Uganda: Selected Issues and Statistical Appendix

This Selected Issues paper and Statistical Appendix analyzes poverty and social development in Uganda. The paper reviews recent poverty and inequality trends, examines how poor people are coping with risk and vulnerability, analyzes the relationship between economic growth, structural reform and poverty, and describes the government policies in these areas. The paper also provides a brief overview of major institutional developments in Uganda’s financial sector since 1993 with regard to the legal, accounting, and general regulatory framework in which financial institutions operate.

Abstract

This Selected Issues paper and Statistical Appendix analyzes poverty and social development in Uganda. The paper reviews recent poverty and inequality trends, examines how poor people are coping with risk and vulnerability, analyzes the relationship between economic growth, structural reform and poverty, and describes the government policies in these areas. The paper also provides a brief overview of major institutional developments in Uganda’s financial sector since 1993 with regard to the legal, accounting, and general regulatory framework in which financial institutions operate.

IV. Tax Policy and Administration Reforms, 1994/95–1998/9924

94. One of the key objectives of the government’s medium-term revenue strategy in the 1990s has been to increase the revenue-to-GDP ratio while reducing the antiexport bias of the tax system. This has been achieved by relying less on import-based taxes, mainly through a reduction in the average tariff, while increasing reliance on nontrade taxes, mainly through the expansion of the domestic tax base. To accomplish this, the authorities introduced a value-added tax (VAT) in July 1996—which replaced the sales tax and the commercial transaction levy (CTL)—and a new Income Tax Statute in July 1997, eliminated the existing ad hoc policy with regard to exemptions and tax incentives for investors, and enhanced the effectiveness of tax administration.25

95. An important aspect related to the adoption of the new VAT and income tax laws is that, for the first time in many years, actual copies of tax laws have become widely available. Up-to-date versions of the old sales tax, CTL, and income tax laws were simply not available, and only few privileged persons were able to say what the law was. The original laws had been amended so many times that, even for those few people who had all the amendments, it was often impossible to say what was required by the law. By publishing new laws that are generally easier to understand and interpret, huge strides were made to help compliance and improve transparency.

96. During the period 1993/94–1998/99 (July-June) tax revenue, including import commission, increased by 3 percent of GDP to 11.6 percent of GDP (Table 18).26 With the exception of custom duties, all major tax headings increased over the period. In particular, VAT and income taxes combined increased by 1.9 percent of GDP to 5.9 percent of GDP, and now account for about 51 percent of tax revenue, compared with 46 percent in 1993/94 (Figure 6). Although custom duties declined over the period, combined receipts from all import-based taxes actually increased by 0.3 percent of GDP to 2.0 percent of GDP. This increase is the net result of a marked reduction in the effective duty rate and the noticeable increase in the import-to-GDP ratio, coupled with the introduction of excises on imports (see below). Import-based taxes now account for 15.6 percent of tax revenue, compared with 17.9 percent in 1993/94.

Table 18.

Uganda: Tax Revenue and Import Commission, 1993/94–1998/99 1/

(In percent of GDP)

article image
Source: Ugandan authorities.

Fiscal year begins in July.

Figure 6.
Figure 6.

Uganda: Tax Revenue, 1993/94–1998/99 1/

Citation: IMF Staff Country Reports 1999, 116; 10.5089/9781451838633.002.A004

Source: Ugandan authorities.1/ Includes Import commission.2/ Sales tax plus commercial transaction levy (1993/94–1995/96); VAT (1996/97–1998/99).3/ Includes custom duties, excises on imports, and import commission.4/ Coffee stabilization tax.

97. The impact of the ongoing tariff reform and of the introduction of the VAT and the new income tax reflected changes in both tax administration and tax policy. The increase in the tax-to-GDP ratio and the structural changes in tax policy could have not been implemented without significant changes in organization and procedures in tax administration. In the following sections, the main changes in tax policy and administration in the areas of import, valued-added, and income taxation are examined.

