Bolstering Revenue, Building Fairness: Uganda Extends its Tax Reach, 2014-2018

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Abstract 

After a decade of reforms to boost tax collection, in 2014 the Uganda Revenue Authority (URA) faced up to one of its biggest remaining challenges. Although the agency had significantly improved its internal capacity—along with its ability to collect taxes from registered taxpayers—large numbers of Ugandans paid nothing because they were unregistered or because inadequate compliance monitoring enabled them to underpay. The holes in the system undermined public trust and bedeviled the URA’s efforts to meet the government-mandated target to raise tax revenue to 16% of gross domestic product. The URA then joined other government agencies to bring millions of unregistered citizens into the tax net, and it tightened the oversight of existing taxpayers who were paying less than their fair share. Prime targets were millions of Ugandans who worked in the informal economy, which the government said accounted for nearly half of the country’s economic activity. At the same time, the URA set up operations to go after wealthy and politically connected individuals who avoided paying their full tax load, and it created a separate unit to press government departments that failed to remit to the URA the taxes they collected, such as withholdings from employees. The URA’s program achieved strong gains on all three fronts and thereby helped increase the country’s tax-to-GDP ratio to 14.2% in the 2017–18 fiscal year from 11.3% in 2013–14. Just as important, the program made significant progress toward a fairer distribution of the tax burden for Ugandans across all economic levels.

Leon Schreiber drafted this case study based on interviews conducted in Kampala, Uganda, in January and February 2019. Case published April 2019.

To view a short version of the case, please click here 

See related Uganda Revenue Case Study: Righting the Ship: Uganda Overhauls its Tax Agency, 2004-2014

 

Keywords 
domestic revenue mobilization
tax administration
tax policy
tax reform
corruption
Focus Area(s): 
Anti-Corruption
Centers of Government
Civil Service
Financial Management
Critical Tasks: 
Computerization of records
Corruption in the Civil Service
Depoliticization
Independent agencies
One-stop shops
Promotion
Ranks and grades
Revenue collection
Sequencing reform
Training
Core Challenge: 
Capacity (capability traps)
Contracting out (creating semi-autonomous agencies)
Credibility (trust)
Dispute resolution (compliance)
Institutional traps (spoilers)
Reducing capture
Transparency
Country of Reform: 
Uganda
Type: 
Case Studies
Author: 
Leon Schreiber