Uganda taxman installs electronic machines on business premises to tame tax evasion
In a bid to tame tax evasion the Uganda taxman is introducing a raft of new and radical measures to businesses including installing machines at premises of businesses in order to track sales.
It started some months ago when the Uganda Revenue Authority started a campaign to encourage the public to demand for receipts whenever they purchase goods and services.
Few days ago, the taxman took the campaigns a notch higher with a pilot project that could see it install some machines at the premises of businesses in order to track the sales. This is the biggest step so far in the tax body’s attempt to embed itself in private businesses as it seeks to shore up all the tax revenue it can get. If pulled off, the machines could go a long way in curbing tax evasion and increase the tax to the Gross Domestic Product (GDP) ration – a key indicator of how self-reliant an economy is.
“In our pilot, we want to begin with people who are involved in general trade: supermarkets and retailers. And then follow up with people dealing in hardware and also extend to the service industry,” Henry Saka, the commissioner for domestic taxes said.
“So, this is something you should see coming in the next few months. This is one of the areas through which we have learnt from our neighbours.”
Called the Electronic Fiscal Devices (EFD), will provide URA with more insight into what a business or trader is involved in. With this system, the revenue authority will no longer have to do auditing of books of accounts, according to Saka.
Under the new system of machines, URA will be able to track a receipt that was handed to a customer after a purchase, making it hard for any attempt at forgery.
Saka explained that some companies, especially those that deal in general goods, were avoiding generating receipts and so their actual turnover was not reflecting in their tax returns.
In the last financial year 2015/16 URA posted a more than $148 million shortfall in revenue collection. The tax body is still figuring out ways of roping the informal sector into the tax net.
According to figures from the Uganda Bureau of Statistics, the informal sector is estimated to contribute more than 50 per cent of GDP and employing more than 80 per cent of the labour force.
However, as URA prepares to roll out the machines, a number of issues remain. It is not clear whether the machines will work without power. In case there is no power, as is usually the case in most parts of the country, how will receipts be issued? Can the machines stamp out the collusion that usually goes on between the buyers and sellers, which is the biggest factor behind tax evasion?
At the moment, URA is considering whether there should be a cost-sharing model between government and the private businesses in the procurement of these machines.
URA Commissioner General Doris Akol said since 1991 when URA established, the risk of compliance, such as the under declaration of sales, remains a great challenge till today. She said through close monitoring of transactions, tax collections will be boosted.
