Impact of tax evasion and avoidance on Uganda’s economy. A case study of Uganda Revenue Authority (URA)

Abstract

This study is about the impact of tax evasion and avoidance on Uganda’s economy. It examined specific factors for the rising rate of tax evasion and avoidance while establishing mechanism to curb the problem. Also this study provides individual analysis of how tax evasion and avoidance affects the country’s revenue as well as GDP. The study was guided by the data collected from Uganda Revenue Authority (URA) and Uganda Bureau of Statistics (UBoS). These two organizations provided data concerning the taxation system and the GDP status of the economy respectively. The statistical analysis of the quantitative data obtained was analyzed by means of descriptive statistics using the STATA package. Qualitative data were subjected to content analysis. The findings showed that the throughout the period 2005 to 2018, the amount of tax collected for 7 of the Financial years (2009, 2010,2013, 2014 and 2016-2018) did not meet the target of tax collection as it was expected. Many factors were associated with tax evasion and avoidance being the biggest cause. Other factors included; high tax rate and complexity of tax laws systems. Basing on the findings, it was concluded that Tax evasion has a negative relationship with tax revenue. Also, it was concluded that Tax Avoidance has negative and significant impact on Uganda’s GDP. Having come to such a conclusion, recommendations were suggested to combat this problem which is dragging Uganda’s economy. These included allocating more resources both financial and human for tax audits which will enable the authority to investigate potential cases of tax dodging and evasion. Also, all tax exemptions should be subjected to parliamentary approval. This will rid the country of problems related to arbitrariness of tax exemptions witnessed in the past.