Experts have said government is capable of recouping $200million(approximately shs713billion) from rental income tax per year.
Parliament recently amended the Income Tax Amendment Bill to introduce a levy obliging owners of rental premises to pay 25 per cent of their rental income as tax to government.
Last year, government through the Ministry of Finance contracted RippleNami, an American technology company to develop the Rental Tax Compliance System that enables government integrate data to match real estate properties to their individual or corporate owners.
The system will enable government identify individuals or corporations that have been underpaying their rental income tax obligations.
Speaking on the sidelines of a breakfast meeting about the tax forum organized by the American Chamber of Commerce Uganda at Sheraton Hotel, Kampala on Thursday, Jaye Connolly-LaBelle, the RippleNami Uganda chairperson said their system has collected data that will help government close the tax compliance gap in terms of rental income.
“Right now, there is probably 10% of the rental income tax being collected. I would say it should be around $200milion(shs713billion)a year. That is a rough estimate from the 30million collected currently,” Connolly-LaBelle told journalists.
“There has not been a lot of tax compliance because there has not been information. We are trying to make it simpler.”
In the deal signed by government, RippleNami is set to build a data visualization digital system to integrate different types of data to match rental properties in Greater Kampala Metropolitan Area with their owners but also understand the nature of occupancy of the property.
The system will integrate data from tax body URA, KCCA, NIRA, Ministry of Lands, Ministry of Local Government, National Water and Sewerage Corporation and UCC to help know the real owners of property but also attach the value of rental income.
Speaking at the same function, James Odong, the acting commissioner in charge of domestic taxes at URA emphasized that the problem has been low levels of compliance among the public.
“The problem has been non declaration of incomes that people earn from their property and partly our inability to access the respective data about those who own property from the various institutions that collect them. What this system is going to help us is to aggregate all the data together,”Odong said.
“The data will be availed to URA to make sense out of it and we shall later focus on engaging the respective landlord basing on the data gathered by the system and to follow them in terms of what they have to pay in terms of taxes.”
The URA official however said they have not yet assessed in terms of figures what they expect to get in terms of rental income tax in the forthcoming financial year.
Several real estate players have in the past raised concern over the 25 percent rental tax income that they said is most likely to make housing too expensive to handle but also trigger flights of tenants from rentals.
However, according to Patronella Namubiru, the Associate Director at Deloitte, there needs to have efforts by government to educate the public about their tax obligation.
“As the system gets utilized and gaps are identified, conversations have to take place between the different government ministries, departments and agencies to bridge the gaps. There is going to be concern from tax payers but I think there is need for URA to educate the public and but also accountability to happen,”Namubiru said.
RippleNami’s Connolly-LaBelle shared similar sentiments on educating the public about their tax obligations in regards the rental income tax.
“It is more about education and communication between government and the public. The public has got to be able to concern its opinions in regards tax and government must respond to the concerns in form a two way communication. I don’t think education and marketing have been addressing this,” she said.