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Government Moves to Discover 'Shadow Economy'

The government commissioned a team of researchers from Makerere University and the Uganda Revenue Authority to get the facts responsible for the big part of the economy that is not recorded and taxed, also referred to as the Shadow Economy.
04 Dec 2020 20:47

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Professionals and corporate companies have been found to be engaged in many economic activities that are not captured by the national economy statistics and therefore are not paying taxes, according to a survey. 

According to figures at the Uganda Revenue Authority, there are only 1.5 million taxpayers in Uganda out of an estimated 10 million people who are in gainful employment.

This is also far below the 18 million Ugandans that are within the tax eligibility category. The small tax base is responsible for the low tax revenues that the country gets, which is about 14% of the economy, far below the regional average of 17 percent. 

It is also one of the reasons that the few taxpayers feel a heavy burden of too many and high taxes, but it also means the country must always rely on loans and external support to fund its annual budgets. 

These are some of the reasons that the government commissioned a team of researchers from Makerere University and the Uganda Revenue Authority to get the facts responsible for the big part of the economy that is not recorded and taxed, also referred to as the Shadow Economy. 

The shadow economy is dominated by the informal sector, led by agriculture, real estate and transport, especially taxis and boda bodas. 

While some of them pay some taxes and dues, it is almost impossible to know how much they make because their transactions with customers are not registered. 

The survey found that while some activities are unintentionally hidden from statistics, other enterprises intentionally keep them away for various reasons. They include the need to maximize profits by evading or avoiding taxes, fear of the harsh penalties in case of non-compliance that may include closure of business, and high and many tax regimes among other reasons, according to the lead researcher, Ismail Kintu a lecturer at Makerere University School of Business. 

// ”Cue in: High tax rates …. 

Cue out:… others, unknowingly.”//

  

The Uganda Revenue Authority says it has put in place many measures to ensure that tax payment and management is as friendly as possible to the paying public, because for time immemorial, tax has been largely treated as a punishment.

Many people talked to on why people hide their activities also blamed the tax regime as the major reason, as well as the fact that it is not easy to tell the benefit of the tax paid by an individual. 

The survey also revealed that even professional and corporate organisations, including the formal business intentionally hide their activities and under-declare them so as to avoid business. 

Some members of the public blame the government for delivering inadequate tax-funded services which discourages the public from paying taxes. 

// "Cue in: Don’t you think….  Cue out:…. Be of great influence. 

  

Nicholas Musoke, a research and policy analyst at Uganda Revenue Authority says they will continue listening to the public to ensure the tax sector is as friendly as possible through public sensitization and introduction of tax payment systems that are easy to use.  

      

// “Cue in: Having observed that … 

Cue out:…. Try to follow up.”//

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