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UGANDA MANAGEMENT INSTITUTE

TAX ADMINISTRATION SYSTEM AND COMPLIANCE ON SERVICE DELIVERY

ACASE OF UGANDA REVENUE AUTHORITY

Background of the study

Taxes are crucial for maintaining the state’s financial stability since they are the primary source of revenue that funds various governmental financing requirements (Ajeigbe, Ganda, & Enowkenwa, 2024). Taxes fulfill regular obligations like paying employees and covering operational costs and play a crucial role in driving sustainable national development (Kaneva, et al., 2022). Taxes play a crucial role in attaining development objectives and constructing the necessary infrastructure for economic advancement and societal well-being (Kaneva et al., 2022). The Uganda Revenue Authority (URA), established in 1991, is the primary institution responsible for tax administration. Over the years, the URA has undergone significant reforms aimed at improving efficiency, compliance, and service delivery. URA report, (2015) URA has made great strides in improving service delivery through the adoption of information systems, this has been through introduction of electronic methods like electronic declaration of customs transactions, electronic registration, online payment. In addition to that, in 2010, to offer personalized services to taxpayers, the organization created taxpayer-centric Portal to enable the provision of services without hindrance, and electronic service delivery, anytime, anywhere with quick & high quality hence greater degree of transparency to taxpayers. The importance of tax administration in effectively executing tax regulations is well acknowledged. Hence, it is imperative to implement tax administration reform in a manner that is both sustainable and efficient to ensure optimal services for the community (Kowel et al., 2019). An optimal tax administration reform should serve as a tool to enhance voluntary taxpayer compliance, bolster public trust, and improve the tax system’s integrity. An effective administration system is expected to strengthen the government’s ability to maximize tax revenues and enhance tax compliance (Hertati, 2021).

In 2016/17, URA collected Shs12.7 trillion about 14 per cent of Gross Domestic Product against a target of Shs13.1 trillion, more to that, URA also made revenue loss of Shs404billion in the financial year 2015/2016and a deficit of 2.6 trillion in financial year 2017/2018, (Kalirebwami, 2019). Service delivery is a contemporary issue for most governments and researchers alike. Most scholars are in agreement that public service delivery is critical to ensuring the national welfare and stimulation of economic development (Kharel, 2018).

Problem statement

In 2016/17, URA collected Shs12.7 trillion about 14 per cent of Gross Domestic Product against a target of Shs13.1 trillion, more to that, in the financial year 2015/2016and a deficit of 2.6 trillion in financial year 2017/2018, though URA has been collecting taxes and faces multiple tax compliance challenges, this study intends to investigate into tax administration system and compliance on service delivery, a case of Uganda revenue authority.

Objectives of the study

To examine the Challenges in Tax Administration in Uganda.
To assess the Impact of Service Delivery on Taxpayer Compliance

To examine the Best Practices in Tax Administration.

Research questions

What are the Challenges in Tax Administration in Uganda?
What is the Impact of Service Delivery on Taxpayer Compliance?

What are the Best Practices in Tax Administration?

LITERATURE REVIEW

2.1 Challenges in Tax Administration

Tax evasion remains one of the most significant challenges in tax administration, individuals and businesses often underreport income or engage in fraudulent activities to minimize tax liabilities. Factors contributing to tax evasion include high tax rates, weak enforcement, and a lack of taxpayer trust in government institutions, Non-compliance is also prevalent due to inadequate taxpayer education and complex filing processes, leading to unintentional errors (Fisher, 2022).

Inefficient Enforcement Mechanisms Enforcement mechanisms are critical for effective tax administration, yet many tax authorities face limitations in enforcing compliance, inadequate staffing, limited financial resources, and outdated tax laws weaken enforcement efforts. Developing economies, in particular, struggle with low audit rates and limited investigative capacities, allowing tax evasion to thrive (Wujarso et al., 2023).

Complex Tax Structures and Administrative Burden Overly complex tax structures create administrative burdens for both tax authorities and taxpayers. Multiple tax rates, exemptions, and deductions make tax compliance difficult and increase costs for businesses. Complex tax codes also open loopholes for tax avoidance strategies, reducing overall tax revenue, Simpler and more transparent tax systems are recommended to enhance compliance and efficiency (Jafari, & Faghihi, 2024).

