ADEQUACY OF TAX REVENUE AND THE NATIONAL BUDGET DEFICIT

IN UGANDA BEFORE AND AFTER THE

TAX REFORMS (1980-2008).

BY
MUWANGA LAWRENCE
REG.NO: 2008/HD06/12276U

DISSERTATION SUBMITTED TO SCHOOL OF POST GRADUATE

STUDIES IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE
AWARD OF THE MASTER OF ARTS IN ECONOMICS OF MAKERERE
UNIVERSITY.

MARCH 2011

i
 CERTIFICATION
This certifies that the under-signed supervisors have read this dissertation in the
process of guiding the author and there by recommend it for submission to the school
of Post graduate studies in partial fulfilment of a Master of Arts in Economics of
Makerere University.

Signed………………………………………………….Date………………………….

Dr. THOMAS MWEBAZE

Signed…………………………………………………..Date…………………………

Dr. JOWERIA TEERA

i
 DECLARATION

I, MUWANGA LAWRENCE declare that, this dissertation is my original work and

has not been published or submitted for any other degree award to any other
university before.

Signed;.....................................……….Date………………………………..

MUWANGA LAWRENCE

ii
 DEDICATION

I dedicate this research to all my benefactors both local and the international ones.

iii
 ACKNOWLEDGEMENT

During the course of this research, I have received significant help from a number of
people whose input was helpful in accomplishing this work. Sincere thanks go to the
supervisors by the names; Dr. T. Mwebaze and Dr. J. Teera for their technical
guidance towards this research. I highly recognise the contributions of all FEMA
teaching staff to my academic achievement. In fact without good knowledge in
economics this research would have been very difficult for me. Special thanks also go
to the staff at UBOS; Ministry of Finance, Planning and Economic Development;
Bank of Uganda and Uganda Revenue Authority (URA) for their kindness and
generosity in availing me with the required data. I wish to appreciate the contributions
to this dissertation of all individuals unmentioned that God may reward them
abundantly.

iv
 TABLE OF CONTENTS

CERTIFICATION...................................................................................................... i
DECLARATION ...................................................................................................... ii
DEDICATION ......................................................................................................... iii
ACKNOWLEDGEMENT ........................................................................................ iv
TABLE OF CONTENTS .......................................................................................... v
LIST OF FIGURES................................................................................................... x
ACRONYMS ........................................................................................................... xi
ABSTRACT............................................................................................................ xii
CHAPTER ONE ....................................................................................................... 1
INTRODUCTION..................................................................................................... 1
1.1 Background to the study ..................................................................................... 1
1.2 Statement of the Research Problem .................................................................... 5
1.3 Objectives ......................................................................................................... 5
1.4 Research Hypotheses ......................................................................................... 6
1.5 Significance of the study .................................................................................. 6
1.6 Scope of the study ............................................................................................ 6
1.7 Limitations to the study .................................................................................... 7
1.8 Organisation of the study ................................................................................. 7
CHAPTER TWO ...................................................................................................... 8
OVERVIEW OF THE TAX SYSTEM IN UGANDA ............................................... 8
2.1 Structure of the tax system in Uganda ................................................................. 8
2.1.1 Income Tax ...................................................................................................... 8
2.1.2 Import Duty ..................................................................................................... 9
2.1.3 Value Added Tax .............................................................................................. 9
2.1.4 Excise duties .................................................................................................... 9
2.1.5 Withholding Tax.............................................................................................10
2.2 Tax Revenue Performance and government expenditure ...................................10
2.3 Tax Reforms in Uganda .....................................................................................11
CHAPTER THREE ..................................................................................................13
LITERATURE REVIEW .........................................................................................13
3.1 The theoretical literature review .........................................................................13
3.1.1 Elasticity of tax ................................................................................................13

v
3.1.2 Tax buoyancy ..................................................................................................14
3.1.3 Tax effort and Tax effort index ........................................................................14
3.1.4 Budget deficit ..................................................................................................15
3.1.5 Inadequate revenue ..........................................................................................15
3.2 The International Empirical Evidence ...............................................................16
3.3 The Domestic Emperical Evidence ....................................................................22
CHAPTER FOUR ....................................................................................................26
THEORETICAL FRAMEWORK AND MODEL FORMULATION .......................26
4.1 Theoretical (conceptual) Framework ..................................................................26
4.2 Model Formulation .............................................................................................28
4.2.1 Computation of tax buoyancy ..........................................................................28
4.2.2 Tax Elasticity ..................................................................................................29
4.2.3 Tax effort ........................................................................................................33
CHAPTER FIVE......................................................................................................34
METHODOLOGY ...................................................................................................34
5.1 Variables that influence tax revenue and proxy bases for individual taxes. ..........34
5.2 Model Specification............................................................................................34
5.2.1 Model Specification for tax buoyancy of total tax revenue ...............................35
5.2.2. Model for Buoyancy of Individual Taxes ........................................................36
5.2.3 Model for tax elasticity of Total Tax Revenue With respect to GDP ................36
5.2.4 Model for elasticity of individual main taxes with respect to GPD ...................36
5.2.5 Decomposition of elasticity of individual taxes ................................................36
5.2.5.1 Model for Elasticity of individual main Taxes . .............................................37
5.2.5.2 Model for elasticity of tax base with respect to GDP. ....................................37
5.2.5.3 Expected Signs for the Coefficients ..............................................................37
5.2.5.4 Computation of tax effort index ..................................................................38
5.3 Types and Sources of Data .................................................................................38
5.4 Time series data analysis ....................................................................................39
5.4.1 Descriptive statistics ......................................................................................39
5.4.2 Multicollinearity test ......................................................................................39
5.4.3 Unit Root Tests .............................................................................................39
5.4.4 Cointegration Tests .......................................................................................39
5.4.5 Running a Regression ......................................................................................40
5.4.6 Testing for Research Hypotheses ...................................................................40

vi
CHAPTER SIX ........................................................................................................41
EMPERICAL FINDINGS ........................................................................................41
6.1 Diagnostic tests for time series data. ...................................................................41
6.1.1 Normality test. .................................................................................................41
6.1.2 Testing for stationarity. ....................................................................................42
6.1.3 Testing for Multicollinearity ............................................................................44
6.1.4 Testing for Cointegration .................................................................................44
6.1.4.1 Jahansen Cointegration test ...........................................................................47
6.1.4.2 Dynamic Error Correction Model .................................................................48
6.1.4.3 Test results for the Dynamic Forecasting ability ...........................................50
6.2 Buoyancy, elasticity and effort of main taxes 1980-1990. ...................................51
6.2.1 Buoyancy of Total tax revenue and of the main taxes......................................51
6.2.2 Elasticity of total tax revenue and of the main taxes ........................................51
6.2.3 Decomposition of elasticity of the main taxes 1980-1990.................................52
6.2.4 Computation of tax effort for pre-reform period 1980-1990 ............................53
6.3 Buoyancy, elasticity and effort indexes for post-reform period 1991-2008 ........53
6.3.1 Buoyancy of Total tax revenue and of the main taxes ......................................53
6.3.2 Elasticity of total tax revenue and of the main taxes .........................................54
6.3.3 Decomposition of the elasticity of the main taxes 1991-2008. ..........................54
6.3.4 Computation of tax effort for main taxes for period 1991-2008........................55
6.4.0 Estimation of buoyancy, elasticity and effort of taxes 1980-2008. ...................56
6.4.1 Buoyancy for Total Tax Revenue (TTR) and for individual taxes. ...................56
6.4.2 Elasticity of TTR and individual taxes for period 1980-2008. ........................57
6.4.3 Decomposition of elasticities of the main taxes 1980-2008. ............................57
6.4.4 Computation of tax effort of Total tax revenue 1980-2008. .............................58
CHAPTER SEVEN ..................................................................................................59
SUMMARY AND RECOMMENDATIONS ...........................................................59
7.1 Summary ............................................................................................................59
7.2 Conclusion .........................................................................................................60
7.3 Policy Recommendations.................................................................................61
7.4 Suggestions for further research ..........................................................................62
REFERENCES ........................................................................................................63
APPENDICES .........................................................................................................66
APPENDIX 1: DIAGNOSTIC RESULTS .............................................................66

vii
APPENDIX 2: Series of data after carrying out Diagnostic tests ...............................68
Appendix 3: Discretionary changes in revenues of Total tax, . ..................................88
Appendix 4: Actual and adjusted tax revenues 1980-2008. ......................................92

viii
 LIST OF TABLES
Table 1.1: Averaged realised tax revenue, budgeted tax revenue, government
expenditures and Budget deficits (1980-2008)......................................................... .... 3
Table 2.1 Percentage contribution to GDP of the major taxes .................................... 8
Table 2.2 Income tax rates in Uganda, 2009 .............................................................. 9
Table 2.3 Uganda‟s Tax –GDP and Gov. Exp-GDP ratios 1980-2008...................... 10
Table 2.4 Major Tax Reforms in Uganda, 1980-2008. ............................................. 11
Table 6.1 Unit root test for Variables in Levels ........................................................ 42
Table 6.2 Unit root test for Variables in Differences. ............................................... 43
Table 6.3 Correlation matrix .................................................................................... 44
Table 6.4 In levels LTTR is regressed on independent variables that influence it. ... 45
Table 6.5 Descriptive statistics for regression residuals ........................................... 46
Table 6.6 ADF residual results ............................................................................... 46
Table 6.7 Jahansen Cointegration test results ........................................................... 47
Table 6.8 ECM for Total Tax Revenue estimated by OLS based on Cointegration . . 48
Table 6.9 Buoyancy of TTR and of the main taxes 1980-1990 ................................. 51
Table 6.10 Elasticity of TTR and of the main taxes for the period 1980-1990 .......... 51
Table 6.11 Tax-to-base elasticity ............................................................................. 52
Table 6.12Base- to- income elasticity ...................................................................... 52
Table 6.13 Effort indexes for period 1980-1990....................................................... 53
Table 6.14 Buoyancy of TTR and of the main taxes for 1991-2008 ......................... 54
Table 6.15 Elasticity of TTR and of the main taxes for 1991-2008 .......................... 54
Table 6.16 Tax-to-base elasticity for period 1991-2008. .......................................... 55
Table 6.17 Base-to-income elasticity for period 1991-2008 ..................................... 55
Table 6.18 Tax Effort for 1991-2008. ...................................................................... 55
Table 6.19 Buoyancy indexes of TTR and individual taxes for Period 1980-2008.... 56
Table 6.20 Elasticity of TTR and individual main taxes for period 1980-2008. ........ 57
Table 6.21 Tax-to-base elasticity of the main taxes .................................................. 57
Table 6.22 Base-to-income elasticity of the main taxes ............................................ 58
Table 6.23 Tax effort for each tax for period 1980-2008 .......................................... 58
Table A1.1 Descriptive statistics for variables in log level form............................... 66

ix
 LIST OF FIGURES

No table of figures entries found.

