Finance Ministry Explains Revenue Shortfalls

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In short
The State Minister for Planning David Bahati today, Tuesday, explained the under-performance in the revenue collections citing lower fuel imports, and low corporation tax payments from large corporate taxpayers like telecom companies among others.

The State Minister for Planning David Bahati today, Tuesday, explained the under-performance in the revenue collections citing lower fuel imports, and low corporation tax payments from large corporate taxpayers like telecom companies among others.
Bahati was appearing before Parliament's National Economy Committee that is currently scrutinising a government request to borrow 736 billion Shillings from the domestic market to finance supplementary expenditure and mitigate revenue shortfalls being experienced in the current financial year 2017/2018 budget.
According to the government, revenues recorded a shortfall of 324 billion Shillings in just the first half of the current financial year and the overall revenue shortfall by the end of the financial year is projected to hit 659 billion Shillings. The Government had projected to collect 15 trillion Shillings in revenue.
Bahati appeared before the committee together with the Director of Budget Kenneth Mugambe to defend the move to borrow funds to carter for salary payments (48 billion Shillings), payment of contractors by Uganda National Roads Authority (UNRA), buying food for the Uganda Police, the Army and Prisons among others.
Their appearance follows last month's committee meeting in which Finance Minister Matia Kasaija failed to explain the revenue shortfalls with MPs tasking him to re-appear with explanations to the shortfalls and future solutions.
Today, Bahati said that the overall tax and non-tax revenue collections from July 2017 to January 2018 amounted to 8.08 trillion against the target of 8.46 trillion, registering a shortfall of 379.4 billion Shillings.  
Direct Domestic Taxes 

Under direct domestic taxes, the State Minister told MPs that the tax collections from July 2017 to January 2018 amounted to 2.54 trillion against the target of 2.63 trillion, posting a shortfall of 95.4 billion Shillings. 

He attributed the under-performance to low corporation tax payments from the large corporate taxpayers including telecom companies, lower fuel imports by fuel dealers, expanding manufacturers and commercial banks that filed nil returns.
Indirect Domestic Taxes 

Speaking about the indirect domestic taxes which are made on consumption in form of excise duty and Value Added Tax (VAT), Bahati said that the country has so far recorded a revenue shortfall of 245.9 billion Shillings. This includes 49.89 billion from Excise Duty and 182.6 billion from VAT.  Only 1.8 trillion Shillings was collected from July 2017 to January 2018 against the target of 2.06 trillion Shillings.
According to Bahati, this under-performance is attributed to the offset on input VAT by Hima Cement Ltd for over three months, increased costs on expansion of the Tororo plant, low production and sales volume of sugar as well as the increased use of promotional packages on phone talk time and use of data to communicate.  
International Trade Taxes 

The Finance Ministry also cites a revenue shortfall under the International trade taxes of 50 billion Shillings, attributing this to the waiver of import duty on rice which is estimated at 73 billion Shillings, low fuel import volumes in December 2017 that led to a shortfall of 27.4 billion and the significant decline of excisable goods during the period of July to December 2017.
Under the Internal Trade Taxes, government had targeted a revenue collection of 3.54 trillion but collected 3.4 trillion from July 2017 to January 2018.
Non Tax Revenues 

Parliament's National Economy committee also learnt that government has a surplus collection of 34.2 billion Shillings of non-tax revenue (NTR) following a 239 billion collection so far against the target of 204 billion. The performance is attributed to the efficiency in NTR collections as a result of the transfer of collection of all NTR to URA.
Outlook of June 2018 
Bahati said that for the remaining three months to the end of the financial year, the overall revenue shortfall is estimated to amount to 659 billion Shillings with revenue collections projected at 14.4 trillion against the target of 15 trillion Shillings.
Syda Bbumba, the National Economy committee chairperson advised government to examine its expenditure further so that it spends more on development budget rather than administration so that revenue shortfalls can be avoided in future.
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Stephen Mukitale, the Buliisa County MP also demanded that government should work at ensuring that it lives into its means and to stop wastage of funds.
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Also Mukono South MP Muyanja Ssenyonga cited a need for government to cut down on unnecessary expenditures so that Ugandans are able to effectively finance their national budget.
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Bahati promised MPs to find solutions to the revenue short falls and to also implement recommendations given before appealing to them to approve the 736 billion Shillings loan to enable them finance the budget until the financial year ends.


About the author

Olive Nakatudde
Olive Nakatudde is a URN journalist based in Kampala. Nakatudde has been a URN staff member since 2013.

Nakatudde started out in journalism in 2009 with Dembe FM radio in Kampala. In 2012, Nakatudde joined Voice of Africa as a political reporter. She has been a photographer since her journalism school days at Makerere University.

Nakatudde is interested in good governance and public policy, which she reports on intensively from the Uganda Parliament. She is a keen follower of cultural affairs in Buganda Kingdom and covers the kingdom's Lukiiko (parliament). Nakatudde also reports on education and health.