Uganda targets offshore cash amid tough economy

Bank of Uganda

Bank of Uganda headquarters in Kampala.

Photo credit: File | Nation Media Group

Pessimism, criminal prosecution stance adopted by the taxman, and offshore tax revenues dominated the first six months of the financial year 2024/25 amidst weak economic conditions and a need for tax revenues.

Whereas the latest data shows a modest tax revenue surplus recorded in the first four months of 2024/25, a temporary deficit gap registered by Value Added Tax (VAT) collections - a loose indicator of consumer spending appetite, reflects tough economic conditions experienced in many sectors during the past six months.

Overall tax revenue collections recorded between July and October 2024 amounted to Ush8,491.0 billion ($2.2 billion), representing a surplus of Ush46 billion ($12 million) during the period under review.

Direct taxes represented by Corporation Tax, Pay As You Earn (PAYE), and Withholding tax posted a surplus of Ush43.2 billion ($11.6 million) while customs duties registered a surplus of Ush 11.3 billion ($3 million) during the same period according to Bank of Uganda (BOU) data.

On the other hand, indirect taxes represented by Value Added Tax (VAT) and Excise duty suffered a deficit of Ush68.2 billion ($18 million) between July and October 2024 on account of diminished VAT collections from manufactured goods and shrinking excise duties generated from phone talk time, the data shows.

Recent data compiled by the Uganda Revenue Authority (URA) shows tax revenue collections for the first half of 2024/25 amounted to Ush15,248.99 billion ($4.09 billion) compared to a specific target of Ush14,926.85 billion ($4 billion), reflecting a surplus of Ush322 billion ($86 million) for the period under review.

A strong criminal prosecution stance adopted by the Uganda Revenue Authority (URA) towards cases of VAT and Excise duty fraud dating back to more than five years ago has reportedly scared some taxpayers.

A close look at court records revealed monetary tax values of more than Ush5 billion ($1.4 million) attached to certain VAT cases and prison sentences of more than three years issued to accused persons.

Between January and March 2024, URA secured criminal convictions in 16 cases while 22 persons were convicted of tax crimes in local courts during the same period, URA records show.

Faced with high tax collection targets and weak economic conditions, Uganda’s tax body has widened its noose towards Ugandan taxpayers who hold overseas assets, liabilities, and incomes- a less exploited revenue stream in Uganda’s tax system.

Under the Organisation for Economic Cooperation and Development (OECD) policy frameworks, signatory countries are at liberty to exchange financial information about their citizens for taxation purposes through the Automatic Exchange of Information (AEOI) window.

Uganda’s taxman has collected more than Ush230 billion ($62 million) to date through the OECD initiative, official data indicates.

“Under the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information and the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act, 2023, URA will receive offshore account information under the Automatic Exchange of Information (AEOI), annually, with effect from September 01, 2025. The information to be exchanged will include names, TINs, account numbers functional equivalent, account balances, and income related to offshore accounts which will enable URA to obtain details of the undeclared or under-declared assets or incomes on which taxes shall be enforced, collected and the offenders prosecuted…” reads part of a URA notice dated December 20, 2024.