Government revenues – taxes, grants and non-tax revenues – suffered the hardest beating in April falling below target by a whopping 789.8 billion Shillings, the clearest indicator of how the coronavirus has battered the Ugandan economy.
According to the Ministry of Finance Performance of the Economy Report for April 2020, everything was below target. In its projections, the government had hoped to receive at least 1.8 trillion Shillings in total but could only manage to collect 965 billion Shillings.
For taxes, the government had planned to collect 1.5 trillion Shillings but only managed to get 931 billion Shillings– registering a 547 billion Shillings shortfall, one of the biggest seen in a single month in recent times. On grants, the money that comes from donors to support the budget, the government received a paltry 28 billion Shillings against the 128 billion Shillings target.
The non-tax revenue, the money government gets from other sources other than taxes like passport fees and market dues were 6 billion Shillings compared the targeted 107 billion Shillings in April. The collections in April reflect a crash in business as the government closed shops, people stayed home and some companies fired employees or cut salaries to survive the crisis.
In the finance report, the government says that import taxes had the biggest shortfall of up to 314 billion Shillings with companies in origin countries or destination countries remaining closed for the much of the month as countries struggled to control the virus.
Finance says this shortfall was due to a reduction in dutiable imports during the month arising from the effects of COVID-19 on trade.” Fuel imports make a key component in this area but most importers of fuel say retail demand has fallen by 90 percent which calls no need for imports.
Taxes levied on goods like beer, spirits and sugar were also lower than anticipated. Bars, restaurants and other happening places where these are consumed most have been shut for the last two months.
The finance report adds that direct domestic tax collections were lower than the target by Shs 71.87 billion as Pay As You Earn (PAYE), the corporate tax, withholding tax, presumptive tax and rental incomes tax were lower than programmed.
The report says these falls are “partly due to the effect of COVID-19 on the economy that resulted in temporary laying-off of some workers and/or salary cuts, reduced the profitability of firms and reduced payment of rents by tenants.”
Non-Tax Revenues, which is usually collected on such things as passports and other charges by government agencies was affected by the temporary closure of Ministries, Departments, and Agencies (MDAs) that offer services on which NTR is charged.
Low revenues meant the government had to borrow for most of its activities. According to the report, the government spent more 1 trillion Shillings than it could collect– also referred to as fiscal deficit. The government had planned for a fiscal deficit of just 712.04 billion Shillings. The higher deficit was due to the shortfalls in revenues and grants, the report says.
The government this month received a loan from the International Monetary Fund and has written to the World Bank and the African Development bank for money to cover the low revenue plans.