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Uganda Revenue Authority. Possibilities for facilitating graduation of SMEs into the standard regime. Allen Kagina akagina@ura.go.ug. Presentation Outline. Introduction Policy opportunities to reduce the obstacles for migration into the Standard Regime;

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Uganda Revenue Authority


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    1. Uganda Revenue Authority Possibilities for facilitating graduation of SMEs into the standard regime Allen Kagina akagina@ura.go.ug

    2. Presentation Outline • Introduction • Policy opportunities to reduce the obstacles for migration into the Standard Regime; • The role of administrative support measures to prepare larger SMEs for migration into the standard regime; • Importance of improving SME bookkeeping for facilitating migration; • Administrative approaches to ensure that growing SMEs don’t continue hiding in the simplified regime. • Recommendations

    3. SME’s withdraw resources from the formal economy by enjoying certain public goods without paying for them; • Over 2/3 of the income earned in the informal sector is spent on goods and services provided by formal economic activity; • Creates a indirect loss of revenue stemming from unfair competition; • May cause the decline of honest firms that contribute directly to tax revenue; • Makes the tax system opaque and its redistribution effects more uncertain (inequity) IntroductionImplications of a Large SME Sector

    4. Policy opportunities to reduce the obstacles for migration into the standard regime; Initiate a Favourable alternative Systems of taxation with a single tax rate. Applicable where: - Similar economic structures exist Similar business type, tax type, location e.t.c Introduce Presumptive tax/Standard Assessment (minimum/fixed lump sum tax rates) Graduated Business License Fees – Use of Business License as an instrument of income taxation

    5. Policy opportunities Cont … Remove legal impediments & Institute softer special legal requirements; e.g. Submission of Accounts, Registration Requirements, Use of Private Accountants & Auditors, Create Incentives at the formal level/Standard regime; (Refunds, allowable deductions, access to credits/loans e.t.c Raise Tax Thresholds to ease compliance monitoring & attract SME’s into the standard regime;

    6. Administrative Support Measures to facilitate migration Tax Awareness/Education clinics - Rights & obligations SME’s managed through Structural groupings Easy compliance monitoring, Targeted service delivery High level customer care (Client relations Managers) Reduce compliance costs (forms, signatures, returns period Improve process efficiency & Service Delivery, Improve integration and coordination of business processes,

    7. Administrative Support Measures to facilitate migration Set-up SME Tax Administration offices in central business regions for easy monitoring & migration with administrative structures to manage & nurture SME’s e.g. LTO, MTO, STO, Improved accountability and delivery of Government Services (long term) Simplicity of tax system to encourage acceptance Partnership with Local authorities, associations, business associations

    8. Importance of Improving SME bookkeeping to facilitate migration into the simplified regime Lowers the Tax burden by authenticating deductions & Input Tax Credits; Enhances management of the financial health of the business & fosters growth of SME’s into standard regimes; Simplifies imposition of Presumptive/alternative tax rates; Provides opportunities for easy access to credit facilities (Investment and growth)

    9. Administrative approaches to ensure that growing SMEs don’t continue hiding in the simplified regime. Segmentation of Taxpayers Improved compliance monitoring Improved Service delivery Improved efficiency & effectiveness Sub segmentation Sectors (Construction, Manufacturing, Risk profiling Phased Migration Approach with clear criteria (Turnover/Tax paid)

    10. Administrative approaches to ensure that growing SMEs don’t continue hiding in the simplified regime. Improved Compliance monitoring - Integrated systems Integrated Tax Administration System (ITAS) Cross Functional departmental Inter linkages Improved Risk management - Compliance Model

    11. Segmentation – The URA Experience Improved compliance monitoring of SME ‘s graduated into LT’s

    12. Segmentation – The URA Experience Higher growth at the Top Segment in Revenue Collections (LTO Collections)

    13. Recommendations Adopt Customized Presumptive Tax Systems that are suitable for the respective countries; Develop a phased approach to graduating SME’s to simplified tax regimes; Use Segmentation / sub segmentation approach in managing & creating sustainability; Apply Risk Management Techniques in managing the segments; Improve and Simplify processes Improve Service Delivery Introduce Taxpayer Education Create strategic partnerships with stakeholder agencies, associations and SME groupings

    14. Thank You !!!