News Column

Electricity Sector Posts Tax Surpluses

July 28, 2014

Alon Mwesigwa

Power distributor Umeme's resolve to have most of its debtors pay up boosted last financial year's tax collections from the electricity sector, Uganda Revenue Authority has said.

Presenting the tax body's performance at Serena hotel last week, URA Commissioner General Allen Kagina said Umeme had strengthened monitoring, debt management and improved bill payment compliance level by spreading the coverage of the pre-paid meters.

"This resulted into payment of tax-arrears amounting to Shs 56.90 billion," Kagina said.

Value Added Tax collections from the sector was Shs 162.67bn - posting a whopping Shs 85.20bn surplus, the biggest in the 2013/14 fiscal year posted by a single sector. The target was Shs 77.47bn. Umeme and other energy companies like Eskom are among those that paid bonuses and boosted their payrolls which also lifted collections, the tax body said.

Despite rumblings in Parliament with recommendations to terminate Umeme's concession, it did not stop the company from posting a Shs 87bn profit. Indeed, Umeme Head of Communications Henry Rugamba told The Observer on Friday that they had increased their efforts on getting more people into the pre-paid meters, as one of the sure ways to minimise defaulters.

He said they had so far registered 85,000 people registered on prepaid meters. He added that government ministries and departments were paying on time, but the problem of power thieves was still hampering their progress.

Meanwhile, for the financial year 2013/14, URA collected Shs 8tn against the Shs 8.5tn target. While it reflected a shortfall of close to Shs 500bn, the tax body says it realised a 12 per cent growth compared to the same period the year before. Kagina said most corporations performed poorly last year which resulted into low taxes on their profits.

Nonetheless, the revenues collected, according to Kagina, were able to finance 71.5 per cent of the Uganda's national budget. Government had earlier projected that locally-mobilised resources would fund 80 per cent of the budget. While most firms did not perform well in corporation tax because of their general profits declines, levy on the profits they earned from investing in government securities increased.

Because of high inflation rates and a lot of defaulters in the last two fiscal years, commercial banks, for instance, opted to invest in treasury bills, which they consider to have minimal risks.

Other tax heads that posted good results included the Pay As You Earn (PAYE). URA says there was remarkable growth in payrolls, bonus payments and gratuity. The tax body says the banks and other big corporations in energy and oil paid hefty bonuses to their top honchos. Other top-performing tax heads were airtime and international calls, local spirits and waragi.

All was not good, though. Some tax heads posted deficits. They include corporation tax, the levy on profits earned by big entities like banks, and other organisations. URA says there was decline in the profits of many companies as the economy did not perform well as was expected.

Some major taxpayers made huge investments in the country last financial year; so, they had huge deductions on the tax they were supposed to pay. For instance, Nile Breweries, which opened a new Shs 190bn factory in Mbarara, had Shs 20bn deduction while Hima Cement had Shs 7.4bn and Abacus Shs1bn because of high investments.

On the other hand, international taxes grew by 16 per cent this year compared to 2012/13. Meanwhile, Kagina spoke passionately about her impending leave from heading the tax body when her contract expires in October.

"My contract ends in October and I am going to retire," she said "I have not yet decided where I am going, but I think I am going into private business. We have spent 10 years building capacity of staff at URA, I am very sure there is someone among my top staff who can ably replace me."

She made comparisons of what the how URA was performing when she took over in 2004 and how it is performing today. The revenue collections have grown by 317.5 per cent from Shs 1.92tn in 2004 to Shs 8.03tn while tax collections, which used to support 58.7 per cent of the national budget, are now supporting nearly three quarters of the budget.

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Source: AllAfrica

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