O Level Entrepreneurship Education TextBook

GOVERNMENT
REVENUE
ENTREPRENEURSHIP EDUCATION
© National Curriculum Development Centre (2019)
Published by
National Curriculum Development Centre

P.O. Box 7002,
Kampala- Uganda
www.ncdc.go.ug
ISBN: 978-9970-00-154-5
All rights reserved: No part of this publication may be

reproduced, stored in a retrieval system or transmitted in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior permission of the
copyright holder
TABLE OF CONTENTS
FOREWORD ............................................................................................... v
PREFACE .................................................................................................. vi
ACKNOWLEDGEMENT ............................................................................ vii
LIST OF ACRONYMS ............................................................................... viii
SECTION 1 ............................................................................................................... 1
1.0 INTRODUCTION .................................................................................. 1

1.1 AIMS OF EDUCATION ....................................................................................... 3
1.2 SPECIFIC AIMS AND OBJECTIVES OF SECONDARY EDUCATION ............. 3
1.3 AIMS OF TEACHING ENTREPRENEURSHIP .................................................. 5
1.4 AIMS OF TEACHING TAX EDUCATION IN SCHOOLS.................................... 6
SECTION 2 ............................................................................................................... 7
CHAPTER 13: GOVERNMENT REVENUE................................................... 7

13.1: INTRODUCTION TO GOVERNMENT REVENUE ......................................... 7
13.1.3 Sources of Government Revenue ......................................................... 11
SUB-TOPIC 13.2: TAXATION ................................................................... 14

13.2.1 Meaning of Taxation ............................................................................... 14
13.2.2 Origin of Taxation .................................................................................... 14
13.2.3 Key Terms used in Taxation ................................................................... 17
13.2.4 Types of Taxes........................................................................................... 18
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UGANDA CERTIFICATE OF EDUCATION
SUB–TOPIC 13.3: TAX ADMINISTRATION IN UGANDA .......................... 25

13.3.1 Meaning of Tax Administration............................................................. 25
13.3.2 The Role of URA in Tax Administration ................................................ 25
13.3.3 Taxes and Duties Collected by URA ..................................................... 26
13.3.4 Taxes and Duties Collected by the Local Government Authorities29
SUB–TOPIC 13.4: TAX COMPLIANCE ..................................................... 31

13.4.1 Meaning of Tax Compliance .................................................................. 31
13.4.2 Factors Determining Tax Compliance................................................. 31
13.4.3 Elements of Tax Compliance ................................................................. 32
13.4.4 Advantages of Tax Compliance ............................................................ 34
13.4.5 Measures for Improving Tax Compliance ........................................... 35
SUB–TOPIC 13.5: BASIC TAX COMPUTATIONS ..................................... 38

13.5.1 Corporation Tax ....................................................................................... 39
13.5.2: Individual Income Tax............................................................................ 40
13.5.3 Employment Income Tax (Pay As You Earn - PAYE) .......................... 41
13.5.4 Value Added Tax (VAT) ............................................................................ 44
13.5.4.1 Key Terms Used in VAT ......................................................................... 44
13.5.4.2 VAT Computation .................................................................................. 46
GLOSSARY .............................................................................................................48
REFERENCES ........................................................................................................52
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FOREWORD
The educational experiences one goes through have a lot of bearing on the
knowledge and skills acquired, attitudes developed and consequently what one
is able to do in achieving quality and successful life.
The revised tax education syllabus for O’ Level as topic 13- Government Revenue
is housed in the Entrepreneurship Education subject which is a merger of the old
subjects of Commerce, Principles of Accounts and Entrepreneurship Education.
The content in this topic, Government Revenue, has been carefully developed
with concerted efforts and heavy involvement of the Uganda Revenue Authority
(URA) staff drawn from relevant departments to give it a hands-on and rich
expertise intended to produce an up-to-date information that will stand the test
of time and to provide functional knowledge to the learners.
A comparative study was done on a number of countries including Botswana,
Finland, Ghana, South Africa and England to ensure that the content meets
international standards and practices.
I appeal to all stakeholders to join hands and make the implementation of tax
education a perfect success in Uganda.
Alex
Hon.Kakooza,
Janet K. Museveni
Permanent Secretary,
The First Lady and Minister of Education and Sports
Ministry of Education and Sports
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PREFACE
This Syllabus has been developed to give guidance into the coverage of tax
education in the topic of Government Revenue which is topic 13 in the O’ level
Entrepreneurship Education Curriculum. Taxation is a very dynamic subject.
Whereas it’s basic principles remain the same its body of knowledge keeps
changing as new areas of tax are brought on board while some are abandoned.
Taxing policies and rates also keep changing from time to time as the economy
dictates. It was therefore, imperative to develop this syllabus to guide the
teacher on how to cope with the changes in taxes and rates to enable the
teaching of up-to-date and relevant information. This has to be achieved by
enabling the teacher access the URA web- Portal which carries all the latest
information on Uganda's taxation.
Tax education has been a big challenge in schools because teachers have been
lacking the source of current information regarding Uganda’s tax system. Some
of the references that have been used by the teachers are for foreign countries
whose tax systems could be quite different.
There has also been a tendency in the past to have tax education content cutting
across subjects and classes. This syllabus has used a spiral model to design
content whereby even when some content may look the same, the difference is
in scope and complexity. Simpler tax concepts have been reserved for O’ level
and more complex ones for A’ level. Also, more functional content for taxation
has been selected. That is, content which enable the learners practice what they
have learnt at school. For example, filing returns where every citizen earning an
income is supposed to file returns to URA as an element of compliance. However,
many people are not able to file the returns. By implication, the learners will be
able to help their parents and communities to file the returns and in a way
making an income in the process and increasing tax compliance in Uganda.
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ACKNOWLEDGEMENT
The National Curriculum Development Centre (NCDC) wishes to express its

appreciation to all those who worked tirelessly towards the production of this O’
level (UCE) Tax Education syllabus.
Gratitude goes to the Ministry of Education and Sports for supporting the writing
of this Tax Education Syllabus and its implementation. Further gratitude goes to
the Ministry of Finance Planning and Economics Development for the financial
support through the Uganda Revenue Authority (URA). Special thanks go to the
URA particularly the Public Corporate Affairs Division which relentlessly provided
all that was necessary to develop this syllabus ranging from a wonderful
ambience provided to the writing panel, the rich tax reference materials, the very
knowledgeable and experienced URA staff and support extended to developing
this piece of work.
Great thanks are extended to the partners in education who provided the
professional information and advice that was put together to come up with this
tax education syllabus. These include Secondary Schools, Universities, National
Teachers’ Colleges, Uganda National Examinations Board (UNEB), Directorate of
Education Standards (DES) and Business and Technical Institutions.
NCDC is also grateful to the people of the United States of America through
USAID for the Financial and Technical support in improving the Revised
Entrepreneurship Education syllabus and making it more relevant particularly
Tax Education.
Last but not least we would like to acknowledge all those behind the scenes who
formed part of the team that worked hard to finalise this work.
The National Curriculum Development Centre (NCDC) takes responsibility for
any shortcomings that might be identified in the publication and welcomes
suggestions for effectively addressing them.
Grace K. Baguma
Director
National Curriculum Development Centre
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LIST OF ACRONYMS
A’ LEVEL Advanced Level

