Uganda is resorting to widening the tax base to finance the national budget instead of relying on foreign financing.
Matia Kasaija, minister of finance, planning and economic development, told reporters that the government is bringing more business entities into the tax system to expand the tax base. Government’s core aim is to increase the tax contribution to the Gross Domestic Product (GDP) to 16 percent and later to 18 percent from the current 14 percent. Kasaija on Monday said the government is now looking at domestic financing noting that there are many economic activities where people are making large sums of money but not paying taxes. He said this explains why the government is introducing new tax measures to reduce its dependence on foreign aid. Kasaija said external borrowing and grants is becoming more expensive and also grants from donor communities are reducing.
The finance minister said the government is formulating a new strategy to increase domestic revenues using Medium-Term Revenue Mobilization Strategy (DRM-S). In the DRM-S, the government aims to grow domestic tax revenue by 0.5 percent of the GDP annually with a view to reach 18 percent of tax ratio to the GDP by 2020. Marios Obwona, a consultant with National Planning Authority, a state agency, told Xinhua that whereas there is need to widen the tax base, tax administration is equally important. “Uganda needs to improve on tax collection by building the capacity of Uganda Revenue Authority as well as improving on revenue management,” he said.