Business

Govt makes shortfall in tax revenue collections

Government in the financial year 2020/21 collected Shs 18,336.8 billion as tax revenue, which was short of the Shs 20,219.7 billion target by 9.3 percent, according to the latest Annual Macroeconomic & Fiscal Performance Report authored by the Ministry of Finance Planning and Economic Development.

The report notes that the shortfall in tax revenue during the period under review happened as all major tax categories posted shortfalls due to the impact of pandemic-related restrictions on domestic economic activity and international trade activities.

Direct domestic taxes totalled Shs 6,619.4 billion, representing a shortfall of Shs 874.7 billion against the target for the year. This followed major shortfalls registered under PAYE (Shs 315.5 billion), corporate income tax (Shs 239.9 billion) and rental income tax (Shs 168.3 billion), as the pandemic containment measures resulted to job and wage losses, lower profitability and dampened real estate sector activities. At the same time, the fall in aggregate demand during the year negatively affected consumption-related domestic taxes.

Indirect domestic taxes registered a shortfall of Shs 555.7 billion against a target of Shs 5,028.6 billion, as both VAT and excise duty underperformed. Taxes on international trade also registered a shortfall of Shs 495.5 billion or 6.2 percent against the target, as demand for imports on which taxes are levied was lower than what had been anticipated.

Other factors that contributed to the shortfalls in domestic revenues included the delay in implementation of some tax revenue measures such as the increase in excise duty on fuel and withholding tax on insurance and advertising agents; as well as the delays in the implementation of some tax administration reforms, including the Electronic Fiscal Receipting and Invoicing System (EFRIS), and rental income tax solution.

Government collected Shs 1,361.0 billion in form of non-tax revenues, which was only 85.5 percent of the projected collections for the year. During the fiscal year, a total of Shs 141.0 billion was collected as capital gains tax on the transfer from Tullow Oil Company to Total E&P. Grants government received grants worth Shs 1,400 billion, which represents 81.4 percent of the projected inflows. Of the amount received, Shs 74.8 billion was in the form of general budget support and (Shs 1,325.2 billion) received was towards project support.

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