DES Directorate of Education Standards
GS Generic Skills
K Knowledge
NCDC National Curriculum Development Centre
O’ LEVEL Ordinary Level
PAYE Pay As You Earn
S Skills
U Understanding
UACE Uganda Advanced Certificate of Education
UCE Uganda Certificate of Education
UNEB Uganda National Examinations Board
URA Uganda Revenue Authority
USAID United States Assistance for International
Development
V Values
VAT Value Added Tax
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SECTION 1
1.0 INTRODUCTION
A robust tax paying culture is fundamental to the achievement of any

country’s development. This however does not happen overnight but
has to be built overtime.
One of URA’s mandates is to build a culture of tax compliance in the
country. Achieving success on this mandate is not possible without
inculcating this culture right from the basic foundations. It is in this
regard that it was found necessary to start with the young generation
and hence the need to start with schools. Working with school children
is a common approach by most tax administrators around the world as
this segment of the population is at its formative stage of human
development. The emotional, social and physical development of
children has a direct effect on their adulthood ways of life and
attitudes. Based on this, it is deeply believed that exposing the young
generation to concepts of tax education increases tax awareness
among them and eventually produces a voluntary tax compliant
population in future which in turn helps expand Uganda’s tax base,
increases tax revenue and subsequently facilitates better service
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delivery to the population in terms of better roads, well equipped

hospitals, good schools and other social amenities.
There have been earlier efforts along this direction, but these have
hitherto not yielded desired results. In the period between 2000 and
2006, Uganda Revenue Authority (URA) in partnership with the Ministry
of Education and Sports and the National Curriculum Development
Centre (NCDC), enhanced Tax Education in the secondary school
curriculum as part of the drive to increase tax awareness among the
young people. Accordingly, content on taxation was developed in four
subjects namely; Commerce, Principles of Accounts and
Entrepreneurship at O’ level, plus Entrepreneurship Education and
Economics at A’ level.
Taxation is hence among the key areas examined by Uganda National
Examinations Board (UNEB) which administers national examinations
for Primary Leaving examinations (PLE), Uganda Certificate of
Education (UCE) and Uganda Advanced Certificate of Education
(UACE).
Feedback from UNEB reveals that questions from the area of taxation
were very unpopular at both O’ and A’ levels. Very few candidates
attempted them, and those who endeavoured scored very low in the
final examinations. The main reasons cited for this were as follows:
(i) Students were being taught obsolete content on taxation, yet
examination questions were drawn from current information;
(ii) Some teachers lacked the capacity to effectively teach concepts
of tax education;
(iii) Many teachers lacked accurate and current information; and
(iv) There was shear absence of relevant teaching and learning
materials.
In addition, the tax paying culture in Uganda is still poor and voluntary
tax compliance is among the lowest in the East African region.
It is against the above background that, Uganda Revenue Authority
and National Curriculum Development Centre with support from
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USAID have taken a deliberate step to enrich, strengthen and update
the Tax education content in the school Education curriculum.
1.1 AIMS OF EDUCATION

i) To promote understanding and appreciation of the value of
national unity, patriotism and cultural heritage, with due
consideration of internal relations and beneficial inter-
dependence;
ii) To inculcate moral, ethical and spiritual values in the individual
and to develop self-discipline, integrity, tolerance and human
fellowship;
iii) To inculcate a sense of service, duty and leadership for
participation in civic, social and national affairs through group
activities in educational institutions and the community;
iv) To promote scientific, technical and cultural knowledge, skills and
attitudes needed to promote development;
v) To eradicate illiteracy and to equip the individual with basic skills
and knowledge to exploit the environment for self-development as
well as national development, for better health, nutrition and
family life, and the capability for continued learning; and
vi) To contribute to the building of an integrated, self-sustaining and
independent national economy.
1.2 SPECIFIC AIMS AND OBJECTIVES OF SECONDARY

EDUCATION
i) Instilling and promoting national unity and an understanding of
social and civic responsibilities; strong love and care for others and
respect for public property, as well as an appreciation of
international relations and beneficial international co-operation.
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ii) Promoting an appreciation and understanding of the cultural

heritage of Uganda including its languages;
iii) Imparting and promoting a sense of self-discipline, ethical and
spiritual values and collective personal responsibility and
initiative;
iv) Enabling individuals to acquire and develop knowledge and an
understanding of emerging needs of society and the economy;
v) Providing up-to-date and comprehensive knowledge in theoretical
and practical aspects of innovative production, modern
management methods in the field of commerce and industry their
application in the content of socio-economic development of
Uganda;
vi) Enabling individual to develop basic scientific. Technological,
technical, agriculture and commercial skills required for self-
employment;
vii) Enabling individuals to develop personal skills of problem-solving,
information gathering and interpretation, independent reading
and writing, self-improvement through learning and develop of
social, physical and leadership skills such as are obtained through
games, sports, societies and clubs.
viii) Laying the foundation for further education;
ix) Enabling the individual to apply acquired skills in solving problems
of the community and to develop in him a strong sense of
constructive and beneficial belonging to that community;
x) Instilling positive attitudes towards productive work and strong
respect for the dignity of labor and those who engage in productive
labor activities.
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1.3 AIMS OF TEACHING ENTREPRENEURSHIP
The teaching and learning of Entrepreneurship Education fits very well
into the aims and objectives of Secondary Education in particular
Numbers (iii), (iv), (v), (vi) and (x). In line with these, the following aims
for teaching Entrepreneurship Education have been developed.
i. Addressing the six mentioned attributes mentioned in (iii)

above.
ii. Addressing the emerging needs of society and economy which
include: creating jobs, exploiting local resources and
sustainable use of the environment.
iii. Addressing innovative production by way of value addition to
local products with business planning skills to help promote
modern management methods contribute to socio-economic
development of Uganda.
iv. Developing basic commercial skills such as marketing,
production, human resource and financial management as well
as planning and budgeting, organising, leadership and quality
management which are required for self-employment.
v. Scanning the environment for business ideas and
opportunities, market for products and services, and social
entrepreneurship.
vi. Producing learners who have positive attitudes towards
productive work by participating in all sorts of legal work and
have respect for those who work.
Therefore, as a contribution to the aims of Secondary Education,

Entrepreneurship Education is aimed at producing an individual who
can:
a. demonstrate the entrepreneurial awareness and motivation;
b. Explore the environment for opportunities as an entrepreneur,
intrapreneur or enterprising person;
c. Start and manage chosen activities successfully for the
development of self, community and the nation.
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We hope to build on these relationships to raise the profile of the

importance of tax education in the Uganda Education system
specifically being emphatic with secondary education.
1.4 AIMS OF TEACHING TAX EDUCATION IN

SCHOOLS
i) To promote understanding and appreciation of the value of
national unity, patriotism and cultural heritage, with due
consideration of internal relations and beneficial inter-
dependence;
ii) To inculcate moral, ethical and spiritual values in the individual
and to develop self-discipline, integrity, tolerance and human
fellowship;
iii) To inculcate a sense of service, duty and leadership for
participation in civic, social and national affairs through group
activities in educational institutions and the community;
iv) To promote scientific, technical and cultural knowledge, skills
and attitudes needed to promote development;
v) To eradicate illiteracy and to equip the individual with basic skills
and knowledge to exploit the environment for self-development
as well as national development, for better health, nutrition and
family life, and the capability for continued learning; and
vi) To contribute to the building of an integrated, self-sustaining and
independent national economy.
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SECTION 2
CHAPTER 13: GOVERNMENT

REVENUE
The government needs money to provide social and economic services
for the wellbeing of its people. Taxes being the major source of
government revenue has been covered in detail in this topic. When
people pay taxes, the government is able to fulfil its obligations.
13.1: INTRODUCTION TO GOVERNMENT REVENUE
13.1.1 Meaning of Government Revenue

This is the total amount of money received by a government, from
different sources in order to finance its programs.
13.1.2 Uses / Importance of Government Revenue

