November 19, 2017

Uganda non-tax revenue remains low but rising

April 11—International trade remains Uganda’s leading source for taxes (42%), but the government has been looking at every possible option including non-tax revenue (NTR) to help shore up its finances.

Three years ago, Keith Muhakanizi, the often besieged Permanent Secretary in the finance ministry and Secretary to the Treasury told a Uganda Revenue Authority (URA) workshop, NTR must continue to go up if his job is going to get any easier in future.

A recent paper by Joseph Mawejje and Ezra Muyambonera, published under the auspices of the Economic Policy Research Centre (EPRC) agrees with him.

Although the share of NTR is very low, it is gradually increasing.  According to the paper, NTR contribution has increased eightfold over the last five years from UGX 56 billion in 2010/11 to UGX 445 billion (just over $120 mllion) in 2015/16.

However, NTR has the potential to double to 0.4 per cent of GDP by 2019. This strategy will require NTR to contribute an additional UGX 130 billion per annum.

Sources of NTR include grants and gifts, fees, fines, penalties and cash surpluses derived from operations of public enterprises.

The EPRC paper says leveraging the contributions of non-tax revenues can help to boost domestic revenue mobilization in Uganda.

Muhakanizi’s problem is that several Ministries, Departments and Agencies (MDA) are reluctant to remit this money to the Consolidated Fund. There are always excuses why the cash is spent at source and this remains a point of often heated debate between the finance ministry and MDAs.

An important source of NTR accrues from collections by self-accounting bodies such as the Uganda Communications Commission (UCC), Civil Aviation Authority (CAA), and Electricity Regulatory Authority (ERA). Such bodies usually collect NTR and spend at the source. Mawejje and Muyambonera say this practice potentially undermines efforts to improve revenue mobilization.

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