ELECTRONIC TAX MANAGEMENT STRATEGIES AND REVENUE PERFORMANCE BY UGANDA REVENUE AUTHORITY
CHAPTER ONE: GENERAL INTRODUCTION
This chapter will cover background to the study, statement of the problem, objectives of the study, research hypotheses, scope of the study, justification of the study, definition of key terms and conceptual framework
- Background
This section presents the background of study in areas of Historical background of the study, theoretical background, conceptual and contextual background.
1.1.1 Historical background of the study
The history of governments being concerned about Tax revenue performance dates back to ancient civilizations, where taxes were collected in the form of goods or labor. In ancient Mesopotamia, taxes were collected in the form of crops and livestock. In ancient Egypt, taxes were collected in the form of labor, with citizens required to work on public projects. In ancient Greece and Rome, citizens were required to pay taxes in the form of money, which was used to fund public goods and services. During the Middle Ages, European monarchs began to establish more centralized systems of revenue collection, with the creation of professional tax collectors and the introduction of new taxes, such as the poll tax and the land tax. In the 18th and 19th centuries, many countries, such as the United States, established more formal systems of revenue collection with the creation of income taxes and other forms of direct taxation. In the 20th century, many countries began to rely more heavily on indirect taxes, such as sales taxes and value-added taxes (VAT), as a means of revenue collection. Today, most countries use a combination of direct and indirect taxes to fund government spending. Revenue collection also shifted from primarily local and regional collection to centralized collection through the creation of national tax agencies (Faccia, & Mosteanu, 2019).
Electronic tax management dates back to the late 1960s and early 1970s, when the first electronic tax filing systems were developed. These early systems were primarily used by large corporations and required the use of mainframe computers and specialized software. In the 1980s, the development of personal computers and the increasing availability of computer software made it possible for smaller businesses and individuals to file their taxes electronically. The IRS (Internal Revenue Service) started to accept electronic tax filings from individuals through the Electronic Filing Tax Program (ELF) in 1986. In the 1990s, the IRS continued to expand its electronic filing options, making it possible for tax professionals to file returns electronically on behalf of their clients and for more taxpayers to file their returns online. The IRS also began to offer online services for taxpayers, such as the ability to check the status of their refunds and make payments online (Efobi, Beecroft, Belmondo, & Katan, 2019).
In recent years, the use of electronic tax management systems has become increasingly popular, and the IRS now receives the majority of individual tax returns electronically. With the development of technology and the growing use of cloud-based software, the process of filing and paying taxes has become more convenient and efficient (Chindengwike, 2022).
The evolution of electronic tax management systems technologies has been a gradual process over the centuries. Initially, tax collection was done manually, with tax collectors going door-to-door to collect taxes in the form of goods or labor. As economies became more monetized and taxes were collected in the form of money, manual methods of tax collection were replaced by more efficient methods such as the use of tax books and ledgers. In the 19th century, the introduction of the income tax in countries such as the United States led to the development of more sophisticated methods of tax collection, such as the use of tax forms and the establishment of tax-collecting agencies. With the advent of computers and the internet, tax collection technologies have become increasingly digitized. Today, most countries have online systems for filing and paying taxes, and many tax agencies use data analytics and other advanced technologies to detect and prevent tax evasion. The use of Electronic Filing and Payment (EFP) systems are increasing and mandatory in some countries as it allow taxpayers to file and pay their taxes electronically. This not only improves the speed and accuracy of tax collection, but also reduces the burden on taxpayers and tax agencies. Another development is the use of blockchain technology in tax collection. Blockchain allows for secure and transparent record keeping of transactions and can potentially improve the efficiency and effectiveness of tax collection (Naveed et al., 2019).
