Uganda’s tax system has undergone various administrative and legal reforms geared towards raising more revenue, making tax payment as simple and less costly for investors, the Commissioner General of the Uganda Revenue Authority (URA), Doris Akol has said.
In an article titled ‘Uganda business and investment tax system in a nutshell’ and published in the April edition of Into Africa, a publication with fresh insight into Africa’s emerging markets, the URA boss says the reforms have ensured the tax body is buoyant.
“On the administrative side, for example, these reforms include the restructuring of the URA in 2004 to reflect functional ideals, automating some internal and external services, developing human capacity and re-engineering business processes among others,” Ms. Akol says.
All these, she says, have simplified the ease of paying taxes in Uganda compared her neighbors. “For example, Uganda ranked 84 in the world in terms of ease of paying taxes while Kenya ranked 92 and Tanzania 154,” she writes in the magazine where other African tax experts share updates on tax administration in selected countries in Africa.
On the legal frame work, a number of tax incentives are granted in the tax laws that are targeted towards supporting businesses to grow, she says.
She says investors in free trade zones in Uganda are entitled to a ten-year corporation tax holiday, duty exemption on raw materials, plant and machinery and other inputs; stamp duty exemption, duty drawback to apply on import of goods from domestic tariff area.
Akol says there is no export tax on goods exported as well as exemption of withholding tax on interest on external loans and dividends repatriated, which says helps investors to get relief from double taxation.
On the other hand, she says, mining operations are granted a 100 percent deduction for any expenditure of a capital nature incurred in the exploration of, discovery, testing or gaining access to mineral deposits in Uganda.
“A 50 percent initial allowance is available in respect of plant and machinery, which is increased to 75 percent if such assets are outside the areas of Kampala, Entebbe, Namanve, Jinja and Njeru. 20 percent of the cost of a new industrial building or expansion to an existing industrial building is available as an allowance during the year of income the building is brought into use for the first time,” she says.
On paying taxes, she says, at first glance, taxes are seen as a threat to business growth and that a number of studies have concluded that taxes reduce financial performance of businesses as they are a cost and hence reduce corporate profits.
However, she notes: “It’s also true that business won’t survive if taxes are not levied.” For example, a business to prosper it needs better infrastructure such as paved roads, electricity, and security among others provided by the government as public goods.
“Since no business man/ woman can avoid using such public services we all have to contribute to them through paying taxes. Yes, paying taxes is painful and many of us hate it but we can’t opt out of it-let us all face it,” Ms. Akol emphasises.