Figure 6.1.....................................................................................................................50

x
 ACRONYMS
BDV = Brussels Definition of Value.
CFPED = Committee of Finance, Planning and Economic Development
CTL = Commercial Transaction Levy
DTMs = Discretionary Tax measures
DW = Durban-Watson
Etc = et cetera
FIRS = Federal Inland revenue Service
FY = fiscal year or financial year
GATT = General Agreement on Trade and Tariffs
GDP = Gross Domestic Product
Gov. Exp = Government expenditure
GST = General Sales Tax
GTR = General Tax Revenue
HS = Harmonised System
HTSTD = Historical Time Series Tax Data
IMD = Import Duty
MFPED = Ministry of Finance, Planning and Economic Development
OECD = Organisation for Economic Corporation and Development
OPEC = Organisation Of Petroleum Countries.
PAYE = Pay As You Earn
RY = Real Income
SAP = Structural Adjustment Policy
SIC = Standard Industrial Classification
TR = Tax Revenue
TTR = Total Tax Revenue
UBOS = Uganda Bureau of Statistics
URA = Uganda Revenue Authority
VAT = Value Added Tax

xi
 ABSTRACT
Like any other countries in Sub-Saharan Africa, Uganda‟s tax performance is still
poor. Inadequacy of tax revenue is evidenced by the existence of national budget
deficit. Every year the realised total tax revenue falls short of the budgeted total tax
revenue. The budget deficit annually increases by a bigger percentage than the
increment in realised total tax revenue. In spite of the tax reforms launched by the
government, budget deficit persistently increases. The study aimed at finding out the
cause of the inadequate tax revenue in Uganda that is not enough to service
government expenditure so as to reduce the budget deficit before and after the tax
reforms.

To achieve the main objective, buoyancy, elasticity and tax effort indexes of the tax
system were estimated. Ordinary least square (OLS) method was used on time series
data to estimate those economic magnitudes. Data were got from Ministry of Finance,
Planning and Economic Development; Bank of Uganda; Uganda Bureau of Statistics
(UBOS) and Uganda Revenue Authority (URA). Economic models for estimating
buoyancy and elasticity were established. Elasticity with respect to the national
income of individual taxes was decomposed into tax-to-base elasticity and base-to-
national income elasticity. Models to estimate that decomposed elasticity were
specified as shown in chapter 5, equations 5 & 6.

It was found out that total tax revenue has negative relationship with the budget
deficit (Table 6.8). After the tax reforms, buoyancy increased with the exception of
that of import duties (Table 6.13). Total tax revenue was inelastic before the tax
reforms (1980-1990) and for the whole period (1980-2008).But after the tax reforms
(1991-2008), total tax revenue was elastic with respect to GDP (Tables 6.14). In the
same period income tax and VAT were elastic with respect to GDP (Tables 6.14) but
the base of VAT was still inadequate as evidenced by tax-to-base elasticity and base-
to-GDP inelasticity (Tables 6.15 & 6.16). Import tax was inelastic to its base whereas
the base was elastic with respect to national income (Tables 6.15&6.16). Tax effort
was generally less than one before the tax reforms and the combined periods (Tables
6.12 & 6.23). Tax reforms brought about positive changes in tax effort (Table 6.17).

xii
The study concluded that the country has inelastic tax system and that total revenue
cannot increase automatically as national income grows. The tax effort was less than
one for the whole period (1980-2008) and therefore a country has a high tax potential
and can increase tax revenue generation by redesigning the tax system. The base for
VAT needs broadening and measures to tap import tax should be increased by
fighting corruption, tax evasion and smuggling. Positive changes that were brought
about by tax reforms should be cherished and more should be done to increase tax
revenue generation such as increasing the base of VAT and improving the collection
methods of import duties. Tax reforms brought about positive changes in buoyancy
with the exception of import duties but still more discretionary changes are needed to
achieve tax effort which is one or more. Finally the study concluded that tax revenue
generation is insufficient and thus national budget deficit persistently increases every
year. It was recommended that the government should make ventures to increase tax
revenue such that the realised tax revenue is nearer to the budgeted tax revenue but at
the same time it should check on its spending culture.

xiii
 CHAPTER ONE

INTRODUCTION

1.1 Background to the study

Many developing countries like Uganda experience difficulties in generating
revenue for public expenditure. Limited public revenue is due to low levels of tax
revenue. In Uganda low tax yields have resulted into budget deficit. Some economic
analysis carried out by some economists shows that the growth in domestic revenue in
Uganda has hardly kept pace with the growth of the economy especially the growing
expenditure demands. For example in 2003/04, while the share of revenue to GDP
was 12.6 percent, the share of total government expenditure to GDP was 24.1 percent
(Ayoki , Obwona & Ogwapus , 2008).

Since the 1960s Uganda‟s tax revenue has remained significantly low leading to
inadequate tax revenue. Over the years, inadequacy of tax revenue has been caused by
a number of factors1 which the government has had to fight. Because of the
inadequate tax revenue experienced every year, the country encountered fiscal
challenges and for that matter the government had to make ventures into tax reforms
so as to counteract them ( Kiwanuka 2004).

From the year 1991 to date, Uganda government has initiated some tax reforms to
address the fiscal challenges facing the country. Dynamic reforms have been made
in the tax system both in terms of policy and administration. Such reforms were meant
to mobilise more tax revenue (Ayoke 2007).

It has been observed that prior to 1991 the administration of central government taxes
was a direct function of ministry responsible for finance. To promote efficient
domestic revenue mobilisation measures were undertaken for that noble cause. The
-------------------------------------------------------------------------------------------------------
1.Among the factors that resulted into inadequate tax revenue were the following: A small taxable component of GDP; Tax

exemptions and discretionary powers; Opaqueness and inconsistencies in the laws; tax rates and tariffs were high and prohibitive;

tax system was not comprehensive and economical, and lacked equity and fairness; and poor tax administration. Poor tax

administration was characterised by the following: Redtape bureaucracy, poor tax administration infrastructure and inadequate

logistics, rampant corruption, inappropriate technology etc.

1
measures that were undertaken revolved on combating bottlenecks in domestic
revenue generation (Ayoki et al , 2008). To that effect the government came up with
tax revenue increasing ventures in areas given in the following paragraphs.

In order to boost efficiency in tax administration, reforms were made in line with the
tax collection. In September 1991 Uganda Revenue Authority was set up as an
autonomous agency to collect taxes. It was meant to improve revenue collection
through enhanced autonomy, acquisition of skilled staff, increased integrity and
effective use of automated system. In 1994 the Income Tax Department was
computerised; a venture that was meant to increase the Income Tax collection
( Kiwanuka 2004).

Sales Tax and Commercial Transaction Levy (CTL) were yielding insufficient
revenue. It was for that matter that in 1996 those two taxes were replaced by Value
Added Tax (VAT). VAT has a higher revenue potential compared to sales tax and it is
a fairer tax than sales tax for it avoids payment of tax upon tax. That new tax was
meant to mobilise more tax revenue ( Ayoke et al, 2008).

To increase revenue from import duties measures were undertaken and in 1996
customs tariff reform was set up. It aimed at reducing tariff rates, simplification of tax
structure, reduction of exemptions and phasing out import bans, import license
requirements and pre-shipment inspection ( Ayoke et al, 2008).

Income Tax was not revenue yielding for quite some time. To resolve that problem
the new income tax act of 1997 was enacted to improve income tax decree of 1974
that was giving discretionary powers to a minister of finance to make exemptions. The
new act broadened the definition of taxable income and abolished discretionary
exemptions and tax holidays ( Mutambi 2004).

Sometimes large tax payers would be inconvenienced by the way tax revenue was
collected. To make the whole process smooth, in 1998 large tax payer department
(LTD) was created to offer corporate service on all domestic taxes. There was also a
problem of grievances of disgruntled tax payers which would arise during the course
of time. It was for that matter that in August 1998 a Tax Appeals Tribunal (TAT) was
introduced to solve aggrieved tax payers‟ problems ( Zaake 2000).

2
Despite the above mentioned reforms and perhaps others not mentioned Uganda‟s tax
revenue still remained inadequate to cover government expenditures. That has
resulted into persistently increasing national budget deficit. The persistence of
national budget deficit year in and year out in Uganda has worsened the country‟s
public debt.

