{UAH} Formalising agriculture will widen tax base

Formalising agriculture will widen tax base

Guest Writers

Tuesday, 18 November 2014 22:18

Written by DORIS AKOL

1 Comments

Any mention of roping in the agricultural sector into the tax bracket will definitely generate very emotional arguments for, but mostly against, targeting income earned from farming.

But I would like to inform the public that income earned from the agricultural activities is not exempted from taxation except when it is derived from agro-processing.

The agricultural sector in Uganda is known to be mainly subsistence in nature, but it nevertheless plays a big role in Uganda's economy.

The Uganda Census of Agriculture (UCA) 2008/09 estimated that the number of agricultural households stood at 3.95 million, with over 80 per cent of the total population earning a living off the sector.

It is further estimated that 85 per cent of Uganda's population live in rural areas, 73.3 per cent of whom are engaged in subsistence agriculture and hunter-gathering. This suggests that perhaps 6.7 per cent of the rural population is engaged in commercial activities including commercial agriculture.

We have seen significant evidence that the number of people engaged in commercial farming activity like poultry farming, fish farming, traditional and non-traditional cash crop farming is increasing. Using the procurement of both main and emerging cash crops as a proxy indicator, it is apparent that the number of people earning income from agriculture is increasing.

However, despite the increment, there is no evidence that these inspirational farmers are formalised in any manner that enables them to register for and pay taxes.

This scenario is replicated in many other segments of the informal sector such as the artisans, traders, commission agents in the real estate and motor vehicle sectors, timber dealers, to mention a few. And it creates a system of manifest inequity between these income-earners who are not paying any taxes and the others that duly pay taxes on their incomes.

For instance, a teacher on the government payroll who earns a gross annual salary of Shs 3.24m, an average of Shs 270,000 a month, pays monthly PAYE tax of Shs 3,500. Annually, this teacher will have paid tax of Shs 42,000. Compare this teacher to a poultry farmer who has 200 layers.

Assuming this farmer collects approximately 150 eggs daily, which is five trays a day; at a cost of Shs 7,500 each, these fetch the owner Shs 37,500 a day –or Shs 12.6m a year.

Even if we took into consideration the vagaries that come with farming and leave the poultry farmer with Shs 10m annual income; and if the farmer were to pay presumptive taxes at the lowest presumptive tax band, this farmer is obliged to make a tax payment of Shs 300,000 a year. It is evident that the farmer, by not paying tax of Shs 300,000, is a burden to the teacher who pays an annual tax of Shs 42,000 and yet their income levels are so dissimilar. This is the inequity that comes as a result of an informal sector.

Therefore, it is imperative that the agricultural sector, which is a large component of the informal sector, be brought into the tax net. Players in this sector are among the beneficiaries of the infrastructure and public services that are provided using taxpayers' funds and yet they are not contributing their fair share.

Fellow citizens, the expansion of the tax base is in a sector right next-door and is indeed all around you. There is income being earned all around you that should attract tax. Whoever is earning this income and not paying tax is unduly breaking the back of the teacher, the nurse, doctor and other civil servants.

We do not know all the answers but are calling upon you to share ideas with us on how we can best support each other and liberate our country out of dependence. URA is available to support our existing and potential clients, especially those in the informal sector, to comply with tax laws.

If you have any ideas, please visit our service centres across the country or call; 0800117000 (toll free), 0417442097, 0417442054 or 0417442049. You can also email us on: info@ura.go.ug. We appreciate your support.

dakol@ura.go.ug

The author is the commissioner general of Uganda Revenue Authority.

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H.OGWAPITI
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