell us about your experiences in the past financial year and any lessons for URA as it grapples with a bigger collection target?

Between July and December 2011, our performance fell below expectations and this was mainly because of external problems in the Eurozone and rising inflation that hit 30.5 per cent in October.

Provisional returns for December were very low, with banks and service firms filing low returns.

But strong policy intervention helped turn things around, with inflation declining steadily during the first half of this year. Renewed stability in the shilling also boosted collections because it brought a sense of certainty among many business people.

We were told of some traders who chose to keep their goods in Mombasa and China in the course of last year as they waited for the shilling to stabilise before bringing them to the market. That is the reason we recorded a surplus in June.

The major lesson we learnt is that we need to monitor the environment on a monthly basis in order to check our expectations.

For instance, if exports are projected to grow by 10 per cent at the beginning of the financial year but later on realise only two per cent growth at the end of July, then there is no point trying to flog a dead horse.

What is your initial evaluation of the new five year corporate strategic plan?

The focus of the new plan is to leverage on technology and enhance compliance. Client partnerships must be enhanced and revenue increased.

Last year, we suffered gaps in building partnerships due to a lack of funds but the drop in the cost of collection was artificially low because of staff exits and failure to conduct training.

These factors led to the 1.97 per cent level in administration costs but ideally should have been at 2.7 per cent.

What benefits do you anticipate from regional integration efforts this financial year, by way of wider linkages in Customs and surveillance systems?

We have had a Common External Tariff for the past seven years and we are now trading more within the region than we used to.

So in customs, integration is doing well though we are not yet there because we need to improve the free movement of people across borders under the common market framework.

Integration on matters of trade is proceeding well but we need to harmonise domestic laws. The most important thing is to understand our needs; either harmonisation of tax rates, procedures or laws.

When you harmonise economies that are at different stages of development, the question is what do you harmonise? Do you harmonise at Burundi’s or Kenya’s level?

With less than two years left on your current contract, what are your sentiments on URA’s future after your last day on the job?

The systems we have put in place and the staff capacity that we have built will steer URA forward. I have one year  and two months left on my current contract and I’m not worried about the organisation’s future.

What worries me, however, is losing trained, high calibre people. Between July and May this year, we lost one hundred and sixty nine staff members, who moved to other institutions.

Therefore, there is a need to improve salaries and invest more in research and development to fill staff gaps.

In order to retain staff, we have created a consultancy unit that allows staff to sign retention contracts, go out there and do private work but be able to return to their old jobs.