When proper assessment on tax revenue and government expenditures is carried out
for each year, it is noted that budget deficits are a common annual phenomenon.
Annually tax revenue is far less than government expenditure and that leads to
persistent budget deficit. When realised tax revenue, budgeted tax revenue,
government expenditure and budget deficit are averaged over intervals of six years,
results presented in table 1.1 and graph 1.1 are got.

Table1.1: Averaged realised tax revenue, budgeted tax revenue, government

expenditures and Budget deficit (1980-2008).

1980-1985 1986-1991 1992-1997 1998-2003 2004-2008
RTax Rev.(billion 39.9 89.5 553.8 1243.5 2908.7
Ug. Shs)

BTax Rev. 48.0 107.6 613.0 1500.5 3814.5

G. Exp.(billion Ug. 76.6 200.1 1312.75 3056.87 8148.7
Shs.)
B.Def.(billion Ug. 28.2 95.5 658.95 1713.37 5140
Shs.)

Source: Data from UBOS.

Where ; RTax Rev =Realised Tax Revenue ; G.Exp=Government Expenditure
B.Def = Budget deficit2 ; Ug. Shs = Uganda shillings.
BTax Rev = Budgeted tax revenue
It must be noted that realised TTR is different from budgeted TTR. Budgeted TTR is
the amount of Tax Revenue required by the government and it is included in the
budget. It is very rear that the budgeted TTR is exactly the realised TTR. But it can be
possible in the developed countries where there is much accuracy in tax collection and
budget formulation.
………………………………………………………………………………….......
2. In this case the deficit considered is the Operational Deficit which takes into account the inflation premium of interest

payments and it is considered to be the most appropriate measure of budget deficit. The budget deficit used is that one computed

when all grants are included.

3
Figure1.1

Source: Data from UBOS.

Where; Rtax.=Realised tax revenue ; Btax revenue=Budgeted tax revenue
Gov.Exp=Government Expenditure

Realised Tax revenue annually falls short of budgeted tax revenue and it is far below
the Total government expenditures and that results into budget deficit as shown in
table 1.1 and graph 1.1 above. The visual graphical view from left to right shows that
realised tax revenue and budget deficit increase in successive years.

As shown in table 1.1 from 1980-1985 to 2004-2008 the realised tax revenue
increased by 42 percent while the Budget deficit increased by 92 percent. The budget
deficit has increased by a bigger percentage than the realised tax revenue for the
whole period. The budget deficit has increased by 50 percent in excess of increment
in realised tax revenue for the whole period (1980-2008).

For the periods 1986-1991, 1992-1997, 1998-2003 and 2004-2008 the realised tax
revenue increased by 40 percent, 62 percent, 35 percent and 38 percent respectively
whereas the budget deficit increased by 65 percent, 87 percent, 52 percent and 57
percent respectively. The budget deficit increases by a higher percentage than the
realised tax revenue for each averaged period.

4
As shown in table 1.1 and graph 1.1 the realised tax revenue falls short of the
budgeted tax revenue. For the periods; 1980-1985... 2004-2008 the realised tax
revenue fell short of the budgeted tax revenue by 20.3 percent, 20.2 percent, 10.7
percent, and 20 percent and 31.1 percent respectively. Since every year realised tax
revenue falls short of the budgeted tax revenue that brings in a problem of inadequate
tax revenue which results into budget deficit. Existence of budget deficit alludes to
inadequacy of Tax Revenue that does not cover the estimated total government
expenditure. Tax Revenue is inadequate when realised Tax Revenue falls short of the
estimated Tax Revenue. But the cause of that inadequacy is not known.

1.2 Statement of the Research Problem

Despite the tax reforms in Uganda that aimed at boosting the tax revenue, budget
deficit has persistently increased. Almost every year the country experiences a budget
deficit as shown in table 1.1 and graph 1.1 given in the background. Both the pre- and
post- reform periods are still characterised by budget deficits. Therefore there is a dire
need to analyse the adequacy of tax revenue. The adequacy of tax revenue can be
assessed by analysing the buoyancy, elasticity and tax effort indexes of the total tax
revenue and of the individual tax revenues as ascertained by Yaqub M. (1994) that
among the causes of inadequate tax revenue are; the inelasticity of the revenue
structures and inadequate tax effort.

1.3 Objectives
Main objective
To analyse the adequacy of the Tax Revenue leading to a reduction in the
budget deficit before and after tax reforms in Uganda.

Specific objectives
(i) To estimate the buoyancy, elasticity and tax effort of the Total Tax Revenue
in Uganda.
(ii) To estimate the buoyancy, elasticity and tax effort of the main taxes in
Uganda namely; Income Tax, Import Duties, Excise Duties and Value
Added Tax (VAT).
(iii) To find out the elasticity of individual taxes with respect to the proxy bases.
(iv) To estimate the elasticity of the proxy bases of individual taxes with respect
to GDP.

5
(v) To estimate the tax effort of the total Tax Revenue and of individual taxes.
(vi) To examine the relationship between the total Tax Revenue and the budget
deficit in Uganda.

1.4 Research Hypotheses

(i) The overall Tax Revenue is buoyant and elastic with respect to GDP after the
tax reforms.
(ii) The main taxes are buoyant and elastic with respect to GDP after the tax
reforms.
(iii) The individual taxes are elastic with respect to proxy bases after the tax
reforms.
(iv) The Proxy bases of individual taxes are elastic with respect to GDP after the
tax reforms.
(v) The tax effort of total tax revenue is less than one.
(vi) There is a positive relationship between the total tax revenue and the budget
deficit.

1.5 Significance of the study

This study will help policy makers take appropriate options for revenue mobilisation.
This study will also enrich economic literature by determining the adequacy of tax
revenue through analysis of tax elasticity and buoyancy for the given period (1980-
2008). By establishing the tax effort to determine the extent to which the country‟s tax
potential has been utilised, the study will also guide the policy makers on the
appropriate fiscal policy to undertake in an event of a budgetary imbalance.

1.6 Scope of the study

The study considers the adequacy of tax revenue and the national budget deficit in
Uganda for the period 1980- 2008. The period is divided into two periods, that is,
before the tax reforms and after the tax reforms. The two periods are 1980 -1990 and
1991-2008 respectively. Four major taxes are considered namely; Income tax, Import
duty, VAT, and Excise duty. Among the causes of national budget deficits in Uganda,
the study is confined to estimating the adequacy of tax revenue through analysis of
buoyancy, elasticity and tax effort of total tax revenue and that of individual main
taxes.

6
1.7 Limitations to the study
One of the major shortcomings to this study was the limited data points. At first the
researcher had planned the research period to be 1971-2008 which would give about
39 data points. But it was not easy to trace data on the variables for the period1971-
1979. That was a period characterised by political, social and economic anarchy in
Uganda. Then the research period was reduced from 1971 - 2008 to 1980 – 2008 and
instead of using annual data the researcher resorted to quarterly data that raised the
data points to 116 instead of 29. The whole exercise became tiresome and time
consuming. In addition, though the researcher tried to be as accurate as possible, the
proxies used for the taxes bases may not be accurate and that might have affected the
results.

1.8 Organisation of the study

The study comprises of seven chapters. Chapter one gives the introduction which
includes; Background to the study, statement of the problem, objectives of the study,
research hypotheses, significance of the study, scope of the study, limitations to the
study and organisation of the study. Chapter two presents the overview of the tax
system in Uganda. Chapter three deals with literature review and it analyses
theoretical and empirical literature review. Chapter four gives the theoretical
framework and model formulation. Chapter five looks at the methodology. Chapter
six gives the empirical findings. Lastly, chapter seven presents the summary, policy
recommendations and suggestions for further research.

7
 CHAPTER TWO

OVERVIEW OF THE TAX SYSTEM IN UGANDA

This chapter provides an overview of the tax system in Uganda. It presents the
structure of the tax system, tax revenue performance and government expenditure in
the country, and the major tax reforms carried out.

2.1 Structure of the tax system in Uganda

There are different types of taxes in Uganda‟s tax system. The major taxes include;
Income tax, Import duty, VAT, Excise duties and withholding tax.

Table 2.1: Percentage contribution to GDP of the major taxes

1996 1997 1998 1999 2000 2001 2002 2003
Personal income tax 0.6 0.7 0.9 0.9 1 1.3 1.4 1.5
(PAYE)
Import duty 3.8 3.9 3.4 3.4 3.3 3.1 3.0 3.0
VAT 3.8 4.4 3.8 3.7 4.2 4.2 4.3 4.3
Excise duty 1.7 1.7 1.5 1.2 1.3 1.3 1.4 1.4
Source: Ayoki Milton,(2007); URA website

2.1.1 Income Tax

Income tax in Uganda is levied according to a new Income Tax Act of 1997. The
income tax decree of 1974 had a loophole of allowing discretion to the minister to
declare any class of income to be exempted from tax. The Income Tax Act 1997
aimed at broadening the definition of taxable income. It abolished discretionary
exemptions and tax holidays, and reduced the personal income tax rates to four main
bands namely; 0 percent, 10 percent, 20 percent and 30 percent as shown in table 2.2.
Setting an annual threshold income subject to income tax at Ushs 1,560,000 ( about
Ushs 130,000 per month), the poor are, by definition, „exempted‟ from personal
income tax. Otherwise the main exemptions include pensions; salaries of employees
of the Armed Forces, the police, and the prison service; interest payable on treasury
Bills or Bank of Uganda Bills; bequests and gifts not arising from a business
relationship; charitable donations; non business capital gains; and income exempted
under normal international conventions. The contribution of personal income tax to
GDP for the period 1996 -2003 is shown in table 2.1.
8
Table 2.2: Income tax rates in Uganda, 2009
RANGE ( UGS per month) RATES (%)
130,000 and below Nil
130,000-235,000 10
235,000-410,000 20
410,000 and above 30
Source: Murtuza (2009)

2.1.2 Import Duty

The current tariffs in Uganda are based on the Harmonized Code (HS)-having
changed it from the SITC system in 1995/96. Import duty is levied on the Cost
Insurance and Freight (c.i.f) value on imports, and is the second largest source of
government Tax Revenue in Uganda. The contribution of Import Duty to GDP for the
period 1996 to 2003 is shown in table 2.1.

