Economy - High commodity prices have caused a Shs89.1billion domestic taxes shortfall for the Uganda Revenue Authority, mainly driven by erosion of purchasing power and slowing investments. Commodity prices have been skyrocketing since the beginning of this year due to the volatile economic situation, thus affecting Excise Duty collections.

According to the 2010/2011 financial year performance report released on Tuesday, the revenue body collected Shs2.8 trillion in domestic taxes against an annual target of Shs2.9 trillion.

Speaking at a news conference in Kampala, Mr Moses Kajubi, the URA commissioner domestic taxes, said price wars in the telecommunication sector led to a shortfall of Shs24 billion due to the decline in average call rates.

Telecoms reduced their call rates from an average of Shs300 per minute to Shs180 per minute before they recently increased the rates to 240 per minute as they rushed to attract new customers and retain old ones to grow their subscriber numbers.

Excise Duty and VAT are indirect taxes that are paid by consumers when they buy a particular product or service. This means that any price increase that affects people's ability to buy a certain product impacts on tax revenues.

Direct domestic taxes including Pay As You Earn and Withholding tax on the other hand registered a surplus due to increased collections from major corporations such as Bank of Uganda, Tullow Oil operations and Stanbic Bank as a result of employee benefits, gratuity and bonus payments among others given to staff.

Mr Kajubi, however, noted that the deficit in domestic revenue collections was offset by a Shs205.9 billion surplus in international trade taxes.

International trade taxes fetched the revenue body Shs2.5 trillion against an annual target of Shs2.3 trillion due to the improved performance of VAT on imports and import duty as a result of non-fuel imports which increased by 10.7 per cent compared to the projected 0.3 per cent.

This led to increased revenue from dry cargo imports as reflected in surpluses of import duty of Shs85.3 billion, VAT on imports Shs125.1 billion.

Faridah Kulabako

The Monitor/22/09/2011