The government uses the money it receives in the following ways:
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Providing and improving social services such as health, education,

security, transport and communication. This helps to improve peoples’
welfare.
Photograph No. I shows a poor state of health services which may be
caused by government having less revenue. However, when people pay
more taxes government can be able to provide better health facilities and
services like in Photograph No.2.
1 2
3 4
Photograph No. 3 shows a poor state of the road while no. 4 shows a
modern all-weather road which was constructed using government
revenue.
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Activity 1.
As a good citizen, what lesson do you learn from the photographs
1 to 4 above?
Facilitating Public administration for example; payment of salaries

and wages to government employees, pension and gratuity to civil
servants, office supplies, repairs, fuel, and allowances.
Promoting infrastructural development. The government uses the
revenue collected to build industries, dams, schools, hospitals, roads,
markets, piped water, among others.
Photograph 5 shows a power dam while 6 shows public street lights on the road
which were constructed and provided by government revenue.
Help in overcoming the effects of disasters. This is through extending

humanitarian services to people that are affected by socio-political
instabilities and natural calamities. For example; landslides, floods,
conflicts, drought, epidemics which require government intervention.
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Photographs 7 and 8 show areas affected by landslides and floods

respectively.
Landslides Floods
From the above photographs, when government has enough revenue,

such affected areas can be financed.
Setting up development schemes to help the youth and needy
people; these include financing SACCOs, school fees loan schemes,
senior citizen benefit schemes and others.
Promoting Modernisation of agriculture in the country. This is
through subsidised inputs, establishing demonstration farms,
agricultural exhibitions, and agricultural research centres among
others.
Facilitating the repayment of government debts. Government
revenue is used to pay back borrowed funds from both internal and
external sources.
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13.1.3 Sources of Government Revenue
Government collects money from both tax and non- tax sources.
Tax Sources
A tax is a compulsory monetary payment charged by the government
on individuals or companies to help it finance its expenditure. It is not
charged in return for any specific service rendered by the government
to the taxpayer.
Taxes are the most important source of government revenue. Some of
the taxes levied include; Income tax, Value Added Tax (VAT), Customs
duty and Excise duty.
Non–Tax Sources
Non-Tax revenue is the income earned by the government from
sources other than taxes. These include:
Fees These are standard payments set by law and
required to be paid in return for use or access to
selected Government services or facilities for
example; court fees, registration fees, passport
fees and licencing fees.
Fines and penalties These are charges imposed on offenders of state
laws as a punishment for having gone against
the law for example police traffic fines.
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Photographs 9 and 10 show Traffic Police arresting offenders. These may pay
fines.
With the use of fines and penalties from offenders, government can
generate revenue to finance her expenditures.
Gifts and donations These are voluntary contributions made by

individuals and organisations to the
government.
Borrowing This refers to loans obtained by the
government from within or outside the
country.
Earnings from government enterprises These are profits earned by
the government from the sale of goods or
provision of services.
Proceeds from national lottery This is revenue from sale of tickets
issued by the national lottery for financing a
specific social project.
Rent and rates This is money charged by government on
buildings or premises leased by individuals or
organisations.
Road and bridge tolls These refer to revenue collected from users of
roads and bridges to enable government
maintain these facilities.
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Photograph 11 shows a road toll on a highway.
From the above photograph, government can generate revenue from

the road tolls.
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SUB-TOPIC 13.2: TAXATION
13.2.1 Meaning of Taxation

Taxation is a process by which A tax is a compulsory monetary
government raises money or revenue payment charged by the government
from eligible individuals, companies on individuals, companies and other
and other entities by law. entities to help it finance its
expenditure. It is not charged in return
for any specific service rendered by the
government to the taxpayer.
13.2.2 Origin of Taxation

Taxation is as old as the first existence of human society. Humans have
a natural tendency to associate and hence form up organized society.
Organised society requires a form of leadership structure or
governance. Governance means that some people are recognized as
having Authority to influence others for the common good of society.
In order to achieve this common good all society members needed to
contribute what they are able to (whether their energy, their ideas,
their assets, etc. as guided/supervised by those in governance.
Therefore, tax in its different forms has existed as long as society had
the minimum elements of government.
The Roman Empire, the French Kingdom and here in Africa Taxation
has existed in different forms. Traces of this can be seen through
ancient writings and artefacts available in museums. Holy Books such
as the Bible and the Quran also emphasize payment of tax. For
example, the book of Romans in the bible, Chapter 13 and verse 6 –
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7 say “This is also why you pay taxes for the authorities who are God’s
servants and give their full time to governing. Give to everyone what you
owe them: if you owe taxes pay taxes, if revenue then revenue.” Luke
20:22, 25 says, “Is it right for you to pay taxes to Caesar or not? Jesus
answered, “Give to Caesar what belongs to Caesar and give to God what
belongs to God.”
Taxation in Uganda is as old as the chiefdoms/kingdoms that existed
then. It was however largely informal. The chiefs and kings of different
chiefdoms/kingdoms used to collect contributions or used to impose
casual labour (e.g. Oluwalo in Buganda) to their subjects. This went on
until the coming of the colonial government who introduced the first
formal tax – the hut tax.
The Hut Tax

The first formal tax, the hut tax, was introduced in 1900. It was a type
of taxation introduced by British colonialists in Africa on each hut or
household basis. It was variously payable in money, labour, grain or
stock
It benefited the colonial authorities in three ways;
1. it helped raise money;
2. it broadened the cash economy, aiding further development;
and
3. it forced Africans to labour in the colonial economy (in order
to get money to pay tax)
Furthermore, around this time, the first common tariff arrangements
were established
between Kenya and Uganda. Through this, Ugandans started paying
customs duty as an indirect tax, which involved imposition of an import
duty at a rate of 5% on all goods entering East Africa, through the port
of Mombasa and destined for Uganda. A similar arrangement was
subsequently made with German East Africa (Tanganyika) for goods
destined for Uganda that entered East Africa through Dar-es- Salaam
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and Tanga ports. This gave rise to revenue which was remitted to
Uganda.
The Protectorate government heavily relied on customs duties to fund
its programs, yet the indigenous Africans were not engaging in
activities that would propel the growth of the monetary economy.
Accordingly, government introduced a flat rate poll tax that was
imposed on all male adults. (This was a set fixed amount payable by
every adult male). The requirement to pay tax forced the indigenous
Ugandans to enter the market sector of the economy through either
selling their agricultural produce or hiring out their services. This tax
later was modified to form graduated tax. Graduated tax was also for
adult males but for it was not one fixed amount for all but rather
different amounts for different people depending on a person’s
perceived level of income (or wealth).
Income tax was introduced in Uganda in 1940 through an ordinance by
the Protectorate Government. It was mainly payable by the Europeans
and Asians but was later on extended to Africans.
In 1952, this ordinance was repealed and the East African Income Tax
Management Act, was enacted. It laid down the basic legal provisions
for Income Tax which provisions are still being mirrored in the current
Income Tax law.
In 1958, the East African Income Tax Management Act of 1958 was put
in place. (replacing that of 1952).
Please note that the laws at this time were common for all the partner
states of East Africa (Partner states were only allowed to alter tax rates
if they wanted). This would however soon collapse together with the
collapse of the east African community.
In 1974, The Uganda Income Tax Decree was made (replacing the
previous East African income tax law).
After the breakup of the EAC, the tax departments were formerly
transferred to the Ministries of Finance of the respective countries.
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In 1991, the function of administering Central government taxes was
shifted from the Ministry of Finance to the Uganda Revenue Authority,
a body corporate established by an Act of Parliament.
As can be seen, taxation is neither a creation of a government nor a
political party. It has existed for centuries to help governments raise
revenue to finance administration, provide social services to the people
and to accelerate development. It is therefore advisable for a good
citizen to comply with tax laws by paying taxes due to him or her.
13.2.3 Key Terms used in Taxation