2.1.3 Value Added Tax

The largest share of tax revenue in Uganda is attributed to Value Added Tax (VAT).
Table 2.1 shows that, for the period 1996 to 2003 VAT had the highest percentage to
GDP as compared to other forms of taxes. The share of VAT in GDP for 2000 was
4.2 percent and it was 4.3 percent in 2003. Uganda‟s VAT extends through the retail
stage and includes goods and services in the tax base. The inclusion of the retail stage
(with exception of small businesses) means that all trading margins are included in
taxable value. Uganda imposes three VAT rates: a zero rate, exempt and standard rate
of 18 percent. The zero rate applies to exports; international transport services; drugs
and medicines; educational materials; seeds, fertilizers, pesticides and hoes; cereals
grown, milled or produced in Uganda; and machinery and tools suitable for use only
in agriculture.

2.1.4 Excise duties

Excise duty is applied ex-factory on domestically produced goods, like beer, spirits
and soft drinks, petroleum products, and cellular phone air time. The same tax equally
applies on similar imports, except for cellular phone air time. Uganda also charges a
given percentage of excise duty/surcharge on a range of products e.g. motor vehicles
and other high value imports- for the purpose of raising revenue. The contribution of
excise duty in relation to GDP for the period 1996 to 2003 was between 1.7 percent
and 1.4 percent as given in table 2.1.
9
2.1.5 Withholding Tax
Certain payments are liable to withholding tax. Any payment to a person in Uganda
from the government of Uganda, a Government institution, a local authority, any
company controlled by the government of Uganda or any person designated in a
notice issued by the minister responsible for finance of an amount in aggregate
exceeding one million shillings for the supply of goods or materials of any kinds or
any service is subject to a 4 percent withholding tax. The Minister for Finance has
powers to exempt companies from paying withholding tax. Non-resident entertainers
and sports personnel are supposed to have 15 percent withheld as tax on their
payments.

In general, as seen from table 2.1, VAT has the highest percentage contribution to
GDP followed by import duty. The contribution of personal income tax has been
increasing over the period, while that of import duty has been declining.

2.2 Tax Revenue Performance and government expenditure in Uganda

Table 2.3: Uganda’s Tax –GDP and Gov. Exp-GDP ratios 1980-2008
Year T/Gdp G/gdp Year T/Gdp G/gdp Year T/Gdp G/gdp Year T/Gdp G/gdp

1980 4.16 7.01 1988 4.75 9.15 1996 10.24 13.04 2004 12.62 25.02
1981 4.28 7.22 1989 4.81 9.23 1997 11.03 14.05 2005 12.72 25.11
1982 4.31 7.32 1990 6.85 10.40 1998 11.58 15.01 2006 13.72 25.35
1983 4.37 8.10 1991 7.48 10.49 1999 11.64 16.30 2007 13.21 26.47
1984 4.45 8.65 1992 7.57 10.68 2000 11.77 16.65 2008 13.15 26.51
1985 4.55 8.75 1993 7.87 10.87 2001 11.81 16.90
1986 4.61 9.01 1994 8.27 11.01 2002 12.25 17.01
1987 4.72 9.05 1995 9.81 12.03 2003 12.38 24.1
Source: Data from UBOS and Bank of Uganda.
T/Gdp= ratio of tax to Gross domestic product
G/Gdp= ratio of Government expenditure to Gross domestic product

Uganda‟s tax revenue has increased marginally as a percentage of GDP since 1980.
But the government‟s expenditure as a percentage of GDP has been far higher than
that of the tax revenue. For example, in 1980 the tax ratio was 4.16 percent while that

of the government expenditure was 7.01 percent. So the Government expenditure

ratio was 2.82 percent higher than that of the tax ratio. That indirectly alludes to the
existence of the budget deficit. It is evident from table 2.3 that every year the tax
ratio is far less than the government expenditure ratio.

10
The tax to GDP ratio though has an increasing trend, the rate of increase is very low.
In 1980 it was about 4 percent and after 29 years it was about 13 percent as shown in
table 2.3. In this way the tax ratio has increased by 225 percent while the government
expenditure ratio has increased by 286 percent and that shows that the increment in
tax ratio is lower than that of the government expenditure ratio. It also indicates why
the tax revenue cannot cover the government expenditure. The low tax revenue
performance has been attributed to, among others, the structure of Uganda‟s economy
the biggest proportion of which is composed of subsistence agricultural and informal
sectors accounting for 21.2 percent of GDP in 2007/08 (MFPED, 2009)

2.3 Tax Reforms in Uganda

Like many other developing countries, Uganda has undertaken comprehensive tax
reforms encompassing most of the important revenue sources. The major goals for
these reforms have been: broadening the tax base; increasing efficiency in tax
collection; creating incentives for the private sector; and ensuring equity of taxation.
The reforms involved adjusting tax rates, widening the tax base, reducing exemptions,
and simplifying procedures. However, the goals of tax reforms have not yet been
achieved. Uganda still experiences narrow tax bases.

Table 2.4: Major Tax Reforms in Uganda, 1980-2008.

1990/91 Taxes on government imports were abolished
Payment of taxes through commercial banks introduced, to minimize
fraud and increase efficiency in revenue collection
1991/92 Uganda Revenue Authority (URA) was set up with the view of
improving tax administration.
The national customs tariff system based on the Customs Cooperation
Council Nomenclature was replaced with the Harmonized Commodity
Description and Coding System
1992/93 Export duty on coffee was introduced
1994/95 Coffee stabilisation tax was introduced
Introduction of withholding tax
Introduction of tax Identification Numbers (TIN) and Computerization
of income tax department.
1996/97 Introduction of Vat at a standard rate of 17% to replace commercial
Transaction Levy (CTL) and sales tax. 1996/97

11
1997/98 Introduction of a new Income Tax Act 1997/98
2000/01 Introduced GATT valuation method in place BDV and abolished pre-
shipment inspection
Abolished discretionary powers under section 4 of the Tariff
Management Act 1970 for the Minister of Finance to remit import duty
and excise duty under the customs and Excise Law.
2005/06 Loans to agriculturalists exempted from tax
Graduated tax abolished
Increase the rate of value added Tax (VAT) from 17 percent to 18
percent
2007/08 Introduction of local Service tax
Vat on sale of residential properties reduced from 18 percent to 5
percent.
Road license Fees except for charges on first registration abolished
10 year tax holiday to companies engaged in value exports
Local Hotel tax on all Hotels and Lodge Occupants
Environmental Levy
2008/09 Exemption of duty and tax payments on construction materials
Exempted income tax on new agro-processing investments
Reduced the excise duty on beer made from local raw materials
Exempted heavy Fuel Oil from VAT.
Exempted VAT on trucks of loading capacity of 3.5 tons and above.
Exempted VAT on table salt
Aligned the income Tax Act with the production sharing agreements
Tax on imports and other supplies for companies undertaking petroleum
exploration ,development and production
Schools and tertiary institutions exempted from Income Tax.
Source : Uganda’s Taxation Policy; Review report (2008)

12
 CHAPTER THREE

LITERATURE REVIEW
This chapter presents the theoretical and the empirical evidence of the literature
review. It gives views on tax buoyancy, elasticity, tax effort and tax effort index,
budget deficit, inadequate revenue, empirical evidence on tax buoyancy and elasticity
and lastly tax buoyancy and elasticity in Uganda.

3.1 The theoretical literature review

When there is economic growth and tax revenue increases faster than GDP, then
under such a scenario the tax is considered to be elastic. Sometimes there is growth in
tax revenue which is due to growth in the tax base and increase in tax rate. The two
factors must be considered separately so as to get a clear picture of the tax revenue
generation ( Osoro 1993).

3.1.1 Elasticity of tax

Mirambo(2001), says that elasticity of tax is the ratio of growth rate of tax revenue net
of discretionary change in tax rates to the growth rate of tax base. An estimation of
discretionary changes in tax policy is not easy so as to measure the increment in the
tax revenue. The growth in the tax revenue in response to GDP growth has to be
decomposed into two components: Automatic growth in response to GDP and the
growth resulting from discretionary changes in tax rates and legislation when holding
GDP constant. Elasticity measures the responsiveness of tax revenue to changes in
national income if the tax structure would have remained unchanged. To estimate
elasticity of any tax system, revenue series have to be corrected for the effects of
discretionary changes in tax policy.

Mansfield (1972) argues that automatic growth in tax revenue alone, abstracting from
discretionary changes, is the elasticity of the tax. High tax elasticity, that is, a tax
elasticity coefficient of one or more, is said to be particularly desirable since it allows
growth in expenditure to be financed by raising tax revenue without recourse to the
politically unpopular decision to raise tax rates.

