UGANDA MANAGEMENT INSTITUTE

SCHOOL OF MANAGEMENT SCIENCE

MASTER’S IN BUSINESS ADMINISTRATION

MBA 19

NAME: SOLOME NAMONO

REG. NO: 18/MBA/KLA/WKD/0009

ACADEMIC YEAR: 2019-2020

MODULE: TAXATION

MODULE LEADER: DR JOSEPH KAMPUMURE

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Digital Tax Stamps are physical paper stamp which are applied to goods or their packaging
which contain security features and codes to prevent counterfeiting, tamperproof features,
track and trace capabilities to enable consumers validate the stamp, traders and manufacturers
track the product movement and government to monitor compliance of the product and
stamp.it has a quick response code (QR code) that will allow distributors, retailers and
consumers to verify the authenticity of the products for online ordering and approval for
delivery of stamps. The Tax Procedures Code Act, 2014 provides for a code to regulate the
procedures for the administration of specified tax laws in Uganda; and to harmonize and
consolidate the tax procedures under the existing laws. The objectives of the act are to adopt
uniform procedures for the registration, assessment and collection of all domestic taxes;
promote efficiency in domestic tax administration by harmonizing, consolidating and
regulating tax procedures in a single law; and streamline and simplify the administration and
collection of taxes (URA, 2016).

Below are some of the pertinent issues that should be considered for successful
implementation of the Digital tax stamp by Uganda Revenue Authority:

Develop comprehensive databases of all taxpayers

URA in collaboration with Local Governments should create a comprehensive database for
all eligible taxpayers for efficient identification, assessment and collection of taxes which
should be linked to the national identity database which should be regularly updated. The Tax
Identification Number (TIN) should be linked to a person’s National Identification Number
(for individuals) and company registration number (for organizations). The use of National
Identification Number (NIN) will facilitate information sharing with URA and
tracking/authentication of taxpayer transactions to facilitate the use of Electronic Fiscal
Devices (EFDs) to improve compliance.

Building public awareness through tax education to increase knowledge by taxpayer.

There is need to educate citizens on their constitutional duty to pay taxes trough their
representatives. S.14 of the Tax producer code Act states that a tax representative is
responsible for performing any duty or obligation imposed by a taxpayer and through the
different representatives that tax payers have, there needs to be a broad discussion between
the authorities and the tax payers to discuss the effectiveness of the new changes in the tax
system.

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 Simplification of tax laws and policies

Efforts need to be made by some ‘tax experts’ to annually explain the implications of certain
tax proposals by government using a simplified language and approach. This calls for
concerted efforts to simplify all the tax laws and policies through translating them into local
languages. At local levels, CSOs can work with citizens’ groups (such as neighborhood
assemblies) and trader’s/ vendors’ associations to provide simplified information about
taxation.

Taxpayer registration and follow-up

URA should ensure regular updates to the taxpayer registry. An accurate central taxpayer
registry is critical to ensuring proper management of taxpayer obligations, this will help URA
in ensuring compliance by the tax payers when the new changes / policies have been
introduced in the tax system. The introduction and implementation of the Digital Tracking
and Tracing Solution (DTS) commonly known as the Digital Tax Stamp will deliver
transparency in the outputs of the manufacturing process from industrial production lines,
tracking and tracing of manufactured products. For example, at a unit price of UGX.625 per
bottle, the sectors (water & sodas) are expected to have remitted UGX.14.4Trillion per
annum but only remitted UGX 105Billion in FY 2016/17 and UGX 135Billion in FY
2017/18.

Implementation of external checks that enforce compliance

Informal businesses often operate without paying taxes; yet they regularly interact with other
government agencies or entities such as local governments, schools, hospitals and utility
companies. Establishing an inter-agency information-sharing system is key in verifying
taxpayer status and encouraging formalization for example a quick response code (QR code)
that will allow distributors, retailers, and consumers to verify the authenticity of the products.

