Africa-Press – Uganda. Massive layoffs due to the Covid-19 pandemic led to a Shs168.5 billion shortfall in Pay as You Earn (PAYE) among other taxes, a new report by the Ministry of Finance shows.All the major tax heads registered shortfalls against their respective targets for the half year, according to the report.
Direct domestic tax collections amounted to Shs3.314.7 billion, below the target by 10.5 per cent, which is equivalent to a shortfall of Shs388.8 billion.Shortfalls were registered for collections of PAYE, corporate tax and rental income tax (short of target by Shs168.5 billion, Shs108.5 billion and Shs87 billion respectively), among others.
The Ministry of Finance explains that PAYE registered shortfalls as collections from formal employment remained subdued due to layoffs associated with Covid-19, for example in the education sector. Corporate and presumptive taxes were also lower than their target as profitability of most firms was affected by the pandemic.
“Government had projected to collect indirect domestic taxes amounted to Shs2.432 trillion in the first half of 2020/21. However, only Shs2.159 trillion was realised during the period, resulting in a shortfall of Shs273.5 billion. This shortfall was both in excise duty (Shs127.7 billion) and Value Added Tax – VAT (Shs145.7b). VAT collections for the period were Shs1.443 trillion against a target of Shs1.589 trillion, implying a performance of 90.8 per cent,” the Ministry of Finance says.
The Ministry of Finance explains that most of the low performance under VAT was recorded in the services sector, including wholesale and retail trade, hotels and restaurants, as well as transport and communication that were mostly hit by the Covid-19 pandemic.On the upside, the Ministry of Finance says VAT collections performed above target in the manufacturing sector, buoyed by cement and milk products. Excise duty collections during the half year were Shs715.78 billion against a target of Shs843.51 billion.
The new report shows that the effects of the Covid-19 pandemic affected tax revenue collection, leading to a Shs3.530 trillion shortfall in government expenditure.The report shows that total government expenditure for the first half of FY 2020/21 amounted to Shs16.976 trillion against a programme of Shs20.506 trillion due to revenue shortfalls from the domestic revenue collection and reduction in grants. This implies that government expenditure stood at 82.8 per cent.
The Ministry of Finance explains that revenue collections amounted to Shs9.746 trillion in the first half of FY 2020/21 against a target of Shs10.869 trillion. This resulted in a shortfall of Shs1.122 trillion (representing 10.3 per cent below target). Of the total revenue collected during the half, Shs9.054 trillion was tax revenue while Shs691.9 billion was non-tax revenue.On the other hand, the Ministry of Finance says the revenue and grants received during the half half of 2020/2021 amounted to Shs10.572 trillion against a target of Shs11.797 trillion.
However, in spite of the shortfalls, total domestic revenue collections during the first half of 2020/21 represented a growth of 7 per cent from the same period of last Financial Year.During the period under review, the government received a total of Shs825.7 billion in form of development assistance from development partners against a target of Shs927.9 billion, performing at 89 per [email protected]