Tax base. This refers to any item or economic activity that is subjected
to tax. It refers to the source of the tax such as property, income and
economic activities.
Tax avoidance This is a situation where the taxpayer takes
advantage of the weaknesses in the tax system
so as to pay less tax or not to pay tax at all.
Tax evasion This is the taxpayers’ deliberate refusal to pay
tax. It may take the following forms: dishonest
in tax reporting by under declaring income,
engaging in smuggling and false declaration of
income, among others. Tax evasion is illegal and
constitutes a criminal offence.
Tax registration This is the process of getting eligible persons
recorded on the taxpayers’ register. When a
person is registered as a taxpayer, a Tax
Identification Number is given.
Tax returns This refers to a form filed with a Tax Authority
which reports incomes, expenses and any other
relevant tax information. It allows taxpayers to
calculate their tax liability, schedule of payment
or request refund for over payment.
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Taxable capacity This refers to the extent to which individuals are

able to pay taxes imposed on them and remain
with enough disposable income to enable them
live a decent life.
Taxable income This refers to income liable to taxation by the
Tax Authorities.
Tax Liability This refers to the amount of money a taxpayer is
expected to pay in a given period of time.
Threshold of a tax This refers to the amount of money or level of
income from which the tax liability begins.
Tax holiday This refers to a period of non-tax payment given
by the government to encourage investment.
e-taxation This is a system of tax administration using
online technology that is; the use of internet to
register, assess and pay taxes.
13.2.4 Types of Taxes

Taxes are classified as either direct or indirect.
Direct Taxes Indirect Taxes
These are taxes imposed on the income These are taxes imposed on the
and property of individuals and consumption of goods and services. It is
business entities. The burden of the tax paid by an individual or business entity
is wholly borne by the taxpayer. The when buying the goods and services.
common examples of direct taxes The burden of the tax can be shifted by
include corporation tax, individual one taxpayer to another party. They are
income tax, withholding tax, not directly collected by the
employment income tax, rental income government but indirectly through
tax among others. intermediaries who are usually business
people. These taxes include customs
duty, excise duty, Value Added Tax (VAT)
among others.
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Advantages of Direct Taxes
Direct taxes have a number of advantages to the taxpayer and the tax
collector which include the following:
The taxpayers are informed in advance when, where and how much to
pay. This enables the taxpayers to plan accordingly.
It helps to redistribute income this is because the rich people are made
to pay more taxes than the poor. This enables government to use the
revenue to provide services that improve the welfare of the poor.
The yield from direct taxes can easily be estimated before collection
therefore they can easily be relied upon for proper planning.
Direct taxes have low costs of collection/administration especially with
income tax (PAYE) which can easily be collected by the government
using employers as collectors.
They are flexible in that the government can increase or decrease the
rates according to the economic conditions and requirements of the
economy.
Disadvantages of Direct Taxes
A number of disadvantages are associated with direct taxes. These
include the following:
They have a direct tax burden to the taxpayer (not hidden in the prices)
and are hence perceived to pinch more as the taxpayer sees his/her
disposable income being reduced by these taxes. This causes more
resentment. Tax resentment is not good for the country as it breeds
more creative ways of avoiding or evading the tax.
 Direct taxes are easier to evade as they are not hidden. Sometimes
people can evade by just deliberately refusing to pay the tax This
reduces the amount of revenue from direct taxes thereby affecting the
implementation of government programmes and it becomes
administratively difficult for URA to keep chasing them around for tax.
They are not paid by everybody because some individuals and
institutions are exempted like army and police. This reduces the
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amount of revenue collection and affects service delivery by the

government.
 Direct taxes discourage savings and investment as sometimes
people are left with less income after paying the taxes. This mainly
happens to the low-income earners.
 They discourage people from working hard to avoid being taxed
because the more you earn the more you pay.
 They are difficult to review in the short run so as to raise more
revenue. In case government needs to raise more tax revenue, it is not
possible to ask people to pay more direct taxes in the same year.
Advantages of Indirect Taxes
The following are the advantages of indirect taxes:
The cost of collection and administering indirect taxes is low since

the government does not pay the traders who collect the taxes like
VAT. In addition, they are paid directly to the government bank
accounts.
Indirect taxes pose a low tax burden to the taxpayer since the tax is
part of the price of the commodity. In most cases, the taxpayer may
not know the amount of tax paid. This creates less resistance by the
taxpayer.
They are difficult to evade, since they are included in the prices of the
commodities and cover a wide range of commodities.
They can be used as a means of discouraging the production and
consumption of harmful goods like alcohol, cigarettes among
others. This is by imposing higher taxes on such goods. This helps to
promote the welfare of the people.
They are also flexible; they can be adjusted either downwards or
upwards depending on the economic condition prevailing in the
country.
They help in Protection of domestic industries against competition
from foreign producers. This is done by imposing high taxes on
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imported goods which increases their price and reduces the ability of
the people to buy them. As a result, they turn to cheaper domestic
goods thereby promoting domestic industries.
They promote hard work among taxpayers. This is because people
are forced to work harder in order to meet the increasing prices of
commodities as a result of increase in indirect taxes.
Government is able to raise more revenue as they are paid by
everybody consuming the commodity irrespective of the age, income
level and occupation.
Disadvantages of Indirect Taxes

The disadvantages of indirect taxes include the following:
They encourage trade malpractices especially in foreign trade where
traders may attempt to evade taxes through smuggling.
They reduce economic welfare of citizens because the poor may not
cope with the increasing prices as a result of high indirect taxes
especially on essential commodities.
The revenue from indirect taxes is uncertain because it is not possible
to accurately estimate the effect of such taxes on the demand for
products.
The rich and the poor are required to pay the same amount of
indirect taxes on commodities. This increases the gap between the
rich and the poor as the poor become poorer.
Indirect taxes like import duties interfere with the freedom of trade
hence reducing the volume of goods exchanged between countries.
This therefore, limits consumer’s choice and welfare.
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13.2.5 Rights of a Taxpayer

A right as regards to taxation is an entitlement available to a taxpayer
as provided by law and expected from the Tax Authority.
Taxpayers are entitled to the following rights:

a. The taxpayer has a right to equity and fair treatment before the law.
b. The taxpayers and their agents are presumed honest until proved
otherwise.
c. The tax affairs and information of the taxpayer in URA shall be kept
secret in accordance with the law.
d. The taxpayer must be provided with clear, precise and timely
information.
e. The taxpayer has a right to receive courteous and professional
services at all times.
f. The taxpayer has a right to receive timely, clear and accurate
responses to enquiries, complaints or requests.
g. The taxpayer has a right to be sensitized about tax obligations.
h. The taxpayer has a right to be given prior notice whenever premise(s)
are to be subjected to inspection or audit.
i. The taxpayers’ tax account / ledger must be promptly updated
whenever tax is paid.
j. Tax refunds to be processed within the prescribed time limits where a
tax return is due to the taxpayer.
k. The taxpayer has a right to be given excellent customer care by the
tax administrators.
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13.2.6 Obligations of a Taxpayer
Obligations as regards to taxation are the terms and conditions to

be fulfilled by a taxpayer as required by tax law.
The following are the obligations of the taxpayer. The taxpayer shall:
a. Voluntarily register as a taxpayer with URA.
b. Obtain a Tax Identification Number (TIN), which is free to every
applicant and is the unique identifier for all tax purposes.
c. File accurate tax returns, make customs entries or any forms
relating to taxes and other revenue related obligations at the
right time and place as required by the law.
d. Pay the correct taxes/fees at the right time and place as required
by the relevant laws.
e. Deal and cooperate with the Uganda Revenue Authority’s
authorized staff when handling tax matters.
f. Be honest and make full disclosure of information and correct
declaration of all transactions at all times.
g. Quote the taxpayer TIN for all dealings with URA.
h. Use the services of a licensed customs agent to complete customs
entries and related clearance formalities when importing or
exporting cargo, declare the goods on arrival and have them
ready for inspection.
Uganda Revenue Authority has a taxpayer’s charter. This has been

published and is available on the URA website. The Taxpayer’s charter
is a form of agreement that spells out and binds both URA and the
Taxpayer each to their rights and obligations.
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Discussion Questions
1. With the help of examples distinguish between direct and indirect
taxes
2. Why do you think an individual should pay taxes in his/her country?
3. Give reasons why indirect taxes are more preferred to direct taxes in
Uganda.
4. What are the merits and demerits of indirect taxes in a country?
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SUB–TOPIC 13.3: TAX
ADMINISTRATION IN UGANDA
13.3.1 Meaning of Tax Administration