Involve Key Partners

Partnerships between URA and the Ministry of Finance, Planning and Economic
Development; and other Ministries, Departments and Agencies (MDAs) and ICT Service
Providers, the Government, and Development Agencies like DFID, World Bank and IMF,
and the Swiss experts are important in capturing every eligible revenue contributor. In
addition, partnerships with new or evolving partners must be encouraged and this can be
implemented through holding discussions with the public through their representatives and
other key stakeholders.

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Economic Efficiency
The tax authority has to consider that the new changes to be introduced shall not interfere
with allocation of resources and in consideration of any tax, it will be to an extent that does
not affect the economy or cause distortions in the economic decisions. For example, a good
tax system should have taxes that cause only minimal impact on resource allocation and
economic decisions to be undertaken.

Administrative Simplicity
Before implementation of a new tax it should be ensured that it will be simple and easy to
administer in terms of costs of administration to the tax authorities, staff training and
equipment to be used should not be too expensive. The compliance costs of the tax payer
regarding record keeping, use of consultants and adherence to other required procedures
should not be too high. However administrative simplicity may to some extent be determined
by the complexity of the tax code, the types of tax and the tax payer. the system should cater
for all stakeholders to help minimise costs.

Transparency
It means that the tax payers and leaders can easily find information about the tax system and
how tax payers’ money is used. With a transparent tax system, all tax payers know how
much they are paying and what is being done with the money. Transparency can help in
finding out who benefits from tax exemptions, deductions and credits, and with this, tax
payers are able to adjust to the new changes that are being introduced in the tax system.

Curb tax avoidance

There is need to strengthen the capacity of Uganda Financial Intelligence Authority (FIA)
and URA to curb tax avoidance such as transfer pricing. S.6 of the Anti-money laundering
Act requires that bank accounts should be kept in the names of the account holders, instead
of anonymous or fictitious accounts in incorrect names. S. 18 of FIA Act explains about
combating money laundering, including enhancing public awareness by making collected
information available to competent authorities and exchanging information with other
countries that have treaties with Uganda.S.90(2) of the income tax Act states that the
commissioner may adjust the income arising in respect of any transfer or license of
intangible property between associates so that it is commensurate with the income
attributable to the property. And with this the tax authority is able to curb tax avoidance.

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Ensure Auditing as a legal pre-requisite.
Focus must be on improving the auditing processes and tools in this regard, the tax
administration has to prioritize more aggressive enforcement. Hence there is a need to audit
taxes with volatile collection rates. There were negative variations of 38% in 2013/14 and
6.4% in 2015/16 between actual and target collection for corporate tax. There is also a need
to audit the tax heads that are performing well to establish best practices that can be scaled up
in poor performing tax heads., it is evident that taxes on excise duty on soft drinks (5 % in
2013/14, 6.3 % in 2014/15 and 3% in 2015/16) performed well above the expected target.

Staffing, leadership and Task Forces

Another crucial aspect of the digital stamp tax administration process is staffing and
leadership. URA should form taskforces to oversee compliance of segments identified as
having significant negative variations between actual and target revenue collection as
identified in Indirect Tax-heads such as excise tax and VAT require special attention. In
particular, the large taxpayer taskforces should deliberately use different processes, rules, and
resources from those used by general tax offices.
Segmentation
Simple segmentation by tax-head is key to improving tax collection. While Uganda lacks the
advanced analytical tools and databases required to automatically flag and follow up
suspicious taxpayer behavior, a simple variation analysis such as the one that can be used to
map tax collection opportunities by geography, size, sector, and past behavior, among other
attributes which enables effective monitoring of revenue-collection.

Improving taxpayer service and communications

Improving the way the tax administrations work with taxpayers not only results into better
customer service but also has the potential to increase revenue. Since 2003, URA has
Increased use of modern technology for simple taxpayer transactions such as tax declarations
which may increase the level of voluntary payments.
Have an Innovation /team of experts
Continuous improvement of the tax system through continuous surveys and research on tax
matters is required to establish challenges, opportunities, loopholes and trends to benchmark
best practices especially from the other developing countries, Periodic surveys should be
carried out to ascertain the relevance and trends of challenges affecting effective revenue
mobilization. The surveys must incorporate key drivers of effective revenue collection.

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