A Taxing Time

A few days ago I attended a 2 day course on Ugandan tax run by KPMG Uganda in one of the smart hotels in the centre of Kampala.

I have been struggling to find comprehensive and coherent advice on the tax system in Uganda since I arrived 18 months ago so the course was really useful.

I wasn't too surprised to find that a lot of the Ugandan tax system is based on the UK law and practice. But there are important differences. Much of what was said was very familiar, which made it much easier to spot and note the differences. There were even references to UK tax cases used to define terms used in Ugandan law but not defined here.

Generally the rates are much higher than in the UK. The main income tax rate is 30% instead of 20% and starts with earnings of just £100 pm. The top rate of 40% applies on earnings of more than £2,500 pm. There is no system of tax codes making tax for people with more than one job difficult to manage.

The rules are complicated and not well understood, with the result that often they are not followed properly. On top of that there is a large informal economy of small shops and market stalls that seem to fall outside the system. I do get the feeling that if tax compliance in Uganda was at the level it is in the UK then the level of services that could be funded would increase dramatically.

The Ugandan Revenue Authority do carry out audits and are trying to increase the tax take. If an organisation, commercial or charitable, is audited and found to have been calculating tax wrongly then the level of interest and penalties charged can be very high. Unpaid tax of $1,000 turned into a bill of $30,000 in one case mentioned.

If the art of taxation is to extract the maximum number of feathers from the goose with the minimum amount of hissing then I'm not convinced that the Ugandan authorities are taking the best approach. I would look to do a lot more education to enable people to calculate their tax correctly.

All in all a very interesting and useful 2 days. I will be using the information to produce several tax fact sheets on different aspects from basic PAYE and NSSF to more advanced VAT and Company tax so that these can be provided for the partner organisations. I also plan a series of training courses for partners in different locations or on different programmes and for staff members.