A. Tariff reform

98. The thrust of the tariff reform consisted in gradually reducing tariff barriers by lowering and simplifying the tariff structure and phasing out exemptions and import bans. The tariff structure was lowered and simplified by decreasing the number and range of rates and the maximum rates. The number of rates was reduced from about 20 for Common Market for Eastern and Southern Africa (COMESA) imports and from 5 for non-COMESA imports in 1993/94–1994/95 to two structures of 3 rates each, including zero, in 1998/99 (Table 19). The range of rates was considerably narrowed by lowering the maximum rate for COMESA imports from 118 percent in 1994/95—although most goods had rates at or below 15 percent—to 6 percent in 1998/99. Over the same period, the maximum rate on non-COMESA imports was reduced from 30 percent to 15 percent. As a result of these measures, Uganda now has a simpler and user-friendly rate structure (particularly for investment), whereby, by and large, plant and machinery items are zero rated, raw materials are imported at 7 percent, and final products are imported at 15 percent;27 if goods originate in COMESA countries, the applicable rates are 0 percent, 4 percent, and 6 percent, respectively. However, as import duty rates were being lowered, ad valorem excises were imposed on selected imports, with the dual objective of allowing some degree of protection for domestic producers and partly compensating for the revenue loss.28 Although the excise on imports applies irrespective of the country of origin, it tends to be imposed on goods produced predominantly in COMESA countries. Nevertheless, the situation is better today than in 1994/95 and earlier, when discretion was used widely to supplement tariff duties with very high discriminatory excises.

Table 19.

Uganda: Import Duty Rates, 1993/94–1998/99 1/

(In percent unless specified otherwise)

article image

Fiscal year begins in July, COMESA is Common Market of Eastern and Southern Africa.

Non-COMESA: 4 ad valorem rates: 0, 10, 20, and 30 percent; COMESA: about 20 ad valorem rates from 0 to 118 percent—most at or below 15 percent

Non-COMESA: 5 ad valorem rates: 0, 5, 10, 20, and 30 percent; COMESA: about 20 ad valorem rates from 0 to 118 percent—most at or below 15 percent

Non-COMESA: 5 ad valorem rates: 0, 5, 10, 20, and 30 percent; COMESA: 6 ad valorem rates: 0, 2, 4, 5, 6 and 12 percent—most at or below 6 percent.

Three ad valorem excises on imports—10, 20, and 25 percent—would also apply on selected imports

Non-COMESA: 4 ad valorem rates: 0, 5, 10 and 20 percent; COMESA: 6 ad valorem rates: 0, 2, 4, 5, 6, and 12 percent—most at or below 6 percent.

Two ad valorem excises on imports—10 and 20 percent—would also apply on selected imports.

Non-COMESA: 3 ad valorem rates: 0, 7, and 15 percent; COMESA: 3 ad valorem rates: 0, 4, and 6 percent.

While rates were specified in the tariff code, waivers were given on a discretionary basis to investors licensed by the Uganda Investment Authority under the 1991 Investment Code.

Except for inputs into key industries whose raw materials were not likely to be produced soon.

99. At the same time, the government has made efforts to widen the base of import taxation and, in 1995/96, amended Section 22 of the 1991 Investment Code to abolish discretionary granting of exemptions for investors licensed with the Uganda Investment Authority (UIA).29 The bans on imports of cigarettes, beer, sodas, and car batteries were removed between April 1998 and April 1999.

100. From the administrative point of view, however, the Customs and Excise Department (CED) suffered serious setbacks in 1995/96. In the run-up to the presidential and parliamentary elections in 1996, a political decision was taken to effectively suspend antismuggling operations, which was reversed only at the end of September 1996; in the interim period, a few members of the Anti-Smuggling Unit left. As taxes on highly taxed goods, particularly fuel and cigarettes, were evaded, there was a failure to meet revenue targets in 1996/97 and again in 1997/98; this was also the reason for the slump in import duties in 1995/96–1996/97. In particular, by returning to ad valorem petroleum taxation on July 1, 1996—at a time when oil prices were rising sharply—the differential of petroleum prices between Uganda and neighboring countries was further increased, providing additional incentives for smuggling petroleum products.

