Here’s why URA directed farmers to get TINs

Uganda Revenue Authority has recently, in a bid to increase its tax base, asked farmers to obtain Tax Identification Numbers (TINs). This was through a public notice issued by the revenue body.

URA initiated a Taxpayer Register Expansion Program aimed at formalizing the informal sector for its effective taxation. Uganda’s informal sector contributes approximately 52% to the Gross Domestic Product (GDP) regardless of the fact that this sector does not readily contribute a big percentage to the revenue collected in the country.

With this hindrance to revenue collection, it could be envisaged that URA would embark on initiatives to have all income earners in the informal sector registered for taxes including, among others, farmers.

The initiative seeks to have farmers with a gross turnover of Shs 150m obtaining TINs to enable them follow up with their tax obligations like filing returns and subsequent payment of taxes.

A TIN is basically a 10-digit number which acts as the account of a taxpayer with URA. Different persons have different accounts reflected by their TINs that can be used as a medium of communication between URA and taxpayers.

It is mandatory to quote this 10-digit number in all formal business transactions. For farmers, the obligation to obtain TINs will have severe consequences on them and on the economy. Agriculture is still reported as the backbone of Uganda’s economy and is, according to World Bank, employing 70% of the population, contributes more than half of Uganda’s export earnings and a quarter of the country’s GDP at approximately 24.1%.

Yet, according to URA, the agricultural sector only accounts for 4% of URA’s register with only 38,528 farmers currently registered for taxes.

On the macro-economic level, the obligation to obtain TINs will streamline the taxation of proceeds obtained from engaging in agricultural business in that large scale farmers will directly contribute to the revenue collection of the country and enhance Uganda’s tax-to-GDP ratio.

Since Uganda runs a self-assessment system of taxation, these farmers will be obliged to declare the incomes obtained from the carrying out of agricultural business through filing provisional tax returns six months into the taxpayer’s year of income and final returns at the end of the taxpayer’s year of income with the attendant obligation to pay taxes.

On the other hand, farmers dealing in supplies to which Value Added Tax (VAT) is imposed shall be required to file returns on or before the 15th day of every month. Other obligations include keeping records of all their transactions for a minimum to five years.

Farmers with TINs will enjoy the benefits that come with registration for taxes. They will, for instance, be allowed easy access to all government subsidies. It is a requirement that before a taxpayer is awarded tax waivers or any benefits accruing from government, to present a tax clearance certificate signifying a taxpayer’s compliance status over the years.

Presently, it is mandatory for businesses that have made expenses in excess of Shs 5 million in the obtaining of income to show evidence that the expenses were obtained from persons with TINs before the expenses are allowed as deductions to their chargeable income.

Without this proof, the deduction is not allowed and is re-characterized as income and taxes are charged on it. With such a law in place, businesses will most likely only make purchases from agricultural suppliers or farmers that have obtained TINs in order to be allowed deductions from these expenses.

As a result, farmers without TINs will be deprived of such markets as businesses will prefer trading with farmers that have TINs since purchasing from the latter comes with benefits.

Even if this was not the case, most large entities like government, multinationals, NGOs and UN agencies, among others, transact with tax-compliant persons. For purposes of their own accountability and future references, such entities can only make only make transactions with people registered for taxes with functioning TINs.

Farmers with TINs will enjoy other benefits like obtaining agricultural bank loans, importing farm inputs, exporting produces out of the country, claiming tax benefits like input credits and processing land transactions above Shs 50 million.

The obligation to obtain TINs, however, might have negative implications on the economy. The agricultural sector is itself volatile with numerous uncertainties that come as a result of unreliable weather conditions. This translates into uncertainties in the incomes arising from undertaking agribusiness.

Because obtaining TINs comes with an obligation to file returns and pay taxes, farmers will tend to hike their food prices to cater for the share of amounts to be remitted to URA and the unexpected losses arising from uncertain weather conditions.

These unwarranted increase in food prices could further exacerbate Uganda’s food stability in periods of draught by undermining the food value chain. Much as this is the case, it is beneficial for farmers, especially those dealing in agribusiness with an annual turnover of Shs 150m, to obtain TINs.

nahumuzad55@gmail.com

The writer is an advocate of the High court and a tax expert