Tax administration is the management of both the domestic and
international tax laws in a country. In Uganda tax administration is
done by Uganda Revenue Authority (URA).
13.3.2 The Role of URA in Tax Administration

Uganda Revenue Authority was put in place in 1991 as a body
responsible for administering taxes for Central Government Tax and
non- tax revenue and to provide advice to government on matters of
policy relating to all revenue sources.
The principal roles of URA include the following:
i. To assess and collect central government revenue.

ii. To account to the Ministry of Finance and Economic Development
for all revenues collected.
iii. To facilitate trade and investment. For example; through issuing
tax clearance certificates, fast clearance of goods at importation,
etc
iv. To advise government on matters related to tax and revenue
administration
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v. To sensitise the public about taxation through taxpayer education

programs, media like TV and Radio talk shows, tax clinics and
workshops.
13.3.3 Taxes and Duties Collected by URA

The main taxes and duties collected by URA include the following:
1. Income Tax. This is a direct tax charged on profits or income

earned by an individual or a business entity. It takes two forms;
Individual income tax (for individuals) and corporation tax (for
non-individuals).
 Individual Income Tax. This is a tax levied on the
income of individuals. It is levied on profits (net income)
made by individuals. It is normally a progressive tax.
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 PAYE: It is tax deducted from employee’s remuneration.
It is deducted from the gross remuneration (not from net
income).
 Corporation Tax. This is a tax charged on company
profits and it is normally a proportional tax (flat tax rate)
based on the net income of the company.
 Rental income tax. Tax charged on income received
from letting out immovable property.
2. Excise Duty. This is a tax levied on the production or
importation of specific goods with a view to influence their
consumption and/ or supply on the local market like spirits
perfumes and cigarettes.
3. Value Added Tax (VAT). This is an indirect tax charged on the
consumption of goods and services. It is levied on value added
at every stage in the chain of production or distribution of goods
and services.
4. Environmental Levy. This is a tax imposed on import of
specified used goods for example, motor vehicles, motor- cycles
and other items as per each year’s budget. It is mainly imposed
as a charge on an item that will spoil our environment for
example, used motor vehicles emit poisonous fumes.
5. Infrastructural Levy. This is a tax imposed on imported goods
from outside the East African region. It is intended to mobilise
funds for maintenance of regional infrastructure for example,
roads railways.
6. Gaming and Pool Betting Tax. This is a tax charged on gaming
and sports betting activities. It is collected on gaming, pool
betting, betting materials, casinos and other related items.
7. Export Duty. This is tax imposed on goods being exported to
other countries and is usually paid at the exporting point.
8. Import Duty. This is a tax imposed on goods entering into a
country from other countries (imports) and is usually paid at the
entry point or boarders.
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Non-Tax Revenues
This is the revenue collected by URA on behalf of other government
agencies like stamp duty, passport and work permit fees, traffic fines.
Stamp Duty This is a charge for legalising transactions and/

or documents. For example, upon purchase of
land.
Fines and Penalties These are imposed on any person who has
broken the law like traffic offences, court fines.
Passport Fees This is revenue received from individuals who
apply for passports.
Permit Fees This is a fee imposed to allow an individual/
entity transact a business. For example,
trading licence, animal transit permit and
work permit.
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13.3.4 Taxes and Duties Collected by the Local
Government Authorities
Local Government Authorities are responsible for the assessment and
collection of local government revenue to be used within the locality.
They include the Districts, City Councils and Municipalities, town
councils, among others. These local authorities collect revenue such
as;
Property Tax. This is tax levied on income derived by a
person from the provision, use or exploitation
of property.
Hotel Tax. This is a tax charged on hotels and paid
monthly by the hotel owner to local
authorities.
Local Service Tax. This is a tax levied on wealth and incomes of all
persons in gainful employment, self–
employed and practicing professionals, self-
employed artisans, businessmen/women and
commercial farmers.
Trading Licence Fee. This is a fee paid to allow a person carry out a
specified business in a given area for a period
of time usually one year.
Permit Fees. This is a fee imposed to allow the taxpayer
transact a business. For example; trading
permit, animal transit permit, among others.
Registration Fee. This is a fee paid to enable a business to have
a legal right to exist and/ or legally carry out an
activity.
Plan Fees. This is a fee charged for approval of
construction plans and urban plans.
Market Dues. These are charges made to allow an individual
to trade in the market.
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Street Parking Fees. This is fee payable for use of parking space in
urban areas.
Land Fees. This is a fee payable for land transactions.
Advertising / Billboard Fees. These are fees charged to allow one to
put up adverts like sign posts.
Rent from district markets. Rental fee is payable by tenants who
operate from district markets.
Registration Fee. This is a fee imposed to allow an individual or
entity to have a legal right to exist or legally
carry out an activity.
Discussion Questions
1. What role does URA play in tax administration?
2. Besides obtaining a Tax Identification Number (TIN), as a right of a
taxpayer, what are the other rights of a taxpayer?
3. Outline the different obligations of a taxpayer.
4. Explain the various forms of taxes and duties collected by;
a. URA
b. Local Government Authorities in Uganda
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SUB–TOPIC 13.4: TAX COMPLIANCE
13.4.1 Meaning of Tax Compliance

Tax Compliance is the degree to which the tax paying community
meets the tax obligations as set out by the appropriate legal and
regulatory authorities. Taxpayers who are compliant make timely
and accurate declarations to the tax authority and voluntarily settle
all the due tax liability. Taxpayers who are not compliant either
evade or avoid taxes.
13.4.2 Factors Determining Tax Compliance

There are a number of factors influencing tax compliance and these
include the following:
Simple tax laws that are easy to understand by the taxpayer lead to
more tax compliance than complicated tax laws which may lead to tax
evasion or avoidance.
Simple procedures of paying taxes increase tax compliance like e-
payment while complicated procedures discourage tax compliance.
The tax rate. Low tax rates encourage tax compliance than higher tax
rates due to its affordability.
Taxes that are fair encourage more tax compliance than taxes which
are not fair.
The quality of tax administration. Tax administrators who have
professionalism, integrity and customer care promote tax compliance
among taxpayers.
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The popularity of government and quality of governance. An unpopular

or corrupt government discourages tax compliance than one that is
popular and not corrupt.
The quality of business management. Taxpayers who keep proper
records are more tax compliant than those who don’t keep records.
Financial position of the taxpayer. Individuals and firms with limited
finances tend to have low levels of tax compliance than those with
adequate funds because the tax burden is higher to low income earners
than to high income earners.
Level of tax education. Higher levels of tax education increases
awareness and tax compliance whereas low levels of tax education
leads to non - compliance.
13.4.3 Elements of Tax Compliance
There are five elements of tax compliance. These include the following:
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1. Registration
Every taxpayer or any person who is in business is expected to register
with URA for tax purposes. A Taxpayer who is registered is issued with
a Tax Identification Number (TIN) which is the key identifier of the
taxpayer. Tax registration is free and can be done at any URA office or
online on the URA web portal (www.ura.go.ug) and it should be done in
time.
Requirements for TIN Registration