2.2 Service Delivery on Taxpayer Compliance

The activities underlying the compliance of taxpayer in the public sector are needed to meet the basic statutory requirements of the tax procedure. This comprises of the preparation of tax returns by the individual taxpayers and organizations. Voluntary tax compliance is the willingness of the taxpayers’ to adapt to the relevance tax system in order to pay their taxes without any enforcement by tax authority (Opejin, 2011; Batrancea, Nichita&Batrancea, 2012).

The individual taxpayers are expected to duly document their income and compute their tax liabilities and forward their tax returns. This concept is said to be self-assessment; it is one of the method employed by tax authority to measure secure voluntary tax compliance in Nigeria. There have being empirical evidences suggesting that ethical code of for both taxpayers and tax administrators may play significant role in taxpayers compliance decision. In line with this, Ho and Wong (2008) suggested that individuals with strong ethical value may have favourable compliance attitude towards tax authority as they will regard complying with rule and regulation as an obligation that must be honoured. Within the literatures of tax compliance, the awareness of the taxpayers about the justice of the tax system is recognized as an significant factor that can have significant influence on tax compliance behavior (Gilligan and Richardson, (2005).

2.3 Best Practices in Tax Administration.

One of the most effective strategies for improving tax administration is simplifying tax processes. complex tax structures lead to higher compliance costs and encourage evasion. Simplified tax codes, clear documentation, and easy-to-follow procedures enhance taxpayer compliance and minimize administrative burdens. The integration of Information and Communication Technology (ICT) in tax administration has significantly improved efficiency. Digital tax systems such as e-filing, e-payment, and automated audits reduce errors, enhance transparency, and improve taxpayer experience. The use of blockchain technology and artificial intelligence (AI) in tax compliance monitoring is also gaining traction (OECD, 2021).

Improving taxpayer services encourages voluntary compliance and reduces tax resistance. that responsive and user-friendly tax services, such as call centers, online portals, and tax advisory services, foster trust between tax authorities and citizens. Effective tax administration requires a strategic approach to compliance enforcement. Bird and highlight that risk-based compliance strategies, such as targeted audits and predictive analytics, help tax authorities focus on high-risk taxpayers while reducing unnecessary burdens on compliant citizens.

The Directorate General of Taxes (DJP) has implemented a range of proactive measures as the leading entity in delivering services to taxpayers. An influential project that commenced in 2013 was adopting information and communication technology via the development of eregistration, an online method for registering taxpayers. This technology facilitates the registration of tax subjects as taxpayers without requiring them to physically visit the Tax Service Office (KPP) in their residence. This phase specifically caters to taxpayers with limited time to physically go to the KPP to acquire a Taxpayer Identification Number.

During the e-registration process, taxpayers must complete the form per the specified recommendations and digitally scan their original Resident Identity Card. However, this system still possesses vulnerabilities, one of which is the indeterminacy of the delivery timeframe for NPWP cards.

CHAPTER THREE

METHODOLOGY

3.0 Introduction

This chapter presents the methodology which consists of the research design, area of study, study population, sample population and selection, sampling technique, data collection method, data quality control, data collection procedures and limitations of the study.

3.1 Research design

The study will use descriptive research design. The design will avail the researcher with comprehensive information about the research study as a way of getting solutions.

3.2 Area of the study

The study will be carried out at Head office of Uganda Revenue Authority.

3.2 Study population and sample size

The study will target, management staff and top management in Uganda revenue authority.

3.3 Sampling techniques

The study will use simple random sampling technique to select respondents, while the purposive sampling technique will be used for selecting top management.

3.4 Data collection methods

Source of data will be from both primary and secondary sources.

3.5 Data Collection Instruments

The major instruments for data collection will be questionnaires and interview guide. The questionnaire will provide respondents with ample time to comprehend the questions raised and hence, they will be able to answer factually.

3.6 Data collection procedures

Upon receiving the University permission to carry out research, the area of study will be visited for purposes of familiarization.

3.7 Quality control of data instruments

The instrument will be taken to the supervisor to check its correctness there after pilot study will be carried out to find out if it measures what it is meant to for.

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