Top of Form
According to the International Monetary Fund (IMF), the average tax-to-GDP ratio for African countries is around 17%, which is lower than the global average of around 25%. However, there is significant variation among countries, with some countries having a tax-to-GDP ratio of over 30% and others having a ratio of less than 10%. In terms of specific countries, some African countries with high tax-to-GDP ratios include Botswana, Morocco, Tunisia, and South Africa. These countries have relatively well-developed economies, transparent and effective tax systems, and a high level of tax compliance. On the other hand, some African countries with low tax-to-GDP ratios include Somalia, Eritrea, and Burundi. These countries are characterized by poor economic development, fragile governance, and a lack of capacity to collect taxes. It’s worth mentioning that the tax collection in Africa is still low compared to other regions and there are efforts to improve the tax systems to increase the revenues (Moore, 2020).
In Uganda Analysis of revenue performance dates back to the colonial era, when the British government imposed various taxes on the population to fund their administration of the territory. During this time, taxes were primarily used to fund the operations of the colonial government and to support the development of infrastructure such as roads and railways. After Uganda gained independence in 1962, the government continued to rely on taxes as a primary source of revenue. The government also established a number of new taxes, such as the Value Added Tax (VAT) and the Excise Duty Tax, to support the development of the country’s infrastructure and services. In the 1980s and 1990s, Uganda’s economy faced significant challenges due to war and political instability, which resulted in a decline in tax revenues. However, after the return of political stability in the 2000s, the government made efforts to improve the tax system and increase revenue collection. Today, Uganda’s tax system is governed by the Uganda Revenue Authority (URA), which is responsible for the administration of taxes, including income tax, value-added tax, and excise duty. The government has also introduced various tax incentives to attract foreign investment and support the growth of the country’s economy (Efobi et al., 2019).
In recent years, the Ugandan government has been focusing on improving the tax compliance and widening the tax base through technology, digitalization and education. The government has also been working to reduce the administrative burden on taxpayers and increase transparency in the tax system (Kangave et al., 2016).
1.1.2 Theoretical background
This study in understanding electronic tax management strategies and revenue performance in Uganda, the study will adopt Tax Base theory as proposed by
1.1.3 Conceptual Frame Work
Electronic tax management refers to the use of technology and digital tools to manage the process of filing and paying taxes. It includes the use of software and online systems to prepare and file tax returns, as well as pay taxes, and track the status of tax payments. Electronic tax management systems can automate many of the tasks associated with tax compliance, such as calculating tax liability, generating reports, and submitting returns. These systems can also provide real-time data on tax obligations, which can help businesses to stay compliant with tax laws and regulations. Electronic tax management can improve the accuracy and efficiency of the tax management process, and also make it easier for businesses to comply with tax laws and regulations (Daniel, & Esther, 2019).
Revenue is the income that a business or organization receives from its normal business activities, typically in the form of money, but it can also include other assets. It is the total amount of money that a company earns by selling its products or services. Revenue is considered the top line item on an income statement and is often used as a measure of a company’s overall financial performance. It is important to note that revenue is different from profit, which is calculated by subtracting all expenses from revenue. Revenue is also different from cash flow, which measures the amount of cash coming into and going out of a business (
1.2.4 Contextual background
According to the URA, (2021) Report indicates that last Financial Year 2021-22, URA collected UGX 21,659.44 billion the biggest collection in the history of our country. The revenue grew by 12.44 percent as compared to collections for FY 2020/21, which reflects a nominal growth in revenue of UGX 2,396.44 billion. However, the outturn for the year saw a net revenue collection of UGX 21,659.44 billion, short of UGX 704 billion against a target of UGX 22,363.51 billion.
1.2 Statement of the problem
URA adopted Electronic Tax Management Strategies in 2003 into the in all its tax collection department to increase revenue collection, improve quality of administration, reduce costs of compliance and provide services to the tax payers all the time from anywhere (Kangave et al., 2016), however despite the adoption of Electronic Tax Management by URA in 2010, it is still faced with numerous challenges like failure to hit revenue collection targets set by Ministry of finance its supervision ministry. According to the URA, (2022) report,
1.3 General objective of the study
The general objective of the study is to examine the influence of electronic tax management strategies and revenue performance in Uganda.
