JUBA STUDY CENTRE

Student Name:

JOHN KULANG MOSES

Course:

BBA (Generic)

Student ID:

02/0032/1511323

Lecturer:

Kisule

Module:

Taxation Management

Module Code:

BBM 2202

Assignment Number:

One

Date Issued:

12/08/2016

Due Date:

18/08/2016

Assignment Brief:
Guide to Students
1 Maximum 10 pages word processed
2

Use Times New Roman

Font Size should be 12

1.5 Spacing

For referencing purposes use the Harvard Author-

Fred

1.

Date System
Q.1
1a)
Employment is defined in section 3 of the income Tax Act. It means:

The position of an individual in the employment of another person

A dictatorship of a company

A position entitling the holder to a fixed or ascertainable remuneration

The holding or acting in any public office.

1b)
In Section 19(1) defines employment income to mean any income derived by an employee from
any employment.
Sources of Employment Income
Section 19(1) includes the following items into employment income, whether revenue or capital
in nature:

Any salaries, wages, leave pay, payment in lieu of leave, overtime pay, commission,
gratuity, bonus, fees or the amount of any travelling, entertainment, utilities, cost of

living, housing, medical, or any other allowances.

The value of any benefit granted. e.g. motor vehicle benefit: calculated as (20% *A*B/C-

D) where
A- is the market value of the vehicle at the time it was first provided to the employee for private
use.
B- is the number of days in the year of income during which the car was used for private
purposes by the employee
C- is the number of days in the year of income
D- is any payment made by the employee to qualify for the benefit.

1c)
Resident Individual
Section (9) of the Income Tax Act defines a resident individual for the year of income if that
individual:

has a permanent home in Uganda. Permanent home do not mean a permanent house. It
can even be under a tree as long as there is physical evidence that someone resides there.

is present in Uganda
1. For a period of, or periods amounting in aggregate to 183 days or more in any twelvemonth period that commences or ends during the year of income
2. During the year of income and in each of the two preceding years of income for

periods averaging more than 122 days in each of income, or

is an employee or official of the Government of Uganda posted abroad during the year of
income

1c)
Resident company:
Section 10 of the Income Tax Act defines a resident company for the year of income if it

is incorporated or formed under the laws of Uganda

has its engagement and control exercised in Uganda at any time during the year of

income, or
undertakes the majority of its operations in Uganda during the year of income

2d)
Vehicle benefit is calculated using the formula
(20% *A*B/C)-D)
Where: A=Market value 20,000,000
B=100 days
C=365 days
D=0
So benefit= (20% *20,000,000 *100/365)-0
=Sh.1, 095,890
2e)
Loan Benefit: (10% - 5%) 20,000,000

Loan benefit= 5% *20,000,000

Loan benefit= Sh.1, 000,000
2f)
Bananda`s Taxable Income
For the year ended 31 December 2013
Basic salary (1,500,000 *12)

18,000,000

Entertainment (200,000 *12)

2,400,000

Motor vehicle benefit (Note 1)

1,095,890

School fees

6,000, 000

Air ticket

5,000,000

Leave pay

2,000,000

Subsistence allowance (Note 2)

Accommodation (Note 3)

6, 000, 000

Loan benefit

1,000,000
41,495,890

2g)
Tax Liability= 300,000 +30% (41,495,890 -4,920,000)
Tax liability= 300,000+30% *36,575,890
Tax Liability=300,000+10,972,767
Tax Liability=11,272,767
Q.2

2a)
Taxation is the process of assessing, collecting and general management of taxes. In other
words, taxation is a process of imposing taxes, collecting taxes, that is say taxation involves
enumeration, assessment, tax collection, tax service and control.
A tax is a financial charge or other levy imposed upon a taxpayer by a state or the functional
equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by
many administrative divisions. Taxes consist of direct and indirect taxes and may be paid in
money or as its labour equivalent.
According to Black`s Law Dictionary, a tax is pecuniary burden laid upon individuals or
property owners to support the government a payment execrated by Legislative authority. It is
not a voluntary payment or donation, but an enforcement contribution, execrated pursuit to
legislative authority and is any contribution imposed by government whether under the name of
toll, tribute, tallage, gabel, impost, duty, custom, excise, subsidy, aid, and supply.
2c)
Property Income is defined in the Income Tax Act as;

Any dividends, interest, natural resource payments, rents, royalties and any other

payments derived by a person from the provision, use or exploitation of property.

The value of any gifts derived by a person in connection with the provision, use or

exploitation of property.
The total amount of any contribution made to a retirement fund during a year of income

by a tax exempt employer.

Any other income derived by a person but does not include an amount which is business,

employment or exempt income.

Any amount included in business income of the person under any other section of the
Income Tax Act.

2b) A taxable person according to Income Tax Act as,

This is a person who is either registered for VAT or one who is not yet registered but is required
to be registered. Such person may be any of the following: an individual, partnership, company,
trust, Government as well as public or local authority e.g. town council.

2c)
Business income means any income derived by a person in carrying on a business and includes
such amounts whether revenue or capital nature.

The amount of Gains or losses from the disposal of business assets such as land and

buildings.
Any amount derived by a person as consideration for accepting a restriction on the

persons capacity carry on business carry on business.

The gross proceeds derived by a person from the disposal of trading stock, i.e. sales.
The value of any gifts derived by a person in the course of, or by virtue of, a past,

present, or prospective business relationship.