For an individual to be registered for a TIN the following must be
submitted:
A copy of two identification documents e.g. Driver’s Permit,
Voter’s Card, Passport, Employer ID, National Identity Card and
email address of the applicant, among others.
A fully completed individual application form. (The taxpayer is required

to provide accurate information when filing the application form.)
2. Filing Tax Returns

A tax return is a declaration form designed by a Tax Authority for
purposes of accounting for taxes. Filing tax returns involves completing
the tax return form with correct information about the business for the
respective period and submitting it to the Tax Authority for purposes of
establishing the position of the taxpayer.
Filing tax returns is done for domestic taxes.
3. Declaration (for customs)

This involves providing accurate and correct information particularly
during importation of goods and services to the URA Customs when
clearing on a prescribed form for further processing. This can be done
using Automatic Systems’ Custom Data World. (ASYCUDA).
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4. Payment of Tax
The correct amount of tax due should be paid in time. This can be done
through the bank, use of mobile money and e-payment platforms like
pay way.
5. Record Keeping
The taxpayer should keep accurate and proper business records as
required by the international standards. Proper record keeping is
necessary for assessment / determination of the proper tax payable.
13.4.4 Advantages of Tax Compliance

The advantages or benefits of tax compliance go both to the taxpayer
and the government. They include:
Increases government revenue: This helps in financing the recurrent
and development expenditures.
Reduces the cost of tax administration: Tax collection is easy and
less costly when people pay taxes willingly.
Enables faster clearance of goods since priority is given to those who
are more compliant for example at importation or exportation level.
Promotes continuity in business activities as there is limited
interference from Tax Authorities. Sometimes businesses which are not
Tax Compliant are forced to close until when they clear the taxes due.
This interrupts business operations which may make customers go to
other stable businesses. However, when a business is tax compliant,
such inconveniences are avoided.
Eases acquisition of contracts by the business. One of the
requirements for bidding for a contract from any government
organisation is a Tax Clearance Certificate (TCC) issued by URA. This
can only be obtained when you are tax compliant and have no tax
liability. Therefore, tax compliance enables you to acquire contracts
which can expand your business.
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Earns the taxpayer a good reputation / good corporate image as
opposed to those who are published / blacklisted in the media.
Reduces the cost of doing business since the taxpayer is not subjected
to penalties, fines and unnecessary delays.
Compliant taxpayers benefit from tax exemptions especially if they are
accorded basing on compliance like withholding tax exemptions.
13.4.5 Measures for Improving Tax Compliance

Carrying out tax education: This helps to sensitise the public about
the importance of paying taxes, how to pay the taxes and where the tax
revenue collected is allocated.
Charging low tax rates: High tax rates may lead to tax avoidance and
tax evasion because of the high tax burden which leads to low tax
compliance. On the other hand, low tax rates pose low tax burdens and
therefore high tax compliance among taxpayers.
Making tax laws simple and clear: This ensures proper
understanding and interpretation of the tax laws by tax collectors and
taxpayers. This encourages tax compliance.
Ensuring quality service provision: Government should ensure that
the tax revenue collected is properly used to provide public goods and
services that benefit the people. For example; construction of roads
with sufficient street lights, hospitals with drugs and good facilities,
schools, provision of safe water etc. When people notice that the taxes
they pay are used to improve their wellbeing, they willingly continue to
pay taxes. This promotes tax compliance.
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The photograph 12 shows a good road with sufficient street lights
Reducing the level of corruption among tax officials and taxpayers.

High levels of corruption reduce tax compliance as a lot of revenue is
lost. However, reducing levels of corruption through setting up anti-
corruption laws, strengthening and empowering the Public Accounts
Committee (PAC), and Inspector General of Government (IGG) can help
to increase tax compliance.
Improving tax administration. A high level of professionalism,
integrity and customer care exhibited by the tax administrators builds
taxpayers’ trust and confidence in the Tax Authorities hence promoting
tax compliance.
Collecting taxes at a convenient time when the taxpayer get revenue
from their activities. Farmers for example can be taxed after harvesting
while salary earners need to be taxed at the end of the month when
they receive their salaries. This increases tax compliance.
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Punishing all tax evaders. This can be done by taking them to courts
of law, imprisonment, paying fines and penalties, confiscation of their
property, among others. This deters others from being non- compliant.
Discussion questions
1. What are factors that determine tax compliance in Uganda?
2. Describe the elements of tax compliance.
3. What are the benefits of tax compliance?
Explain how tax compliance in Uganda can be increased.
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SUB–TOPIC 13.5: BASIC TAX

COMPUTATIONS
Tax computation deals with establishing the correct amount of tax to

be paid by the taxpayer.
Below are the terms commonly used in tax computations:
Gross Income
This is the total amount of business income, employment income
and property income of a person for a year excluding exempt
income.
Chargeable Income
This is the total income of a person for the year after deducting
business expenses and losses. Chargeable income = Gross income –
business expenses.
Withholding Tax
Withholding tax is a form of income tax that is deducted at source by
one person effecting payment to another person. The person making
payment is obliged to withhold tax and is referred to as a
withholding agent and the person receiving payments from which
tax is required to be withheld is the payee.
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13.5.1 Corporation Tax
This is a tax imposed on companies and the rate applied is 30% of the
company’s chargeable income.
Example 1
RK Limited gross income for the year 2017 was Ug. Shs 95,000,000 and his allowable
expenses amounted to Ug. Shs 60,000,000. Calculate his chargeable income and
determine the amount of tax payable given corporation tax rate of 30%.
Solution
Step 1: Determine chargeable income.
Chargeable income = Gross income – allowable expenses
Chargeable income = 95,000,000 – 60,000,000
Therefore, Chargeable income = Ug Shs 35,000,000
Step 2: Compute of tax payable
Tax payable = Chargeable income x Corporation tax rate of 30%.
Tax payable = 35,000,000 X 30%
Therefore, tax payable = Ug. Shs 10,500,000
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13.5.2: Individual Income Tax

This is a tax imposed on a person’s chargeable income at specific rates.
All persons involved in business are required to pay income tax.
Example 2
Mr Okumu’s gross income for the year 2017 was Ug. Shs 75,000,000 and his allowable
expenses amounted to Ug. Shs 50,000,000. Use the table below to determine his
Income Tax payable.
Table i
Annual chargeable income Tax Rate (bracket)
1. Not exceeding Shs 2,820,000 Nil
2. Exceeding Shs 2,820,000 10% of the amount by which chargeable

but not exceeding Shs income exceeds Shs 2,820,000.
4,020,000.
3. Exceeding Shs 4,020,000 Shs 120,000 plus 20% of the amount by
but not exceeding Shs which chargeable income exceeds Shs
4,920,000. 4,020,000.
4. Exceeding Shs 4,920,000. (a)Shs 300,000 plus 30% of the amount

by which chargeable income exceeds Shs
4,920,000
(b)Where the chargeable income of an

individual exceeds
Shs 120,000,000 an additional 10%
charged on the amount by which
chargeable income exceeds Shs 120,
000,000.
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Solution
Step 1: Determine chargeable income
Chargeable income = Gross income – allowable expenses
Chargeable income = 75,000,000 – 50,000,000
Therefore, chargeable income = Ug. Shs 25,000,000
Step 2: Compute Individual Income Tax payable

Tax payable = Chargeable income x Individual income tax rate.
NB. Okumu’s Chargeable income falls in the fourth category of
exceeding 4,920,000 and the applicable rate is 30% of the amount by
which chargeable income exceeds Shs 4,920,000 plus 300,000
Tax payable = 300,000 + (25,000,000 – 4,920,000) x30%