101. In the second half of 1997, the government took two parallel sets of actions to address the situation. First, it overhauled the management of the CED and the Uganda Revenue Authority (URA). In August 1997, a new URA Board was appointed and its basic functions redefined, with a view to limiting its involvement in management and day-to-day operations of the URA. Several URA senior managers were replaced, including the Commissioner General and the Commissioner of Customs. Furthermore, the disclosure requirements of the Leadership Code became applicable for members of the URA Board and URA staff. Second, the government sought to implement for the CED a comprehensive modernization strategy that had been developed in 1996 with external technical assistance. The strategy was incorporated in the CED’s yearly business plan in 1997/98, when the introduction of the automated system for customs data (ASYCUDA) allowed faster and more effective clearing procedures; better handling of transit goods was achieved through closer cooperation with Kenya and Tanzania; and a preshipment inspection company was hired to handle inspection and valuation. In 1998/99 period, a senior HMS customs official (from the United Kingdom) was appointed as Deputy Commissioner General to overview and implement the customs’ modernization strategy. HMS customs experts were also appointed to establish procedures for postimport audits, special audits of the excise goods factories, the processing of airport passengers and cargo, risk analysis and selective verifications, and the training of staff in these areas. While the strategic modernization strategy was being implemented, smuggling was being more effectively fought through (i) the sealing of petrol stations; (ii) the introduction of chemical tracers in fuels; (iii) a program of physical inspections and audits of petrol stations; and (iv) the establishment of a new Anti-Smuggling Unit. Furthermore, a new satellite and shortwave radio communication network was established linking most customs stations.

102. As a result of the nominal tariff reductions discussed above, the average effective duty rate on imports—i.e., the ratio between import duty revenue and dutiable imports—almost halved from 10.3 percent in 1993/94 to a projected 6.4 percent in 1998/99 (Figure 7). In part to offset this revenue decline, the effective excise on imports was increased from 0.3 percent to 1.7 percent. Nevertheless, import duties did not decline as a percent of GDP, as the reduction in the effective rate would have suggested, as the shilling value of dutiable imports increased as a ratio to GDP from 12.6 percent in 1993/94 to 19.1 percent in 1998/99. As a result, import duties declined by only 0.1 percent of GDP to a projected 1.2 percent of GDP over the 1993/94–1998/99 period, while excises on imports actually increased from almost zero to 0.3 percent of GDP (Figure 8). The combined yield from the three import-based revenue sources—duties, excises, and import commission—increased over the 1993/94–1998/99 period by 0.3 percent of GDP to 1.8 percent. In this context, total import-based revenue in 1998/99 increased more rapidly than imports (Figure 8), suggesting that the administrative improvements that were started in 1997/98 are yielding results.

Figure 7.
Figure 7.

Uganda: Effective Duty Rates and non-COMESA Rate Spread, 1993/94–1998/99 1/

(In percent)

Citation: IMF Staff Country Reports 1999, 116; 10.5089/9781451838633.002.A004

Source: Ugandan authorities.1/ Fiscal year begins in July; COMESA is the Common Market of Eastern and Southern Africa.2/ EDR is the effective duty rate; EIC is the effective import commission; and EER is the effective excise rate.
Figure 8.
Figure 8.

Uganda: Imports and Import-Based Revenue, 1993/94–1998/99 1/

(In percent of GDP)

Citation: IMF Staff Country Reports 1999, 116; 10.5089/9781451838633.002.A004

Source: Ugandan authorities.1/ Fiscal year begins in July.

B. Impact of the Value-Added Tax

103. Following two years of legal and administrative preparations, the VAT was introduced in July 1996, replacing the sales tax and the CTL. The main objective of the change was to significantly widen the domestic tax base while introducing an elastic, efficient, and neutral tax. Significantly, the VAT Statute, unlike the laws it replaced, did not include provisions allowing the Minister of Finance to grant exemptions.30 A related objective was to use a modern tax such as the VAT as a stepping-stone toward the reorganization of the URA as an integrated tax administration.31

104. Although the VAT legislation was basically sound (with a broad coverage and a single, positive rate), some policy features and administrative and political steps complicated its administration and almost derailed the reform.32 Owing to a low initial registration threshold and poor screening (initially, all taxpayers to whom registration forms were given were registered for VAT when the forms were not returned), the size of the register was much larger (13,514 registrants) than what was originally expected by the URA (about 7,000), as well as what the URA could effectively handle at the time (about 4,000). Popular resistance to the VAT, coupled with the imposition of prohibitive excises on selected imports, led to a strike by traders in September-October 1996. The registration threshold was then—barely four months after the introduction of the tax—raised from U Sh 20 million to U Sh 50 million. At that point, VAT management mistakenly focused on deregistration and recovery of taxes from deregistered taxpayers at the expense of improving overall compliance. Furthermore, VAT officers were severely criticized by traders and publicly denounced by the government for their aggressive collection methods and for corruption, and they were forbidden to carry out on-site visits for a period of almost three-and-one-half months. Faced with these problems and with the need to demonstrate improved compliance, the VAT register was drastically reduced to 3,365 by end-June 1997—leaving out several businesses that should have been in the VAT system. These events significantly complicated the operational efficiency of the tax and, in its first year, the VAT yielded only 3.4 percent of GDP—that is, 0.1 percent of GDP less than the taxes it had replaced (Table 20).

