For over a decade Uganda’s tax-to-GDP ratio hovered between 12 per cent and 13 per cent,
despite various amendments to tax laws and reforms in tax administration. Part of the low
revenue contribution can be attributed to factors external to the Uganda Revenue Authority
(URA), such as the structure of the economy – particularly the prevalence of the informal
sector and the ubiquity of cash transactions. Another explanation is that poor revenue
collection is a result of factors internal to the URA. One of these factors is that the URA’s
enforcement efforts have concentrated on taxing corporate entities at the expense of
individuals. With the exception of employees, very few individuals comply with their tax
obligations outside those incurred at points of importation. Specifically, many wealthy
individuals in the private and public sector either do not pay taxes or grossly under-declare
their income. The consequence is that very little tax is being collected from this category of
taxpayers.
This paper explores the potential for increasing tax revenue by taxing High Net Worth
Individuals (HNWIs) through various lenses, including examining the legislative and
administrative framework governing the taxation of individuals, collaborative efforts between
the URA and other government agencies to improve tax administration, and mechanisms in
place to support the sharing of taxpayer information both within the URA and with third
parties. We highlight the strengths and weaknesses in the legal and administrative
frameworks, with the underlying aim of designing an approach for taxing HNWIs. This paper
discusses the findings of phase one of a two-phase project. The second phase will conduct a
comparative study on taxation of HNWIs in other jurisdictions, with the aim of developing
guiding principles for taxing Uganda’s HNWIs.