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Electronic systems boost tax compliance - report

A study has ranked Uganda as only second to Rwanda in East Africa, when it comes to making it easy for people to comply with tax obligations.

The report by PricewaterhouseCoopers titled, Paying taxes 2014: The global picture, compares tax systems in 189 economies worldwide. It points out that with the development of electronic systems from 2008 to 2013, Ugandans take an average of 209 hours to comply with all their tax duties.

The report notes that corporate tax takes 41 hours, labour taxes 66 hours, while consumption taxes take the longest time of 102 hours. Kenya, Madagascar, Rwanda and Uganda have made improvements in the use of electronic tax payment systems.

“The time taken to comply with taxes in Uganda has improved a little in the most recent period, and is better than the average for sub-Saharan Africa, which is now at 314 hours.”

Uganda Revenue Authority’s adoption of electronic systems put Uganda in the 98th position out of 189. Reforms in the payment of vehicle registration, e-stamp duty, electronic cargo tracking and e-cargo declaration, have eased tax compliance.

Tax administration has also been boosted by the restructuring of the Kampala Capital City Authority and the Uganda Registration Services Bureau in online registering of businesses.

Kenya, having introduced online filing for VAT in 2009, has reduced the time it takes to comply with taxes to 308 hours, from 340. Meanwhile, Rwanda had the shortest time, jumping from 168 in 2004 to 113 hours this year. Burundi and the Democratic Republic of the Congo have also tried to reduce time taken to comply.

The report, however, notes that the adoption of electronic systems in Africa is still low, especially in areas that have limited access to network services.

“Rolling out new information and communication technologies and then educating taxpayers and tax officials in their use are not easy tasks for any government. But where citizens face limited broadband access, power shortages, slow network speeds and system failures, implementation is slow and the challenges are even greater,” the report says, urging simplified systems.

“Overly complicated tax systems encourage evasion and are associated with larger informal sectors, more corruption and less investment,” the report points out.

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