Table 20.

Uganda: Sales Tax, Commercial Transaction Levy, and VAT, 1995/96–1998/99 1/

(In percent of GDP)

article image
Source: Ugandan authorities.

Fiscal year begins in July.

105. In the following two years, the authorities introduced a few changes that improved the operations of the VAT. In June 1997, several zero-rated items were transferred to the exemption list. In 1997/98, the VAT Department started drawing up yearly business plans that included functional objectives—including for auditing and collection. The business plans included workload projections, which justified hiring more auditors, and training plans. As part of the Enhanced Structural Adjustment Facility ((ESAF)-supported program and consistent with the VAT Department’s business plan, audit targets were set and met in 1997/98. A registration enforcement program was also developed. Key elements of this program included the cross-checking of registration information among the VAT, income tax, and customs administration departments, the stricter application of penalties for nonregistration, and the limitation of government contracts to VAT-registered enterprises. As a result, the VAT register increased steadily to about 4,200 in January 1999. In July 1998, the penalties for failure to file and/or pay the VAT were strengthened.33

106. However, the authorities did not succeed in achieving their second objective, namely, to use the VAT to modernize tax administration. The VAT Department developed independently from other URA departments. For example, while a single taxpayer identification number (TIN) was being developed for all other revenue departments, the VAT Department introduced its own VAT number, which complicated the exchange of information on taxpayers. The VAT computer system (VENUS) was too rigid and was not adapted to changing procedures. As a result, it is now unable to provide crucial data for effective management of the tax,34 and several operations and calculations have to be conducted manually. This limitation has contributed to a heavier workload for VAT officials.

107. Faced with the need to modernize tax administration, the authorities established the Large-Taxpayers Department (LTD) in November 1998.35 The LTD manages the assessment, collection—including its enforcement—and auditing of income taxes, VAT, and domestic excises of the largest 100 taxpayers. Effectively, the authorities’ strategy is to use the LTD as a model for modernizing the whole the URA. As new procedures and structures are successfully introduced by the LTD, they will be subsequently applied to other departments. The LTD is being organized along functional lines, including through a clear separation of collection and auditing functions. This has allowed the drawing up of detailed plans for comprehensive and refund audits and collection based on manpower, and of classroom and on-the-job training programs delivered by foreign experts. To facilitate compliance, procedures for faster VAT refunds and the simplification of filing and collection procedures through direct banking are also being introduced.36 It is fair to say that the LTD has brought about a cultural change in URA; there is much more understanding of the importance of functional specialization in modern tax administration and of close coordination between different operational branches for effective enforcement.

108. As a result of administrative improvements, the VAT is now solidly contributing to the increase in the revenue-to-GDP ratio, as it accounts for 3.8 percent of GDP, compared with the revenue yield of 3.3 percent of GDP from the sales tax and CTL it replaced. More significantly, in the three years since its introduction, the revenue productivity of the VAT has increased by almost 0.02 percent of GDP per percentage point of the tax rate to 0.22 percent of GDP.37 This level of productivity is still rather low by developing country standards, which is an indication of both the work that remains to be done and the potential of this revenue source.38

C. Reform of Income Taxation

109. Another major structural improvement in tax policy was the adoption in July 1997 of a new Income Tax Act.39 As the VAT Statute did in 1996, the Income Tax Act removed the Minister of Finance’s power to grant discretionary exemptions. While retaining the existing 30 percent tax on companies’ income and the 4 percent withholding tax on a wide range of business transactions, the act introduced several important modifications to the taxation of corporate and personal income. The most relevant are as follows:

  • It provided a new incentive regime for business development, the essential elements of which included (i) establishing accelerated and streamlined depreciation allowances to give significant benefits for investments in new productive assets like plant, machinery, and equipment; and (ii) the termination of tax holidays granted under Section 25 of the Investment Code. The existing tax holidays for company profits were grandfathered but are not being renewed as they expire, while the existing tax holidays for withholding taxes on payments such as dividends, interest, royalties, and management fees were terminated with immediate effect.

  • It introduced new tax arrangements for mining, exploration, and development that eliminated the scope for government or politicians to negotiate special tax arrangements for individual mining companies.

