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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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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Facts about the Informal sector
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 ?
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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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Facts about the Informal sector
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%)
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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;
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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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Administrative Initiatives
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Administrative Initiatives
• 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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