Tsegaye (1993) says that a high elasticity may simply reflect the progressiveness of
the tax structure, showing positive ratios of tax revenues to increases in income. A

13
high elasticity (that is greater than unity) implies that the tax revenue increases faster
than the income. This means if the tax is meant to maximize revenue, the government
could rely on more elastic taxes which do not require frequent discretionary changes.
It is therefore essential that the tax elasticity be equal to or exceeds unity to maximize
revenue.

3.1.2 Tax buoyancy

Jayasundera (1991) explains that the buoyancy of a tax system reflects the total
response of tax revenue to changes in national income as well as effects of
discretionary changes in tax policies over time. Matundu (1995) adds to the view of
Jayasundera that a buoyancy coefficient which is greater than one would imply that
for every one percent increase in GDP, tax revenue increases by more than one
percent.
According to Osoro (1993) buoyancy of tax is defined as the ratio of growth in tax
revenue to growth in tax base. The buoyancy of tax measures the responsiveness of
tax revenue to changes in income without controlling for the discretionary changes in
tax policy. The discretionary changes are the changes which result in more tax
revenue from the same tax base. The sources of such changes are changes in tax
legislation or changes in the tax rate.

3.1.3 Tax effort and Tax effort index

According to Bollinger (2005), tax effort refers to current level revenues collected by
the Government. Task effort index is defined as the difference between the buoyancy
and elasticity of the total tax revenue expressed as a percentage of the latter. It is
estimated to measure the administrative efforts undertaken to improve the tax system
during the study period. An average country should have tax effort index of 1.1.
When tax effort is less than unity it means a country exploits its estimated potential
less than average. It also means that operation is on the normal range of the Laffer
curve3. In this case tax rate increase would be viable in order to increase revenue.
Countries with tax effort above unity are said to operate on prohibitive region of the
Laffer curve. Tax rate cut would benefit those countries in their attempt to raise extra
revenue.

…………………………………………………………………………………………
3. Laffer Curve refers to the relationship between tax rates and tax revenue.

14
3.1.4 Budget deficit
Parthasarathi Shome (1988) says that when a country is in a process of formulating
its budget, it undertakes revenue projections. If the revenue turns out to be smaller
than the budget expenditures, a country ends up with deficit financing. Budget deficit
is precisely total revenue falling short of total public expenditure.

Osoro (1997) argues that if the government wants to reduce its deficits, it should not
determine the level of spending on political grounds and then adjust the tax to suit it.
The level of spending should be determined by the funds available. This can be
achieved by adopting a proper budgeting process. Measures to reduce deficits must
begin with policies to curtail spending. As long as spending grows faster than revenue,
any policies to contain deficits will be successful only in the short run. The
government thus needs to cut unproductive and unauthorised expenditure, which calls
for budget restructuring and stern efforts to strictly enforce spending limits. Other
measures that can be taken would increase revenue by enhancing tax collection, for
example, through greater productivity of the tax system. Improved tax collections
would, in turn, reduce government‟s need for borrowing, which is a low-cost mode of
financing public spending relative to taxation, and ultimately help reduce the deficit.

3.1.5 Inadequate revenue

According to Yaqub (1994) inadequate revenue refers to the situation whereby the
estimated tax revenue is greater than the realised tax revenue. Among the causes of
inadequate tax revenue is the inelasticity of the revenue structures and inadequate tax
effort. Inadequate revenue creates fiscal crisis. Holcombe & Sobel (1997) continue to
argue that fiscal crises are an interaction of many complex causes including
inadequate tax bases, increasing expenditure demand and limits placed on state
government by voters.

Adequacy of Total Tax revenue is estimated by computing its responsiveness to GDP.

If it is inelastic to GDP then automatically TTR is inadequate. If it is elastic to GDP
then the elasticity of its component Tax Revenues is estimated. If each individual tax
revenue is elastic to its base and the base in turn is elastic to GDP, then TTR is
adequate. Total Tax Revenue to be adequate all its component Tax Revenues must be
adequate.

15
3.2 The International Empirical Evidence
Different authors have carried out practical estimation of buoyancy and elasticity of
the tax system of different countries. They have made an analysis of the tax system
and the implications of the indexes computed. Among those who carried out the
empirical studies, some are presented in the following paragraphs.

Osoro‟s (1993) study on the revenue productivity of the tax system in Tanzania for
the period 1969-1990 showed a low elasticity for the total tax system, as well as for
individual taxes. Elasticity for total tax revenue was 0.76 with buoyancy of 1.06
which means that the Tanzanian tax system was unproductive over the study period.
Elasticities of individual taxes were as follows: income tax, 0.76; company tax, 1.13;
sales tax, 0.79; PAYE, 0.66; import duty, 0.55. Only company tax had elasticity above
unity, which means that 1 percent increase in GDP was on average accompanied by
1.13 percent increase in revenue from company tax. The other four taxes had
elasticities below unity, meaning that these taxes lagged behind GDP. The study
concluded that the tax reforms in Tanzania had failed to raise tax revenues. These
results were attributed to the government granting numerous tax exemptions and poor
tax administration.

Mtatifikolo (1990) did a study on the performance of the Tanzania tax system for the
period since the major tax reforms of 1973- 1984. This study gives an estimate of the
buoyancy and elasticities of the major taxes. Mtatifikolo uses the same method as one
adopted by Thac and lim (1984), as an indicator of the tax effort of the government of
Tanzania. The results showed buoyancy of 0.998 for the total tax system. Buoyancies
of individual taxes were as follows; PAYE, 0.97; Business income tax, 1.27; income
tax, 1.17; tax on import, 1.16; sales and excise tax, 1.16. The study revealed that,
having observed a low buoyancy of the business income tax relative to the elasticity,
this suggests substantial tax evasion and avoidance.

Chipeta (1998) evaluated effects of tax reforms on tax yields in Malawi for the period
1970 - 1994. The results indicated a buoyancy of 0.95 and an elasticity of 0.6. His
study concluded that despite the tax reforms tax revenue was not buoyant and elastic
with respect to GDP.

Milambo (2001) used the Divisia Index method to study the revenue productivity of

16
the Zambian tax structure for the period 1981 - 1999. The results showed elasticity of
1.15 and buoyancy of 2.0, which confirmed that tax reforms, had improved the
revenue productivity of the overall system. However, these results were not reliable
because time trends were used as proxies for discretionary changes and this was the
study‟s major weakness.

Ole (1975) estimated income elasticity of tax structure of Kenya for the period 1962-
1972. Tax revenue was regressed on income without adjusting for the unusual
observations. The results showed that the tax structure was income inelastic with an
index of 0.81 for the period studied. After the study it was recommended that the tax
system required urgent reforms to improve its productivity. The results also implied
that Kenya‟s tax structure was not buoyant and therefore the country would require
foreign assistance to close the budget deficit.

Njoroge (1993) studied the revenue productivity of tax reforms in Kenya for the
period 1972/73 to 1990/91. Tax revenue was regressed on income after adjusting tax
revenues for discretionary changes. The period of study was divided into two to make
it easier to analyse the effects of tax reforms on revenues from various taxes. Income
elasticity of total tax structure was found to be 0.67 for the period 1972 to 1981. This
meant that the government received a decreasing share of rising GDP as tax revenues.
The elasticity estimates for individual taxes were as follows: sales tax 0.6, import
duties 0.45 and income tax 0.93. The buoyancy for the overall tax system for the
same period was 1.19, implying that the tax system was quite buoyant. For the period
1982 to 1991, Njoroge (1993) found that the overall elasticity was 0.86 while
buoyancy was 1.00. The study concluded that from a revenue point of view, the
system did not meet its target; hence it required constant review as the structure of the
economy changes. However, the results could not be relied upon because the study
never took into account time series properties of the data.

Okello (2001) analysed the structure of excise duties in Kenya from the period 1970-
96. The buoyancy and elasticity of excise duties in Kenya were also estimated and to
compute elasticity, proportional adjustment method was applied. The results of the
study showed that the excise tax system has been efficient over the period as
evidenced by elasticity of 1.13 and buoyancy of 1.41. Okello attributes these results to
a number of factors, these include; government efforts to increase the rate of excise

17
tax in line with inflation where specific rates applied, and the conversion of most
excise tax rates to an ad valorem basis. Also, the expansion of the excise tax base to
include an additional range of products including imports, and the redefinition of the
excise tax base itself contributed to buoyancy. This means that although the growth in
excise tax can mainly be attributed to the growth of GDP, the effects of discretionary
changes were also successful in generating additional revenue. In the long-run,
however, the results predict that excise tax revenue will continue to grow faster than
the growth in GDP, but that discretionary measures will not generate expected
additional revenue as evidenced by an elasticity of 1.24 and a buoyancy of 0.61.

Kusi (1998) studied tax reform and revenue productivity of Ghana for the period 1970
- 1993. The results showed a pre-reform buoyancy of 0.72 and elasticity of 0.71 for
the period 1970-1982. The period after reform 1983-1993, showed increased
buoyancy of 1.29 and elasticity of 1.22. The study concluded that the reforms had
contributed significantly to tax revenue productivity for the period 1983-1993. In this
study, Kusi(1998) evaluates the revenue productivity of Ghana‟s overall tax system
and of individual taxes on the basis of estimates of tax buoyancies and elasticities.