The study will be carried out because of the following reasons. Uganda revenue authority being a tax collection body is responsible to deliver the targets and enable the government to meet its expenses.
Revenue collection remains a key challenge in African and Uganda in particular (Mukunda, 2017). This is mainly on account of limited tax compliance. In the last three decades, Uganda has embarked on improvements to broaden the tax base and increasing domestic revenue mobilization. Modernizing the tax administration systems is among the initiatives (World Bank, 2018b). In comparison with regional neighbours, Uganda’s tax revenue to GDP is still below the 16 per cent Sub-Saharan average and lags behind her East African Community (EAC) neighbors too (World Bank, 2018b).
1.7 Significance of the study
The findings of the study are expected to be significant in the following ways;
This study is intended to provide policy makers, that is the Ministry of Finance Planning and Economic Development and tax law makers in parliament insights to base any possible amendments to suit the local needs. This will drive voluntary compliance among tax payers.
The Uganda Revenue Authority has so far tried several means to enforce tax compliance. This study will provide additional information to URA to understand how best to enhance tax compliance among business.
To other researchers, it is important to tell the nature of the relationship between tax administration systems and tax compliance, thus this study will provide a current reference material.
To the researcher, this study will boost the knowledge on taxation and hence be a milestone in the career growth as well as academic achievements.
1.8 Scope of the study
The scope of this study will be confined to the geographical, subject and time scope. The study will concentrate on tax audit and tax evasion control and will be carried out from Uganda Revenue Authority (URA). URA is one of the subsections under the Ministry of finance and it is located at plot 95 Kampala road, Nakawa Industrial Area, Kampala, Uganda. URA is found in Nakawa Division of the city of Kampala, approximately 6.5 kilometers (4 miles), by road, east of the city centre, off of the Kampala-Jinja Highway.
The period of data to be considered from Uganda Revenue Authority will be from 2017 to 2022 this is because, during this period, Uganda Revenue Authority adopted several strategies to enhance its tax auditing strategies.
1.9 Organization of the study
The study will describe the Background, the problem statement, objectives of the study, research questions, research hypothesis, significance of the study, scope of the study justification of the study and organization of the study.
1.9. Justification of the study
Numerous studies have emerged concerning e-tax systems and their contribution to tax compliance and revenue performance. Haryani et al. (2015), Wasao (2014), Muturi and Kiarie, 2015). Maisiba and Atambo (2016); Simuyu and Jagongo, (2019); Ondara et al., (2016). It can be noted that, these studies were conducted outside Ugandan context which leaves a literature gap which this study intends to address. A study by Night and Bananuka,. (2020) examined the mediating role of adoption of an electronic tax system in the relationship between attitude towards electronic tax system and tax compliance; Nakitende (2019) focused on electronic tax system and tax compliance. These studies focused on electronic tax systems and tax compliance and did not focus on how e-tax strategies contribute to performance at Uganda Revenue Authority.
Thus, the purpose of this study is to examine how e-tax strategies has enhanced revenue performance at Uganda Revenue Authority.
1.10 Scope of the Study
The scope of the study includes the geographical scope, content scope and time scope.
1.10.1. Geographical Scope
The study will be carried out at Uganda Revenue Authority headquarters at Nakawa in Kampala. This case study was chosen because URA has reported on how internal controls have helped the organization achieve effective revenue performance.
1.10.2 Subject and content scope
The content of the study will focus on e-tax strategies and revenue performance. This will involve doing an assessment on how e-tax payments, e-tax filling, electronic invoicing and receipting influence revenue performance.
1.10.3 Time scope
This study covered a period of five financial years from 2018/2019, 2019/20, 2021/22. This period was considered because it was the period when URA increasingly rolled out e-tax strategies.
1.11. Operational Definitions of key terms
Electronic tax systems: This refers to the practice of using electronic means to file tax returns, carry out tax payments and issue electronic receipts and invoices.
Revenue Performance: This is a measure of an organizational revenue performance in terms of quarterly and annual tax collection.
1.12 Conceptual Framework
Independent variable Dependent Variable
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