Tax payable = 300,000+ (20,080,000x 30%)
Tax payable = 300,000 + 6,024,000
Therefore, Individual Income Tax payable = Ug Shs 6,324,000
13.5.3 Employment Income Tax (Pay As You Earn -

PAYE)
Employment income tax is collected on a monthly basis through a
system known as Pay As You Earn (PAYE). It is paid at the time the
income is being earned. While making payment of employment
income, employers are required by law in any month to withhold tax at
the prescribed PAYE tax rates and pay the tax withheld to URA by the
15th day of the following month to URA.
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The Income tax rate for individuals

The table below is used as a reference to calculate employment Income
tax in Uganda.
Table ii
Monthly chargeable income Tax Rate (Bracket)
1. Not exceeding Shs 235,000. Nil
2. Exceeding Shs 235,000 but 10% of the amount by which chargeable
not exceeding Shs 335,000. income exceeds
Shs235, 000.
3. Exceeding Shs 335,000 but Shs 10,000 plus 20% of the amount by which
not exceeding Shs 410,000. chargeable income exceeds Shs 335,000.
4. Exceeding Shs 410,000. a) Shs 25,000 plus 30% of the amount by
which chargeable income exceeds
Shs 410,000
b) Where the chargeable income of an

individual exceeds Shs 10, 000,000 an
additional 10% charged on the amount
by which chargeable income exceeds
Shs 10, 000, 000.
Example 3
Kapere is employed as a security guard in Kacumbala (U) Ltd. He
earns a monthly salary of Shs 200,000. Compute Kapere’s monthly
tax liability.
Solution
Kapere’s’ tax liability is NIL because his monthly salary is less than the threshold of
Ug. Shs 235,000 so his salary does not attract PAYE.
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Example 4
Ewogu is an employee of Kapir Ltd. He earns the following monthly
income, a salary of Shs 700,000; travelling allowance of Shs 120,000
and medical allowance of Shs 300,000. Compute his monthly PAYE
tax liability.
Solution
Employment Income: Add up all his income
Table iii
Salary 700,000
Travelling allowance 120,000
Medical allowance 300,000
Total 1,120,000
Ewogus’ total income exceeds Shs 410,000, therefore use rates in the fourth bracket
(part a), that is. Shs 25,000 plus 30% of the amount by which chargeable income
exceeds Shs 410, 000.
Step 1
Ewogus’ chargeable income = total income less 410,000
= 1,120,000 – 410,000
= Ug Shs 710,000
Step 2
PAYE tax liability = 25,000+ Chargeable income x 30%
= 25,000+ (710,000 x30%)
= 25,000+ 213,000
PAYE tax liability = Ug. Shs 238,000
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13.5.4 Value Added Tax (VAT)

Value Added Tax (VAT) is an indirect tax on goods and services
consumed in Uganda. It is charged by the entity involved in production
or distribution but payable by the consumer of the goods/services (as
it is included in the prices).
13.5.4.1 Key Terms Used in VAT

Taxable person A person who is registered or is required to be
registered under provisions of the law to pay
VAT. In other words, for one to qualify as a
taxable person the turnover should exceed
Ugx150 Million per annum whether registered or
not.
VAT Threshold This is the turnover above which one is required

to register for VAT. For example, in Uganda the
current VAT threshold is Ug Shs 150 Million of
taxable supplies.
Taxable Supply This is supply of goods or services other than an

exempt supply made by a taxable person for
consideration as part of his/her business
activities.
Goods These include all kinds of movable and

immovable property, but does not include
money.
Movable Property This includes stock in trade and the capital

goods of a business.
Immovable Property This includes land with developments on it and

any real right to such property.
Services These are intangible assets. They include

intellectual and industrial property rights for
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example copyrights, trademarks, among
others.
Taxable Value. Is the price of a taxable good or supply

excluding VAT. It is also known as the tax base.
VAT Rate This is the percentage used to calculate VAT for

example; Standard rate at 18% and Zero rate at
0%.
Output Tax This is the VAT a taxable person charges on

selling taxable supplies i.e. tax charged upon
selling taxable goods and services.
Input Tax This is the VAT a taxable person is charged on

taxable purchases and expenses incurred for
business purposes. The purchases could be
from local sources or imported.
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13.5.4.2 VAT Computation

VAT is computed by applying the VAT rate (R) on the taxable value (TV)
VAT = R x TV
Where:
R is the VAT rate which is 18%.
TV is the taxable value.
This applies when the taxable value is VAT exclusive.
Example 5.
Andruvule Imported goods worth Ug Shs 60,000,000 and sold to Mutumba a local
distributor at Ug Shs 65,000,000. Mutumba sold to Watau a wholesaler at Ug Shs
68,000,000. Watau sold to Efrance a retailer at Ug Shs 70, 000,000. Efrance sold the
goods to various customers at Ug Shs 72, 000,000. Given that all prices are exclusive
of VAT and the VAT rate is 18%.
Question
Calculate:
a) VAT payable at each stage.
b) Total VAT payable to URA.
c) Final price the consumer will pay VAT inclusive.
Solution: Table iv
Chain of Distribution (VAT Trail)
Stage Activity Purchase VAT on Selling VAT on VAT payable

price purchase price sales to URA
(Input (output (output
VAT) VAT) VAT–(input
VAT)
Customs - - -
VAT on 60,000,000 10,800,000
imports
I Importer
Andruvule 60,000,000 10,800,000 65,000,000 11,700,000 900,000
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Ii Distributor 540,000
Mutumba 65,000,000 11,700,000 68,000,000 12,240,000
Iii Wholesaler 360,000
Watau 68,000,000 12,240,000 70,000,000 12,600,000
Iv Retailer 360,000
Efrance 70,000,000 12,600,000 72,000,000 12,960,000
V Final
consumer 72,000,000 12,960,000 12,960,000
a) From the above table iv VAT payable at various stages is obtained by

subtracting in put VAT from output VAT. For example;
VAT at Stage I = Output VAT- Input VAT
11,700,000 - 10,800,000 = 900,000
VAT at Stage ii = 12,240,000-11,700,000 = 540,000

VAT at Stage iii = 12,600,000- 12,240,000 = 360,000
VAT at Stage iv = 12,960,000-12,600,000 = 360,000
b) Total VAT payable to URA = Sum of VAT at different stages

= VAT on imports + stage i + stage ii + stage iii + stage iv
= 10,800,000 + 900,000 + 540,000 + 360,000 + 360,000
= Ug Shs 12, 960,000
c) The total price the final consumer pays VAT inclusive will be:
= Final selling price (VAT exclusive) + Total VAT payable
= Ug Shs 72,000,000 + 12,960,000
= Ug Shs 84,960,000
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GLOSSARY
ASYCUDA: Automated System for Customs Data. This is used for

declaration, valuation, payment, data processing, reporting and
release of goods.
Capital Gains Tax (CGT): A type of tax levied on the profit from the
disposal of an asset. Tax on gains that arise on the sale of capital assets,
items such as land, buildings and shares.
Deduction (tax): A reduction in tax obligation from the taxpayer’s

gross income. Deductions are removed from taxable income and thus
lower tax liability.
Double Taxation Treaty: An agreement with two or more countries to

reduce how much tax a worker or company must pay, so they don’t
need to pay tax twice on the same income.
Duty-Free Zone: A zone where merchandise can be brought in without

paying import duties.
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E
Exportation: the activity of sending goods to another country in order

to sell them there. The term export means sending of goods or services
produced in one country to another country. The seller of such goods
and services is referred to as an exporter; the foreign buyer is referred
to as an importer.
F
Filing Tax returns involves completing the tax return form and
submitting it to the tax authority periodically for purposes of
establishing the correct tax position.
I
Impact of a tax refers to the first resting place of a tax. Or the burden
suffered by the taxpayer.
Importation: Bringing of goods or services into a country from abroad

for sale.
P
Provisional tax is tax initially paid pending assessment and payment
of the final tax.
S
Self-Assessment: Calculation of one’s own tax liability.
Smuggling is any action that involves importation or exportation of
goods with an intent to defraud revenue.
T
Tax administration is a mechanism/system of assessment, collection,
enforcement and accounting for the tax levied.
Tax Agent: A tax agent or tax preparer prepares and files the returns of
income on behalf of taxpayers.
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Tax assessment is the way of determining the tax value/amount to be

paid.
Tax Authorities: The authority responsible for tax collection.