Interest derived by a person in respect of trade receivables or by a person engaged in the

business of banking or money lending.

Rent derived by a person whose business is wholly or mainly the holding or letting of
property.

2d)
There are different types of taxes in Uganda which include: income taxes, taxes on the
production and sale of goods, value added tax (VAT) Employment taxes, Death taxes, property
taxes, taxes on privileges and rights, income tax and very many more others.
Developing countries like Uganda face formidable challenges in trying to establish effective and
efficient tax systems. As summarized by Vito Tanzi, the leading authority on these issues, all
developing countries have to address four basic problems: (1) the structure of the economy,
which makes it difficult to impose and collect taxes; (2) the limited capacity for tax
administration; (3) the poor quality of basic data and; (4) in developing countries, the fact that
the political setup is less amendable to rational tax policy than it is in advanced countries. Each
of these basic challenges is discussed further below.
i.

Structure of developing economies

Developing countries have well-known economic characteristics: large shares of total economic
output and employment are based in agriculture; they have relatively large informal sectors;
entrepreneurial units are small and numerous; wages form a relatively small share of total
national income; and a relatively small share of total consumer spending takes place in large
modern establishments. The size of the informal sector plays a significant role. Not only does it

reduce the possibility of relying on certain modern taxes, such as personal income taxes at the
individual level, or value-added taxes at the wholesale, retail, and consumer levels, but it also
makes it much more difficult to reach those with the economic ability to pay taxes.
ii.

Tax Administration and Data

The second challenge facing tax policy in developing countries is the lack of efficient tax
administration. Administrations face major problems: a large proportion of the economy is at a
subsistence level; many taxpayers do not keep records, and even where records are kept, they are
not necessarily reliable. Taxpayer cooperation is also low because of chronic shortages of trained
officials, traditions of corruption, and lack of visible improvement in Government services.
Consequently, countries often develop tax systems that exploit whatever obvious revenuegenerating options they have rather than develop modern and efficient tax systems that create
wide tax bases from which to draw revenue. Hence, many developing countries often end up
with too many small tax sources, too heavy a reliance on foreign trade taxes, and a relatively
small use of personal income taxes.
iii.

Political and social factors

Political and social factors create additional challenges in devising tax policies for developing
countries. Lack of political will to support tax reforms in developing countries has often led to
unsuccessful reforms. Lessons learned from successful reform programs suggest that the key
factor is strong political will, demonstrated by a commitment from leaders at all levels of
Government. Additionally, most developing countries suffer from military dictatorships,
corruption, deep poverty, disease, and famine. All these challenges have inevitably led to low tax
revenue yields in developing countries.
BARRIERS TO EFFICIENT TAX ADMINISTRATION
While tax laws impose obligations on taxpayers to contribute to Government revenues, the actual
amount of revenue flowing into the hands of any Government depends on the effectiveness of its
revenue administration. Weakness in revenue collection leads to inadequate tax collections. For a
number of reasons, efficient tax administration is a major problem in developing countries. Not
only do developing Governments face an uphill battle in bringing individuals and businesses into
the taxation process, as discussed above, but Government face insufficient administrative staff
with no skills, high levels of illiteracy among taxpayers and tax collectors, lack of sufficient

computer equipment and facilities, and lack of reliable statistical data a case inseparable from
Uganda.

It is based on proper bookkeeping and yet poor bookkeeping is the order of the day in
most companies in sub-Saharan Africa.

The tax revenue yield is low since most people are unemployed. Retrenchment and a
large informal sector have worsened the unemployment problem.

Collusion between the employers and the employees to falsify the records present for tax
purpose does cripple the PAYE system.

For the reason or another, tax collectors also collude with the employers to under declare
the income for purpose.

Where the registration of the tax/ employers is not complete, some employment incomes
will walk away untaxed, its supposed to be computerized kind of thing to make it
difficult for the to dodge.

Some casual work abroad may find it difficult to trap for the tax purposes using the PAYE
system, many exemptions are been given in the ITA. Most the persons exempted are rich
one who can pay the tax.

People are not aware of the importance of paying taxes, especially like Southern Sudan,
which is just from war, no basic services like proper health care centers, schools and
clean water. The responsible officers eat the funds paid in and no proper investigation
been done.

It is undisputable that the far-reaching impact of the HIV/ AIDS epidemic, the expending
informal sectors, and the Governments limited capacity for effective tax administration all
threaten the productivity and competiveness of the economy, and reduce the amount of revenue
the Government can collect. The Government has to make itself more fiscally relevant to
everyone in Uganda, and needs to find creative ways to do so. Appropriate policies must be
sensitive to economic, social, and political realities.
Reference
Williams, Walter E. (2008-08-06). "Government theft, American-style". WorldNet Daily.
Retrieved 2008-09-1

John Mary Matovu (2010) Domestic Resource Mobilization in SubSaharan Africa: The Case of
Uganda,http://www.dfid.gov.uk/R4D/PDF/Outputs/ProPoor_RPC/60667_Full_Case_Study_Uga
nda.pdf, accessed 12/02/2013
Aryeetey, E. (1994), Financial Integration and Development in Sub -Saharan Africa: A Study of
Informal Finance in Ghana, Mimeo. (Processed), Overseas Development Institute, London
Aryeetey, E. and Nissanke M. (2006), Financial Integration and Development: Liberalization and
Reform in Sub-Saharan Africa. Routledge Studies in Development Economics