His study also looked at the links between the tax reform of 1983-1993 and revenue
performance. The analysis shows that the tax reform had a tremendous positive effect
on the productivity of both the individual taxes and the overall tax system. In the
1970-1982 periods, all the individual taxes, except excise duty, had estimated
buoyancies of less than unity, thereby causing the total tax system to have a buoyancy
coefficient of 0.72. During the tax reform period of 1983-1993, however, all the
individual taxes, except excise duty and cocoa export duty, showed buoyancies of
more than unity, causing the buoyancy of the overall tax system to increase to 1.29.
Compared with the 1970-1982 period, the tax buoyancy increased by 79.9 percent in
the 1983-1993 period. The estimated income elasticity of the overall tax system for
1970-1982 was very low, 0.71; this was because all the individual taxes, except excise
duty, had estimated elasticities of less than unity.

Thac and Lim (1984), in their study on the tax effort of Papua New Guinea
government, used the size difference between buoyancy and elasticity, expressed as a
percentage of the latter as an indicator of tax effort of the government. They reported
the following tax efforts results; customs duties, 159 percent; excise duties, 31percent;

18
personal income tax, 15 percent; company income tax, 32 percent and the total tax
system was 40 percent. They concluded that apart from customs duties that have low
tax potential other taxes have a high tax potentiality.

There was a study which was undertaken by Lewis and Mokgethi (1983) regarding
the elasticity of the major components of Botswana government revenue relative to
important national income aggregates for various periods. The results of their study
showed that customs revenue was very buoyant with respect to both GDP and imports,
which is not always the case in developing countries. They attribute this to the
changes in revenue sharing formula that were introduced in the mid-1970s, which
ensured a minimum rate of duty payable to Botswana even if the rates of study as
collected were to fall. The income tax applies to non-mining income was slightly
inelastic with respect to the overall GDP, but was elastic with respect to non-mining
GDP. All other domestic revenue was slightly inelastic with respect to non-mining
GDP and only showed a buoyancy of 0.8 against overall GDP. The study revealed
that overall; the non-mining sources of revenue had been elastic with respect to non-
mining GDP. The tax system as a whole was quite elastic with respect to GDP over
the period since independence in 1966 and also in the period of the 1970s.

A more recent study on Botswana was conducted by Graeser in August 2004. He

found that the overall elasticity of the sales tax regime is 1.29, which according to him,
is a bit higher than expected. The study showed that generally, broad consumption
taxes usually show elasticities slightly less than one-perhaps 0.95 and part of this can
be explained by the specific nature of the Botswana economy. For the period 1990 to
2000, motor vehicle tax had elasticity of over +2.3, and for the last four years (2000-
2003), there was a reduction from elasticity of +2.3 to only +0.5. The category of
other taxes, which are composed of export duties, property tax, motor vehicle tax,
license fees (business and professional tax) and airport tax, overall, the elasticity has
been 1.59, which is elastic relative to GDP. This has primarily been because property
taxes and motor vehicle taxes have been elastic. The study also revealed that the
airport taxes were then showing negative elasticity. The non-tax revenues also
exhibited an unsatisfactory trend, with negative elasticity of -0.363, the biggest
contributor to this was the parastatal profits, particularly Bank of Botswana profits.

Non-mineral income tax, which is the sum of wage withholding (PAYE), withholding

19
on interest and dividends and business profits tax is a large aggregate revenue
category which is subject to numerous economic influences. According to Graeser, it
is surprising (although gratifying) to detect a regime over the previous eight years of
constant elasticity. There have been changes in administrative efficiency as well as
changes in law over this period, but apparently, the changes have been subtle and
evenly spaced over the interval. The overall elasticity of 1.9 is large, but expected by
the steeply progressive rate structure on personal income tax ( 5 percent to 25 percent
with a substantial untaxed floor amount).

Teera ( 2003), when analysing the tax performance across countries for the period
1975-1998, mainly; Sub-Sahara Africa, low-middle income countries, high-income
OECD countries, utilizes what Musgrave (1969) referred to as the stochastic approach,
where tax performance is analyzed by comparisons with the average performance. In
her study, the term „tax effort‟ was used to signify the measure of country‟s tax
performance. It is regarded as the expected tax yield, given a country‟s taxable
capacity, hence reflecting the extent to which a country makes use of its taxable
capacity (Goode, 1984).

In her analysis Teera (2003) used dynamic measures of tax performance which
involve comparisons of change in the tax ratio overtime; such measures take the form
of tax elasticity and buoyancy. The larger the value of the elasticity or buoyancy, the
faster is the rise in the tax ratio. The results got showed that the low-income countries
have the greatest percentage of countries with tax effort below unity (55 percent),
followed by Sub-Sahara Africa (54 percent). But when considering tax buoyancy, the
upper-middle income countries had the highest percentage (all countries in this group
have a buoyancy ratio below one), followed by Sub-Sahara, low-income, and then
lower-middle income countries. The high income OECD countries have the lowest
percentage of countries with a tax effort index and buoyancy ratio below unity (22
percent). The results of the tax buoyancy indicate that the high-income OECD
countries have the least percentage number of countries with buoyancy below unity,
followed by the lower-middle income group. This implies that the lower income
groups have made less effort to increase revenues over the period as compared to
higher-income groups (except the upper-middle income group).

Ariyo (1997) in his study of the productivity of the Nigerian tax system improved

20
upon the one done by Omoruyi (1983) in the following respects. First, the study
covered the period 1960-1990, and therefore updates the analysis. Second, the study
captured the impact of the structural changes in the Macroeconomic management
frame work introduced since 1996. Third, Omoruyi (1983) disaggregated his analysis
in terms of decades (1960-1967, 1970-1980, etc). His research findings were as
follows: For the total period covered by the study, there was an elasticity of 1.18 for
government tax revenue relative to GDP. The non-oil component, however, had a
lower elasticity coefficient of 0.94, while the performance of import duties (IMD)
showed the same pattern. The cumulative effect of the oil boom PPT (petroleum
profits tax) was reflected with an elasticity of 2.60 and 1.51 in relation to GDP.

Ariyo (1997) also found out that Company Income Tax was elastic with an elasticity
coefficient of 1.21, which suggests an improved efficiency in tax collection from this
source over the years. It also probably reflects the ability to bring into the tax net the
numerous limited liability companies that sprang up all over the country following the
oil boom. It is also attributable to an improvement in the accounting and recording
habit of most companies, especially those applying for quotation on the Nigerian
capital market. The results highlighting the differential effect of the oil boom showed
that, the oil boom had a significant positive effect on the overall buoyancy of the
country‟s revenue sources, rising to 1.88. This contrasted with the deterioration of the
oil component of GDP whose coefficient fell from 0.94 to 0.61 during the study
period (an effect of the Dutch disease) 4.

Matundu (1995) in his study evaluated the revenue performance of the Namibian tax
System. His findings were as follows; the overall elasticity of the Namibian tax
system was 1.04, which according to him shows that discretionary changes are needed
to raise the ratio of taxes to GDP. Income taxes had the second largest elasticity
coefficient, i.e., these taxes grew faster than the growth in GDP. Income taxes were
also elastic with respect to the base, even though the base grew almost proportionate
in relation to GDP. The response of domestic taxes on goods and services to the base
and GDP was not very high, however, this group of taxes showed an overall positive
------------------------------------------------------------------------------------------------------
4. Dutch disease: This term in economics refers to a situation where a country becomes totally dependent on grants or

donations to run its economy and when the grants or donations decline or cease then its economy breaks.

21
response to the growth in its base, as well as to the growth in GDP. General Sales tax
(GST), which is the most important component of domestic taxes, on goods and
services, had the lowest elasticities. The buoyancy coefficient was above unity,
reflecting the importance of the numerous discretionary changes related to this tax
made by the Namibian government. Property taxes which constitute of only transfer
duty had a relatively high elasticity. Since no proxy base could be obtained,
underlying factors for this high elasticity could not be fully explained.

Matundu used the same method as one adopted by Thac and Lim (1984) and
Mtatifikolo(1990), as an indicator of the tax effort of the government of Namibia.
Matundu found the government tax effort for total tax system to be 27.9%. The
highest concentration of the tax effort was in domestic taxes on goods and services. A
high tax effort was also directed at stamp duties with the least amount of effort being
directed at other mining company tax and non-mining company tax. On average, the
Namibian government directed a greater effort at the least elastic of the main taxes,
namely, GST. According to Matundu, changes in rates of GST could be relied upon to
produce more revenue with relative certainty.

3.3. The Domestic Empirical Evidence

Some authors have carried out practical estimation of buoyancy and elasticity of the
tax system of Uganda. They have analysed the tax system and the implications of the
indexes computed. Some of those who carried out the empirical studies are presented
in the following paragraphs.

Ayoki, Obwona and Ogwapus ( 2008) considered the tax reforms implemented by
the government and how revenue yields of individual taxes and overall tax system
have responded to changes in GDP( or Proxy bases). They computed elasticity and
buoyancy indices for the pre- and post- reform periods as well as the combined period.
According to them, the Pre-reform period refers to the period between 1988-1995 and
the post reform period refers to the period between 1996-2003. The results of their
computations showed a tax-to-income elasticity coefficient of 0.645 for the pre-
reform period and 0.545 for post-reform period. There was inelastic response of
overall tax revenue to changes in income, prior to, and after the major reforms.

Their findings showed that import duties had the highest tax-to-income elasticity
coefficient of 1.256 while excise duties and direct taxes had the lowest coefficients
22
which are 0.705 and 0.706 respectively. It was observed that only direct taxes and
VAT had elasticity of more than one, that is, 2.082 and 1.306, respectively after the
major reforms. They compared indices between the pre- and post- reform periods. The
reforms improved revenue yield of direct taxes from an index of 0.706 (pre-reform) to
an index of 2.082 (post-reform). Those reforms improved the tax –to-income
elasticity on VAT/Sales tax from 1.037 to 1.306.