Tax avoidance refers to where the taxpayer exploits the loopholes
within the tax system for purposes of not paying tax.
Tax base is the item or economic activities on which tax is levied.
Tax capitalization refers to where a company converts its profits into
capital in order to avoid paying a higher amount of tax.
Tax clearance occurs when a taxpayer is declared to have complied to
all his/her tax obligations.
Tax Compliance is the degree to which the tax paying community
meets its obligations, in appropriate legal and regulatory provisions.
Tax Credits: Sums that can be offset against a tax liability.
Tax deferred: when taxes levied are owed at a later time such as VAT
deferment.
Tax evasion is the deliberate refusal of a taxpayer to pay the tax
assessed.
Tax exemption is where a taxpayer or a commodity is relieved from
taxes due to certain reasons.
Tax holiday refers to the grace period given to a taxpayer, within which
he/she is exempted from paying the tax.
Tax identification Number: A unique identifier issued by the tax body
to identify a taxpayer.
Tax invoice is a legal document which a seller submits to a customer
in which the tax is included.
Tax liability refers to the amount legally owed/due to a tax authority,
as result of taxable event/transaction.
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Tax payment refers to the act of settling the amount of tax due to the
taxpayer.
Tax rate refers to the proportion of the tax base which is deducted as
tax.
Tax refund refers to the amount paid back (reimbursed) to the
taxpayer, who had paid beyond the rightful amount or on supplies that
are by law are relieved of tax by the relevant authorities.
Tax return is a declaration form prescribed by the tax authority for
purposes of accounting for taxes
Tax threshold refers to the minimum point or amount from which
income tax can be levied.
Tax: Tax is a compulsory contribution levied by the government on

items such as employee’s income, business profits, and the cost of
goods and services
Taxable capacity is the ability of the taxpayer to pay the amount of tax
assessed and remains with some disposal income to live the life
accustomed to.
Taxable income refers to gross income less deductions.
Taxation at Source: When tax is taken out of your income before it’s
paid, e.g. by your employer.
Taxpayer: An individual who pays taxes.
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51
REFERENCES
1. Gruber, J. (2016) Public Finance and Public Policy, 5th

edition, Worth Publishers.
2. Rosen, H. and Gayer, T. (2014) Public Finance, 10th edition,
McGraw-Hill.
3. Stiglitz, J. and Rosen Gard, J. (2015) Economics of the Public
Sector, 4th edition, W. W. Norton & Company.
4. Irvin. B. Tucker (2010) Economics for today 7TH Edition
South- Western Cengage Learning Canada.
5. Irvin. B. Tucker (2010) Macroeconomics for today 7TH Edition
South- Western Cengage Learning Canada.
6. John B. Taylor – Principles of Microeconomics 6th Edition
(2009) Itaughton Mifflin Company, Boston New York.
7. William A. Mc Eascheru (2009) Macroeconomics
Contemporary Introduction 8th education, University of
Connecticut USA.
8. Mugume Christine (2006) Managing Taxation in Uganda, 1st
Edition
9. John Ddumba Ssentamu (2011), Basic Economics for East
Africa 4th, edition, Fountain Publishers, Kampala.
10. M.L Jhingan (1996), Money, Banking, International Trade and
Public Finance, Konark Publishers Pvt Ltd, Delhi.
11. Richard T. Froyen (1998), Macroeconomics, Theories and
Policies, 6th, edition, Prentice Hall, USA.
12. McConnell Brue (2005), Economics Principles, Problems and
Policies, 6th, Edition, McGraw- hill Irwin, New York.
13. www.ura.go.ug
14. Chapter 340 of the Laws of Uganda.
15. Chapter 349 of the Laws of Uganda
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National Curriculum
Development Centre,
P.O. Box 7002, Kampala.
www.ncdc.go.ug

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GOVERNMENT

National Curriculum Development Centre

All rights reserved: No part of this publication may be

ACKNOWLEDGEMENT ............................................................................ vii

LIST OF ACRONYMS ............................................................................... viii

1.0 INTRODUCTION .................................................................................. 1

CHAPTER 13: GOVERNMENT REVENUE................................................... 7

SUB-TOPIC 13.2: TAXATION ................................................................... 14

SUB–TOPIC 13.3: TAX ADMINISTRATION IN UGANDA .......................... 25

SUB–TOPIC 13.4: TAX COMPLIANCE ..................................................... 31

SUB–TOPIC 13.5: BASIC TAX COMPUTATIONS ..................................... 38

The National Curriculum Development Centre (NCDC) wishes to express its

A’ LEVEL Advanced Level

A robust tax paying culture is fundamental to the achievement of any

delivery to the population in terms of better roads, well equipped

1.1 AIMS OF EDUCATION

1.2 SPECIFIC AIMS AND OBJECTIVES OF SECONDARY

ii) Promoting an appreciation and understanding of the cultural

i. Addressing the six mentioned attributes mentioned in (iii)

Therefore, as a contribution to the aims of Secondary Education,

We hope to build on these relationships to raise the profile of the

1.4 AIMS OF TEACHING TAX EDUCATION IN

CHAPTER 13: GOVERNMENT

13.1: INTRODUCTION TO GOVERNMENT REVENUE

13.1.1 Meaning of Government Revenue

13.1.2 Uses / Importance of Government Revenue

Providing and improving social services such as health, education,

Facilitating Public administration for example; payment of salaries

Help in overcoming the effects of disasters. This is through extending

Photographs 7 and 8 show areas affected by landslides and floods

From the above photographs, when government has enough revenue,

Gifts and donations These are voluntary contributions made by

From the above photograph, government can generate revenue from

SUB-TOPIC 13.2: TAXATION

13.2.1 Meaning of Taxation

13.2.2 Origin of Taxation

The Hut Tax

13.2.3 Key Terms used in Taxation

Taxable capacity This refers to the extent to which individuals are

13.2.4 Types of Taxes

Direct Taxes Indirect Taxes

amount of revenue collection and affects service delivery by the

Advantages of Indirect Taxes

The following are the advantages of indirect taxes:

The cost of collection and administering indirect taxes is low since

Disadvantages of Indirect Taxes

13.2.5 Rights of a Taxpayer

Taxpayers are entitled to the following rights:

Obligations as regards to taxation are the terms and conditions to

Uganda Revenue Authority has a taxpayer’s charter. This has been

13.3.1 Meaning of Tax Administration

13.3.2 The Role of URA in Tax Administration

i. To assess and collect central government revenue.

v. To sensitise the public about taxation through taxpayer education

13.3.3 Taxes and Duties Collected by URA

1. Income Tax. This is a direct tax charged on profits or income

Stamp Duty This is a charge for legalising transactions and/

13.4.1 Meaning of Tax Compliance

13.4.2 Factors Determining Tax Compliance

The popularity of government and quality of governance. An unpopular

13.4.3 Elements of Tax Compliance

Requirements for TIN Registration

A fully completed individual application form. (The taxpayer is required

2. Filing Tax Returns