  • It introduced presumptive taxation for small businesses (with turnover of less than U Sh 50 million per annum).

  • It introduced a limited capital gains tax, providing for taxation of gains made in a business context (i.e., from disposal of business assets) but excluding gains from disposal of personal assets from the scope of the tax.40

  • It introduced a more effective and easier-to-administer final withholding tax, at a uniform rate of 15 percent, on interest and dividend earnings of resident individuals and various payments, such as dividends, royalties and management fees, to nonresident individuals.

  • It eliminated and/or tightened exemptions. For example, exemptions for the judiciary, and for persons working on donor-funded projects were terminated. The power of the Minister of Finance to grant discretionary exemptions was also removed, and, with the enactment of the new act, many previously granted income tax exemptions automatically expired.41

  • It dramatically reduced the range of nontaxable allowances (especially in areas like housing) and introduced more effective provisions for taxing benefits in-kind, particularly by establishing clearer valuation rules.

  • It adopted a residence-based definition of income for tax purposes, with allowable credits for taxes paid on income earned from sources outside Uganda.

110. As a result of these policy changes, income tax revenue increased steadily from 1.6 percent of GDP in 1996/97 to 2.1 percent of GDP in 1998/99. The two main tax headings behind this growth have been the personal income tax (PIT) and the corporate income tax (CIT) (Figure 9). The PIT increase reflects both the monetization of in-kind benefits implemented in 1996/9742 and the expansion in the definition of taxable income achieved through the Income Tax Act. The CIT increase mainly reflects the expiration of tax holidays. In 1997, about 300 companies were benefiting from tax holidays granted under Section 25 of the Investment Code. Figure 9 shows how CIT revenue recovered after the slump in the mid-1990s generated by the erosion in the tax base due to tax holidays and exemptions.

Figure 9.
Figure 9.

Uganda: Income Taxes, 1993/94–1998/99 1/

(In percent of GDP)

Citation: IMF Staff Country Reports 1999, 116; 10.5089/9781451838633.002.A004

Source: Ugandan authorities.1/ Fiscal year begins in July.2/ Includes presumptive tax on small businesses.

D. Other Changes in Tax Regulations

111. In addition to the reforms outline above, the arrangements for exempting procurements related to government-funded and donor-funded projects have been much improved. These improvements have expanded the tax base and limited the scope for tax evasion through collusion between contractors and government officials, which typically occurred under the system of paying import taxes by issuing treasury credit notes (TCNs).

112. The TCNs were introduced in 1992/93 as a means for the government to—only formally—pay taxes on imports for donor-funded projects and government contractors. The payment of tax by the government to the URA through TCNs was essentially a paper transaction, which allowed the government contractor to clear goods tax free. Contractors entitled to exempt inputs had to get a sponsoring ministry to issue a TCN to account for the taxes assessed on the goods. The TCNs applied almost exclusively to imports for large construction projects that would have been part of the development budget. However, the TCN system was prone to abuse and provided scope for corruption. Since the TCNs accommodated the exemptions with pieces of paper, they did not provide any incentive on the part of ministries to control the amount of exemptions granted. While a bona fide TCN could take months to issue, others could be issued very quickly by interested government officials. In fact, TCNs were also easily abused to clear imports that bore no relation to government contracts. In some cases, the TCNs were issued long after the goods were cleared.

113. In 1996/97, TCNs were replaced by a new system whereby budget allocations would include funds to pay taxes on goods and services qualifying for exemptions. Although this system has not always worked efficiently, the transition from an outright exemption regime to a system of budgeting for payment of taxes has reduced exemptions, and the scope for abuse has greatly narrowed. In 1996/97, procedures for applying exemptions on the activities of nongovernmental organizations (NGOs) have also changed. NGOs implementing projects under the auspices of a specific ministry must now get this ministry to pay the taxes due—which requires that the relevant line ministry must accept that the NGO project activity is worthy of support.

24

This chapter was prepared by Edgardo Ruggiero.

25

An independent Uganda Revenue Authority (URA) had been established in 1991.

26

The noticeable revenue increase in 1994/95 was due to the coffee boom. To cushion the impact of the unexpected rise in the world market price of coffee on macroeconomic aggregates, including domestic demand and the exchange rate, the authorities introduced a coffee stabilization tax, which remained in effect for two years.

27

This rate structure is indicative and has important exceptions, including zero-rated items such as farm inputs and health and educational goods.