According to their findings revenue yields of import duties declined during the
reforms period from elasticity index of 1.256 to 0.382. This was explained by drastic
decline in response of the tax revenue to changes in the tax base from 1.066 to 0.244.
Tax reforms had a positive impact on direct taxes and VAT/Sales tax as evidenced by
increase in tax-to-income elasticity from 0.706 to 2.087 and from 1.037 to 1.306
respectively. Import duties declined from 1.256 (pre-reform) to 0.382 (post-reform).
They discovered that elasticity for Uganda‟s overall tax system for the period
1988/89-2003/04 was 0.636. That meant that the tax structure in Uganda is inelastic.
That can be interpreted that for every 1 percent rise in GDP during 198-2003, the
Uganda tax system yielded only 0.636 percent increase in tax revenue. They assessed
that low tax-to-base elasticity of direct taxes of 0.623 with high proxy base to income
coefficient of 1.519 which signifies a big proportion of untaxed or uncollected
revenue.

The low tax-to-base elasticity of individual tax categories of 0.9 in comparison with
their base-to-income coefficients was 1.139 on average, implied that the inelasticity of
the overall tax system is caused by problem of poor collection of taxes. In the Pre-
reform period between 1988-1995, there was inelastic response of the overall tax
revenue to changes in income as reflected in tax-to-income elasticity coefficient of
0.648. The tax-to-income elasticity coefficients of import duties of 1.256 and
VAT/Sales tax of 1.037 show elastic yields of these taxes prior to the major reforms.
The buoyancy index for the overall tax system during the pre-reform period (1988-
1995) was 1.299 and the post-reform index was 1.202. That showed that revenue
increases during pre-reform period were driven by discretionary tax measures.

The study of these economists was geared at determining the extent to which Tax
reforms increased revenue mobilisation. Indeed they achieved their objectives by
noting that the reforms had positive impact on some taxes. However, they did not

23
estimate adequacy of Tax revenue. For adequacy of Tax revenue, Total Tax Revenue
must be elastic to GDP and in turn individual taxes should be elastic to GDP as well.
In addition individual taxes which are the components of Total Tax Revenue must be
elastic to their bases and the bases must be elastic to GDP. An individual Tax
Revenue is adequate when it is elastic to GDP and it is elastic to the base and in turn
the base is elastic to the GDP. Inadequacy of a single Tax Revenue makes Total Tax
Revenue inadequate even if other Tax Revenues are adequate.

In developing countries, adequacy of TTR or of individual Tax Revenues is not

estimated. Because it is time consuming and analysis of time series data sometimes is
not easy. Time series analysis involves determining its stability and cointegration.
There is also a need to get enough sample units suitably in excess of hundred sample
units. In the sample units are not enough that may result into biased results which may
not be useful in policy formulation. So when dealing with time series data all its
characteristics must be handled wisely and technically. It is hard to estimate Tax
Revenue adequacy that is why it is not mentioned in budget speeches. In fact it would
be good if it is mentioned in budget speeches.

Like in developed countries, estimation of adequacy of Tax revenue would be

beneficial to the developing countries like Uganda. The government would know
easily which individual Tax Revenues are revenue enhancing and which are not.
Then the government would come up with solutions to taxes whose revenue is
inadequate. Just giving increment in Total Tax Revenue without mentioning its
adequacy does not help very much. It would be economically beneficial to estimate
the adequacy of each Tax Revenue. Determining the proxy bases of each individual
tax is very useful. That would be accompanied by estimating the adequacy of those
proxy bases. The base is adequate if it is elastic to GDP.

What should be noted is that when Ayoki , Obwona and Ogwapus analysed tax
reforms and domestic revenue mobilisation in Uganda, calculated tax buoyancy and
elasticity for a short period (1988- 2003). For a time series, the number of
observations of 14 years is considered to be very small. There is a possibility of
getting biased results. In addition they did not show how they handled the properties
of time series data. At least they would have given a few pages in their study
informing the readers how time series properties of the data were manipulated.

24
In their5 book entitled „Tax Reforms and Domestic Revenue mobilisation in Uganda‟
page 43, they said, „The reported R-squared suggests that estimated models provide
reasonably good fits to the data‟. The regression might have been spurious 6.They said
nothing about the DW test 7 which would have affirmed whether it was a spurious
regression or not. According to granger and Newbold, an R2 >DW is a good rule of
the thumb to suspect that the estimated regression is spurious (Gujarati 2003, p.807).
When DW is greater than R2 it is an indication that the regression is not spurious. In
normal circumstances DW is greater than R2. Dealing with time series data requires
comparing the two, that is, DW and R2. Since they did not compare the two it is a
clear testimony that they did not seriously consider the time series properties of the
Data. Thus their results may not be useful for policy formulation.

Given the above scenario, this study increases the number of observations from 14 to
quarterly data for 29 years which gives 116 observations. The study period is 1980-
2008. Time series properties of the data would be observed jealously by the researcher.
-----------------------------------------------------------------------------------------------------------------------------------------------------

5- Ayoki M., Obwana M. and Ogwapus M.

6. Spurious regression: this term refers to the situation when two uncorrelated variables are regressed, R2 exists and is

statistically significant also the coefficient of the independent variable exists and is statistically significant. Then there is a

tendency to conclude that there is a relationship between the two whereas there is no relationship at all. Such a regression is

defined as spurious.

7. DW test: it is also denoted by„d‟ and it is also called Durban –Watson d statistic. It is defined as the ratio of the sum of

squared differences in successive residuals to the residual sum of squares (RSS). It is the most celebrated test for detecting

serial correlation. If„d‟ is closer to „2‟ it is assumed that there is no first-order autocorrelation, either positive or negative.

When„d‟ is closer to „0‟ then there is positive serial correlation. If„d‟ is closer to „4‟ then there is negative serial corr elation.
2
Refer to Damodar N. Gujarati, 2003, 4th Ed. Pp.467-471. In regression analysis when„d‟ is less than R , it is an indication
2
of a spurious regression. R is defined as the ratio of the explained sum of squares to the total sum of squares denoted by

ESS/TSS.

25
 CHAPTER FOUR

THEORETICAL FRAMEWORK AND MODEL FORMULATION

4.1 Theoretical (conceptual) Framework

In this sub-section economic theory that relates the dependent variable to independent
variables is analysed. In this regard we take tax revenue as the dependent variable and
all the other variables that influence it as independent variables.

According to Wojciech (2003), tax elasticity and buoyancy in literature had been
estimated or analysed by regressing aggregate tax based revenue on gross domestic
product (GDP)- a proxy for the tax base, and incorporating a dummy variable singer
( 1968) or some other proxy to capture the exogenous influences exerted by tax
legislation on the tax net, the tax rate or the tax structure. What should be noted is
that besides discretionary changes in the tax net, rate and structure arising from
legislative innovations, there are other sources of exogenous influences on the tax
yield, and hence on tax elasticity and buoyancy.

External developments in open economies affect the tax base and hence the tax yield
both directly and indirectly. Ventures like the East African common market can affect
tax revenue generation. `Studies have revealed that a relatively large foreign trade
sector tends to be related with a high tax level. It has been argued that this relationship
is due to the administrative ease of taxing imports and exports. However, different
authors have formulated the variables of foreign trade differently as M/Y, (M+X)/Y
and X/Y but (M+X)/Y was found to be superior because the ratio of its coefficient to
its standard error was the highest and its equation had the highest adjusted R 2 (Joergen
Lotz and Elliott 1970). From economic analysis carried out by Joergen et al,(1970),
it is stated that there is a positive relationship between tax revenue and the country‟s
openness.

National income (GDP) is theoretically positively related to tax revenue. Similarly, an

evaluation of tax systems in developing countries reveals a positive relationship
between national income and total tax revenue. This finding supports the hypothesis
that as countries develop, tax bases expand more than proportionately to the growth in
national income (Musgrave, 1984).

26
According to Akinlo (2006), external grant has a negative relationship with tax
revenue. That implies increment in external grants reduces effort to collect revenue.
In recent years there has been a growing interest in the possible linkages between high
levels of development and taxation in Africa. It is assumed that without aid,
governments would be forced to raise more taxes or borrow from other sources.
According to the present findings, increase in development aid appears to be a source
of disincentive to making full use of domestic resources for revenue generation
(Ayoki 2007).

There is an inverse relationship between budget deficit and total tax revenue. When
budget deficit increases, expands the external public debt which suffocates internal
investment and hence reduces tax base and tax revenue generation (Tanzi 1981,1992).

Agbeyegbe ,Stotsky and Woldemariam (2005) say that theoretical studies show that
real exchange rate has a positive relationship with total tax revenue. For example the
depreciation of Uganda shilling by say one percent against Us dollar can increase
overall tax by a certain percent level point of GDP.

Christodoulakis (1994) says that there is a negative relationship between total tax
revenue and inflation. Inflation reduces the value of tax revenue and tax rates cannot
be adjusted automatically with reference to changes in underlying inflation.

Bolnick (2002) in his article stated that literacy rate has a positive relationship with
total tax revenue. The more people are educated the more they learn the importance of
tax and can easily comply with tax payment. The government can achieve a
significant rise in tax revenue by investing in mass education. One of the millennium
goals is to promote literacy. Each country is expected to advocate for universal
primary education. Each child has a right to education. The parents helped by the
government should make it a point that their children receive basic education. They
should not stop at basic education but their children should aim at attaining
professionalism through attainment of tertiary or university education.

