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Gov’t arrears threaten URA performance

Peter 11th Sep, 2024 Economy Pedson Mumbere
Gov’t arrears threaten URA performance

John Rujoki Musinguzi, the Commissioner General of the URA. FILE PHOTO


Uganda's revenue collection is facing a serious threat from the growing backlog of government arrears, which is straining the Uganda Revenue Authority’s (URA) ability to meet its targets.

During a high-level meeting between the URA and the World Bank, this pressing issue took center stage as both parties discussed reforms aimed at boosting revenue and strengthening Uganda’s financial stability.

The agenda focused on Uganda's Public Investment Management (PIMS), domestic revenue mobilization, climate change resilience, and IT system integration. However, the conversation quickly turned to a critical challenge the accumulation of government arrears.

  • John Rujoki Musinguzi, the Commissioner General of the URA, who was panellist with Dr. Verena Maria Fritz, the Lead Governance Specialist from the World Bank, emphasized the growing pressure caused by these arrears, explaining how they are creating cash flow unpredictability and making it harder for the URA to plan effectively.

"The accumulation of government arrears has become a significant barrier to our efforts in revenue collection. It disrupts our ability to project and mobilize funds efficiently," he said, urging the World Bank to provide guidance on improving cash flow predictability.

This issue goes beyond the URA’s administrative operations. Accumulating arrears can destabilize public services, delay government projects, and reduce the ability to meet budgetary obligations. With the economy heavily reliant on consistent revenue streams, this creates a ripple effect that could hinder Uganda’s economic growth and development efforts.

  • According to URA, despite these challenges, they are working towards the Domestic Revenue Mobilization Strategy (DRMS), an initiative aimed at increasing taxpayer compliance and boosting revenue. Internal reforms are a key part of this strategy, including the implementation of digital solutions designed to enhance efficiency.

Among these are the Bonded Warehousing Information Management System (BWIMS), automated audits, and the Digital Tracking Solution, which have helped streamline operations and improve tax collection.

Government arrears can arise when the government delays payments to private sector suppliers of goods and services, interest on bonds, and other parties.

In addition to technology-driven reforms, URA is focusing on building human capital to modernize tax administration. Musinguzi highlighted the creation of a Tax Academy aimed at equipping staff with the skills needed for efficient tax management. Furthermore, URA has established a strategy and risk management division to address enterprise risks and guide future organizational direction.

In combating corruption, Musinguzi emphasized the role of the newly formed Integrity, Compliance, and Ethics Division. By tackling corruption and improving accountability, URA aims to create a more trustworthy tax system.

  • On the technology front, Robert Mutebi, URA’s Commissioner of Information Technology and Innovation, said they have made a deliberate decision to ensure that all revenue collected is traceable through advanced automation. This approach, he added, is intended to make tax collection more efficient and taxpayer-friendly, reducing the administrative burden and minimizing errors.
  • The meeting also touched on the broader issue of climate change resilience. While specific strategies were not fully outlined, both parties recognized the importance of incorporating climate risks into revenue administration.

Building resilience to climate-related disruptions could help safeguard revenue streams from natural disasters or shifts in the agricultural economy, which Uganda heavily relies on.

However, Musinguzi acknowledged that these digital reforms have not been without challenges. The rollout of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS) has faced hurdles, particularly among small taxpayers, leading to a temporary suspension of enforcement, which has delayed full implementation, further straining efforts to increase revenue collections.

For the 2024/2025 financial year, the URA was handed a target of about UGX 32 trillion out of a national budget of UGX 72.136 trillion.

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