vada presentation ENHANCING VAT COMPLIANCE management John Tinka Katungwensi 15-June 2016

Table of Content. Introduction Registration Filing & Reporting. Payment & Others Conclusion Q&A Refresher Training in registration Register cleaning guidelines

Presentation on Enhancing VAT COMPLIANCE Introduction The VAT was introduced in Uganda in July 1996 to widen the tax base substantially by; bringing all supplies of goods and services within the tax net; and significantly expanding the number of enterprises liable for the tax. VAT replaced sales tax and the Commercial Transaction Levy (CTL) to broaden the tax base. VAT is a tax on consumption( indirect tax) This implies that VAT should be imposed on all supplies of goods and services (GDP) if there are no exemptions. Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

Presentation on Enhancing VAT COMPLIANCE Introdu….. VAT is imposed on both local and imported goods and services. Currently, the VAT standard rate is18%. However, there are exempt and zero-rated supplies. Exempt supply, the supplier of goods/services does not charge VAT on sales and does not claim VAT refund. Suppliers of zero-rated goods/services do not charge VAT but can claim a refund( majorly exporters) VAT threshold is Ushs 150million( 42,680 US dollars) This implies that any business with a annual turnover of Ushs 150million above is required to register for VAT and comply with the VAT law. VAT is administered by the VAT Act 1996 as amended. Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

VAT Compliance Management Compliance broadly means meeting Legal obligations imposed by a legal tax system Thus in Uganda,VAT compliance means complying with the provisions of the VAT Act CAP 349 of the laws of Uganda. These provisions require one; To register File returns Pay and Maintain records. In Uganda VAT compliance gap is averaged at 60% (IMF).Hence need to enhance VAT compliance. Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

Why enhance compliance management To increase revenue collections. To reduce VAT administration costs. To impact taxpayer behavior.

VAT complianceManagement entails.. Registration Sections 7 & 8 of the VAT Cap.349 provide details on who and when one should register. VAT registration now can be done anywhere by completing and submitting an online application form. No payment is required for one to apply for registration. URA has placed offices with staff in every major town to assist applicants. . The URA team also educates applicants on the obligations that arise to a VAT registered persons. Refresher Training in registration Register cleaning guidelines

Register Growth…

VAT Registration challenges. Taxpayers are trading without being VAT registered. Computer illiteracy Manpower challenges( new staff/numbers) Some lack expertise in using the URA etax system. Lack of a reliable internet access. Limited resources for taxpayer sensitization Informal sector( will talk about it later) Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

REMEDIES TO REGISTRATION CHALLANGES Tax payer services through; Tax-hubs, radio talk shows, contact centres Post registration activities Tax Register expansion project(TREP) through collaborating with government agencies( stakeholders) Interface of etax system with IFMS,NSSF etc Requirement of TIN for government suppliers

VAT compliance Management also entails.. Filing Initially filing was manual As part of the reforms to improve compliance, filing of returns is currently done online Due date for filing is by the 15th day after the end of the tax period Refresher Training in registration Register cleaning guidelines Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

Filing Ratios . Source: URA database 2014 2015

Payments Vs Offsets & Refunds Source : URA Database

Filing & Reporting Challenges. Non and nil filers Failure to apportion input tax( mixed supplies) Misclassifications of supplies between taxable and non taxable. Claiming tax when not incurred.eg on imports. Failure to report sales( sales suppression)- HNWIs evade tax by hiding assets in loss making companies and hide incomes in the expenses. Business to consumer transactions; e-commerce,I ssuance of receipts etc Refresher Training in registration Register cleaning guidelines

Remedies to filing &Reporting challenges Sending reminders to non-filers after the due date Issuing estimated assessment to non filers Penalising late filers Auditing VAT deactivation Returns examination( Advise to amend returns) Using third party information Issuing modified returns advices Deregistering perpetual non and nil filers. We have increased the VAT threshold from 50 to 150m. A unit has been created in LTO to handle HNWIs Client relationship manager (KYC)for the big Taxpayers( LTO,MTO,STOs)

Payments. Tax is due when the return is due. VAT compliance can also be measured in terms of payment made on time. Tax is due when the return is due. Refresher Training in registration Register cleaning guidelines

Payment Challenges Payment challenges. Late payments. Non Payment. Government guarantees. i.e. biggest consumer of good and services Leadership

VAT COLLECTIONS COMPAIRED TO TOTAL COLLECTIONS Empowering advocates for strategy execution

Strategies to improve payments Matching returns and payments( Compliance calander) Reminders to defaulters demanding payments Charging interest on due payments Educating clients (numerous payts) Issuing agency notices to third parties Submission to Debt collection unit Ensuring a reliable payment mechanism Over 23 commercial banks and mobile money

Auditing On average 4000 taxpayers are audited every year through comprehensive, issue and desk audits Audits are carried out on a priority sector/risky sector basis Audit case selection and auditing is done using the e-tax system Challenges; Manpower challenges( numbers, skills) Limited resources

Audit Strategies. Use improved approaches to Taxpayer compliance management such as systematic risk assessment and automated checking and debt management Carry out more desk audits. Focus on the most risky sectors. Audit as many off setters as possible. Audit using the system. Staff capacity building

Tax administration systems/Processes Etax system Filing & payments done using the system Audits are done on the system Feedback mechanism for every transaction Simplified, transparent and automated procedures(To check on corruption) Tax exemptions/tax amnesties/Write offs Objections and appeals ( TAT, Commercial court ,etc) Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

The informal Sector. A large section of the business community is informal and accounts for 49% of the GDP. The informal sector is characterized by ; Poor record keeping No permanent place of abode Mainly employs relatives Poor reporting structures Poor financial management Illiterate or semi illiterate proprietors

Strategies to tap the informal sector. TREP through collaborating with tax gov’t agencies Simplified payment platforms like easy money & mm TIN campaigns like Tin bonanza . Introducing advance tax for certain categories of businesses( commercial vehicles) Sensitization campaigns & workshops Requirement of TIN for expenses incurred which are/ above UGX. 5M( 1500 US$)

Presentation on Enhancing VAT COMPLIANCE Conclusion We need to keep focusing on; Providing taxpayer services; Simplifying the tax laws and processes. Tax education (how to register, keep books of accounts, file and pay taxes due); Committing more resources to Audits; and Developing leaders to inspire others Engaging stakeholders( stakeholder management) To enhance compliance. Monday, May 14, 2018 Presentation on Enhancing VAT COMPLIANCE

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