28

This temporary measure was allowed under COMESA agreements. “The COMESA Council of Ministers agreed that according to the Treaty, member states who may suffer revenue losses or whose industrialization program will greatly suffer as a result of effecting tariff reductions, may impose surtaxes for specified periods on commodities from another member state.” (Government of Uganda, 1996/97 Budget Speech (Kampala: Ministry of Finance, Planning and Economic Development, para. 67). In this context, beginning in July 1996, excises of 10 percent, 20 percent, and 25 percent were imposed on selected imports. In 1998/99, most goods were taxed at 10 percent, and only few goods at 20 percent. However, through statutory instruments, the valuation of some sensitive imports—i.e., textiles and sugar—was artificially raised to discourage importation.

29

The importance of tightening Section 22 goes beyond import duties, as it allowed any investor licensed by the UIA to import capital inputs free of sales tax, import duty, excise duty, import commission, and withholding tax. In fact, the termination of the discriminatory exemptions under Section 22 was impossible to implement until 1996/97, as most investors that had been promised or had received certificates of exemption were grandfathered for one year through transitional provisions.

30

However, the 1998/99 budget law introduced the possibility that the URA Commissioner General could notify the Minister of Finance of cases where the VAT could not be effectively recovered, by reason of the taxpayer’s hardship or the impossibility, undue difficulty, or excessive cost of recovery. In such cases, the Minister may grant a full or partial tax write-off.

31

Under the existing organization, the operational branch of URA is subdivided in departments for each main revenue head (VAT, Internal Revenue, and Customs and Excises), with little communication among them. This organization is a carryover from British practice and was appropriate when the main revenue sources were based on trade and relatively simple indirect taxes (i.e., excises and one-stage sales taxes) and no computerization and little automation existed. Furthermore, within each department, the lack of functional organization hampers specialization and efficiency. For example, tax auditors often double as tax collectors. Furthermore, there is no distinction between collection of current and overdue liabilities. The organization is changing with the establishment of the Large-Taxpayers Department (LTD) in November 1998 (see below).

32

See Section I of International Monetary Fund, Uganda—Selected Issues and Statistical Appendix, IMF Staff Country Report No. 98/61 (Washington. International Monetary Fund, 1998) for further details on administrative changes in 1996/97. This section of the chapter updates the 1998 report to take account of subsequent events and additional findings.

33

Penalties and interest payments are not yet rigorously applied and are sometime used as a bargaining tool to negotiate collection of overdue taxes.

34

For example, VENUS cannot provide reliable refund or estimated arrears positions of taxpayers, nor automatically calculate penalties.

35

Although the relevance of the LTD goes well beyond the VAT, its implementation is discussed here because it forced the VAT Department to focus its collection and audit efforts on medium-sized enterprises. In the past, in order to achieve its collection objectives, the URA departments would concentrate excessively on a few large taxpayers—a strategy that often generated accusations of harassment by the few targeted taxpayers.

36

Outside the LTD, the VAT taxpayer is currently required to (i) submit a return at the tax office; (ii) make its payment at the bank; and (iii) return to the tax office to pick up a receipt. With direct banking procedures, the bank will issue a tax payment receipt upon reception of the payment and tax return.

37

The VAT productivity is calculated as the ratio of the VAT collection as a percentage of GDP to the VAT rate (17 percent in Uganda) and represents how many hundredths of a percentage point of GDP are collected for each point of the tax rate.

38

Notwithstanding comparable levels of GDP per capita, Kenya has higher VAT productivity (0.35 percentage points of GDP). Zambia also has a higher VAT productivity (0.29 percentage points of GDP), although its GDP per capita is lower than Uganda’s. VAT productivity in Uganda may be hindered by the relatively small formal manufacturing and trading sectors. If Uganda’s VAT were at Zambia’s level, VAT collection would be about 4.9 percent of GDP—i.e., 1.1 percent of GDP higher than currently.

39

Owing to initial resistance by manufacturers and the need to clarify procedures, the Income Tax Act was enacted only in December 1997.

40

The old law did not include any provision for taxing capital gains.

41

Exempt institutions are only those identified in Schedule 1 of the Income Tax Act—essentially UN and donor agencies—and any other entity exempted in writing by the Minister of Finance before the enactment of the act on December 31, 1997.

42

For a review of civil service and salary reform see Section II of International Monetary Fund, Selected Issues and Statistical Appendix.

Uganda: Selected Issues and Statistical Appendix
Author: International Monetary Fund