Informal Sector: Presentation by URA CG Akol

8/16/2019 Informal Sector: Presentation by URA CG Akol

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INFORMAL SECTOR “AN INVISIBLE FORCE WITH VISIBLE IMPACT ”

DORIS AKOL – COMMISSIONER GENERAL

MAY 2016 – OPEN MINDS FORUM


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DEVELOPING UGANDA TOGETHER

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Talking Points!

Facts about the Informal sector

Understanding the Informal Sector

Characteristics of the Informal Sector

Drivers of the Informal sector

URA’s Initiatives to Tap into the Informal Sector

Way Forward


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The Informal sector is estimated at 49% of the GDP(UBOS, 2014). In 2002 the size was 43%

Top ranking economic sectors which are highly informal;- Agriculture (27%), Wholesale & Retail

(24%), food processing (15%) and Manufacturing(14%)

Employs more than 70% to 80% of the labor force(UBOS, 2014).

59.8% of Ugandans are employed in the non-agriculture informal sector (ILO,2012).


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Our ambitions for social economic development as acountry are outlined in the National Development Plan

(NDP).

• A transformed Ugandan society

from a peasant to a modern and

prosperous country within 30 years

• From a predominantly low

income of a per capita of USD

506• To a middle income by 2017 and

per capita of USD 9,500 by 2040.

This transformation is expected to be

fully financed through Tax revenue

Social Economic Development



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• Revenue mobilization iskey to the growth and

sustainability of

developing countries’

economies.

• However, as a major

source of illicit financial

flows, the informal sector,or the shadow economy, is

a major hindrance to

revenue mobilization.

Introduction



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• Uganda’s informal sector is

relatively large estimated at

49 percent of GDP, yet it

contributes minimally torevenue.

• The informality cuts across

agriculture, wholesale andretail trade, construction,

transport, etc.

Introduction



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• Agriculture • Services • Industry

Informal Sector



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Teacher• Earns 270,000 UGX a month

• Pays tax 3,500 UGX eachmonth

Rental property ( 3 houses )• Approximately 300,000 each

house a month making a total of

900,000 each month.

• Approximately 700,000 UGX a

month considering expenses.

• Potential tax approximately40,000 UGX.

Should the teacher

pay tax and not the

landlord ?

Who is in the informal Sector?



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Poultry farmer ( 200 chicken )• Approximately 150 eggs a day

considering expenses

• Approximately 675,000 UGX a

month

• Potential tax approximately

34,000 UGX.

Nurse• Earns 320,000 a month

•

Pays tax 8,500 each month

Should the nurse

pay tax and not the

poultry farmer ?


Who is in the informal Sector?


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Understanding of the Informal

Sector-

All unregistered economic activities that contribute to

the officially calculated Gross National Product.


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Hidden ActivitiesPredominantly cash basedtransactional activities e.g.

hair dressingUnregulated

NB: Informal sector not small or illiterate e.g. transport sector,

downtown, retail, wholesale add real estate e.t.c.


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Agricultural sector


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Facts about the Informal Sector

Contributes 27%to GDP and only

2% to tax revenue.Most agriculture is

done onsubsistence basis.

Existence ofMiddlemen in thevalue chain (manyare illiterate, brief

case type andmanipulative).

Leakages


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Wholesale and Retail


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2nd Largest contributor to informalsector (24%) and 24% to revenue.

Vague addresses, Tax payer mutation,brief case businesses, hidden

transactions, eg. Homes are serving aswarehouses and a desk in town servesas the office. Joint renting of shops,poor book keeping, among others.

Leakages


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SECTOR UGANDA RWANDA TANZANIA KENYA

Service GDP , REV GDP, REV GDP, REV GDP, REV

Professional

Services

(2.94%, 1.18%) (2.33%, 1.41%) (1.3%, 2.0%) (2.1%, 0.1%)

Hotel and

Restaurant

(3.45%, 1.27%) (2.13%, 1.59%) (1.1%, 2.9%) (0.8%, 2.0%)

Transport (2.80%, 1.89%) (2.94%, 3.06%) (4.3%, 6.4%) (8.7%, 5.2%)

Real Estate (4.76%, 1.31%) (6.22%, 0.37%) (3.7%, 0.6%) (7.9%, 12.3%)

Agriculture (26.28%, 0.7%) (32.74%, 0.3%) (28.9%, 0.5%) (27.6%, 1.8%)

Industry

Mining (0.75%, 1.82%) (1.65%, 1.30%) (3.7%, 10.3%) (0.8%, 0.4%)

Construction (8.10%, 2.25%) (7.33%, 3.15%) (12.5%, 2.4%) (5.0%,2.3%)


Informal Sector Potential FY 2014-15?


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Drivers of the Informal Sector

Procedures forformalization

remain complexand unknown.

Regulations-under regulated

/enforcement insome sectors e.g.Boda bodas,Kaveera etc.

Porous Borders


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Informal Sector Attributed to:

• The desire by the actors to operate outside the tax

system.

• Limited understanding of the registration process.

• Weak business registration regulations

• Predominant use of cash as opposed to traceable

payment means


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Being approached from two perspectives;


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Addressing the Informal Sector

Perspectives

The Legal /Policy

framework

The

Administrativeframework


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Any taxpayer receiving goods and services aboveShs.5M will be required to provide a TIN of thesupplier before they can claim a deduction;

May 4, 2016 19DEVELOPING UGANDA TOGETHER

Compliance Measures


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Initiatives from the Legal /Policyframework

Simplifying the presumptive regime

TIN requirement for Gov’t suppliers andemployees

Any invoices for supplies above 5mn mustbear a TIN.

Regulators or Licensing authorities shouldrequire a TIN for any one they give a practicing

certificate or a license.• Mandatory payment of tax for all PSVs and

Goods Motor-Vehicles at time of renewal of annual licenses


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Administrative Initiatives

TREP

Ministry ofLocal

Government

UgandaRegistration

ServicesBureau

UgandaRevenueAuthority

KampalaCapital CityAuthority

Collaboration with

local authorities

and URSB to

identify, register

and new Taxpayers.

(TREP). In 2014/15

we registered

43,587 new

taxpayers who paidus Ug shillings

15.79bn.



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Electronic Cargo Tracking for

trucks in transit

Tax educationmaterials in local

languages

Rental incomeproject to register

potential taxpayers


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• Introduction of presumptive regime• Mandatory payment of tax for all PSVs and Goods

Motor-Vehicles at time of renewal of annual

licenses

• Reaching out through media engagements, Newspaper articles, tax clinics ( tailored to specific

sectors/interest groups), appreciation

(Omugano)etc

•Simplification of tax returns (now using mobilephone payments).

• Partnering with the local governments to be the

key champions of tax education.


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Administrative InitiativesWay forward

Receipts

campaigns

• Encouraging theuse of receiptsin transactions

Electronic fiscal

devices

• These gadgetswill be collectingdata fromgazzetted Taxpayers inreal time

National IDs

• Making use of these tominimize Taxpayermutation. Weplan to interfacewith National IDsystem


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“If everyone pays

a little, no onehas to pay too

much!”



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Documents

Informal Sector: Presentation by URA CG Akol