Political stability influences the level of tax collected. Instability lowers tax revenue
collected. Thus, there is negative relation between political upheaval and total tax
revenue ( Ayoki 2007).

27
4.2 Model Formulation
This sub-section gives how models for tax buoyancy and elasticity were formulated
by different economists. They show how the model is developed to adequately
estimate buoyancy and elasticity of total tax revenue and that of individual taxes. The
authors that have contributed to this effect are; Prest(1962), Manafield (1972),Hulten
(1973), Byne (1983), Omoruyi (1983) and Osoro(1991)

4.2.1 Computation of tax buoyancy

According to Osoro (1991), the buoyancy of tax revenue to GDP for any period„t‟ can
be expressed in the following ways:
Εbi =
percentage change in tax revenue

Percentage change in GDP

Εbi = ﴾ ΔT/ ΔY﴿.(Y/T)

Where
Εbi = buoyancy of tax revenue to GDP
ΔT = change in the tax revenue
ΔY = change in GDP
GDP = Growth Domestic Product
To measure year-to-year buoyancy of tax system, the following method can be used:
Bi =﴾﴾ Tt – Tt-1﴿ / ﴾ Yt –Yt-1﴿﴿ / ﴾﴾ ﴾ Tt +Tt-1 ﴿/2﴿/﴾﴾ Yt +Yt-1﴿/2﴿﴿﴿
Where
Bi = year to year buoyancy
Tt = tax revenue in the year t
Yt = GDP in the year„t‟ at current market prices
Tt-1 = tax revenue in the previous year
Yt-1 = GDP in the previous year
To estimate the buoyancy of the entire period, the following method can be used:
BB = Gt/ Gy
Where
BB is the tax buoyancy for the period
Gt is compound growth rate of tax revenue (T) over entire period
Gy is compound growth rate of GDP over the entire period
As Osoro (1991) indicates that buoyancy can be measured by the following equation:
TR = αoYαi er

28
Where;
TR is total tax revenue
Yαi is the gross domestic product (GDP) at current price,
er is the error term.
A log-transformation of Equation above enables us to derive the buoyancy coefficient.
This is represented as:
Log TR = log αo + α1 logY + u
Whereby α1 provides an estimate of tax buoyancy. It measures in percentage terms
the change in tax revenue due to a change in GDP and the effect of discretionary
changes in tax policy.
To get the buoyancy of individual taxes, the following model can be used:
LogTRi = αo + 1 log βi + ut
Where TRi is the tax revenue of tax i and Bi is tax base of tax i.
Prest suggests that Tax buoyancies can also be calculated as follows:
Log T = a + blog GDP
(dT/dGDP)/T = b/GDP
ΒTY = (dT/dGDP) (GDP/T)
=b
Where ;
T = tax revenue
GDP = Gross Domestic Product

4.2.2 Tax Elasticity

Prest (1962) suggests that elasticity of tax revenue with respect to GDP can be
estimated using a double log function as follows:
Log RT* = βo + β1 log RY + ut
Where
Βo = constant
B1 = elasticity of tax revenue to GDP
RT * = adjusted real tax revenue
RY = Real income
ut = error term
To measure elasticity, it is necessary to isolate the effect of discretionary changes in
the Tax policy on tax revenue. Two approaches have been suggested for the exercise.
One method suggested by Prest (1962) involves isolating the data on discretionary
government.
29
 Mansfield (1972) describes this approach suggested by Prest ( 1962) as follows:

T1, T2,……, Tn are actual yields for n number of years.

D1, D2 ….. Dn measures the effect of a discretionary tax change in the ith year on the jth
year‟s revenue outturn.
Tij indicates the jth year‟s actual tax yield adjusted to the tax structure that existed in
year i
Let i = 1 represent the reference year. Hence, the series T11, T12, T13 … Tin depict the
tax receipts attainable if the tax structure remained unchanged, coupled with the
removal of the effect of all discretionary changes introduced over the period following
year 1.
At least two problems are associated with this approach. First, there may be no data
on revenue receipts directly and strictly attributable to discretionary changes in tax
policy. Second the approach assumes that the discretionary changes are as progressive
as the underlying tax structure. This assumption is not likely to hold. This approach
which was used earlier by Omoruyi(1983), shows that elasticity can be measured as:
Elasticity = (ΔT/ΔY) (Y/T).
And for any given tax,K,
Elasticity = (ΔTk/ΔYx)(Y/Tk)
Where Tk, the tax revenue, includes discretionary change in the tax base and rate
schedule and Y refers to GDP at current prices.
The income elasticity of a given tax represented by Equation can be decomposed into
two elements: the elasticity of the tax to the base and the elasticity of the base to
income. In other words, it is decomposable into tax-to-base elasticity:
Elasticity = ( ΔTk/ΔB) (Bk/Tk)
And into base-to-income elasticity
Elasticity = (ΔBk/ΔY) (Y/Bk)
This relationship is expressed in the following identity:
(ΔTk/ΔY)(Y/Tk) = {(ΔTk/ΔBk)(Bk/Tk)}{(ΔBk/ΔY)(Y/Bk)}

It decomposes any tax system as the product of elasticity of tax-to-base and of base-
to-income. One potential hindrance to the use of this method is the non-availability of
required data. This is the problem that compelled Omoruyi (1983) into adopting an
aggregative measure of tax buoyancy for Nigeria.

30
These problems mentioned above gave rise to a consideration of another technique
suggested by Singer(1968), usually referred to as the dummy variable
technique(DVT), which relies mainly on using dummy variables to capture
discretionary changes in tax rates and tax structures. This method introduces a dummy
variable for each year in which there was an exogenous tax policy change. The
resulting model is:
Log TR = αo + α1 log Y + ∑βiDi + er
Where Di takes the value of 1 for each year in which there is an exogenous change in
the tax policy and a value of zero (0) otherwise, and β i is the slope coefficient. The
summation takes account for the possibility of multiple tax changes during a specified
period. If the Dummy variable (Di) is zero, then ∑α2iDi =0. In this case elasticity
would be found by regressing the logarithm of total revenue against the logarithm of
GDP. But when the dummy variable takes the value 1, discretionary changes will be
accounted for, giving; ∑α2iDi = ∑α2i , which will explain the impact of discretionary
changes in tax policy and how they affect tax rates, tax structure and tax base.

Conceptually, the most appropriate measure of the responsiveness of tax revenue to

changes in the base for most analytical applications is the elasticity or in the words of
Prest (1962), the built-in flexibility, which seeks to relate the percentage change in tax
revenue to a percentage change in tax base with a given structure. According to Prest
(1962), since legislative changes in the tax structure alter this elasticity from time to
time and this direct measurement of the tax elasticity from historical revenue series
often becomes problematic. The Problem becomes even more complex if the tax base
itself is not precisely measurable or if such data are not available and thereby recourse
has to be made to using proxy bases. This in fact is a common problem since most
analytical studies on tax responsiveness tend to deal with broad categories of taxes,
which are aggregates of a wide variety of tax rates applied to different tax bases.

In estimating the built-in elasticity of a tax, either the time series data on tax revenues
need to be adjusted to eliminate the effects of discretionary tax measures, or a suitable
estimation methodology has to be adopted, or a combination of the two. The most
appropriate method of data cleaning would clearly depend upon the availability,
nature and reliability of information on tax revenues, discretionary changes in the tax
structure and tax bases. Over the years, at least four approaches have been used to
estimate elasticity namely, proportional adjustment; constant rate structure; divisia

31
index; and econometric methods.
In the case of the proportional adjustment method, adjustments are made in the
revenue yield for each year in the sample period to derive a revenue yield based on
the structure of rates and exemptions for a reference year within the sample period,
which can be taken to be the first year (Byrne, 1983). The data cleaning or adjustment
process may be described in the following manner:
Let:
ATi = the adjusted or cleaned tax yield in year i
Ti = the actual tax yield in year i
Di = budget estimate of the yield arising out of discretionary tax changes in year i.
Year „0‟ is the year whose tax structure is to be used as the basis for building up the
adjusted series; the adjusted tax yield is set at the actual:
ATo = To
For the following year:
AT1 = T1 - D1
Since AT o is equal to To by equation, no further adjustment is needed. In every
subsequent year, however, the non-discretionary components of the tax receipts have
to be adjusted in the following manner:
ATj = ( Tj –Dj)( ATj-1)/Tj-1 where j = 2. . . n

Through sequential substitution, it can be shown that equation can be rewritten as:
ATj = AT1. ∏ji=2(Ti –Di)/Ti-1 where j = 2 …n

This is in essence the Mansfield equation for proportional adjustment data cleaning.
The main weakness of the proportional adjustment method is that the procedure yields
a series, which is systematically biased, and will therefore lead to biased elasticity
estimates. The source of this bias is centred in faulty budget estimates of the
discretionary tax changes.

The constant rate structure method, which involves the generation of a simulated tax
revenue series on the basis of the effective tax rate for a given reference year and
estimates of the tax base for subsequent years, is the most accurate provided that both
the tax and its base are defined narrowly enough to permit application of the reference
year rates to later year taxes with a certain degree of confidence. For instance, this
method cannot be applied to broad tax categories such as excise or customs, but to

32
individual products within these categories. Such a procedure will usually be
extremely cumbersome if it is applies to the full range of tax instruments that exist in
any country, and its data requirements are necessarily very heavy indeed. As a
consequence, this method is rarely ever used for analytical purposes and it is normally
relevant only when substantial changes are being considered in the tax structure. This
method is useful in cases where revenue-neutral tax simplifications are being worked
out (Hulten, 1973).

The computation for the divisia index method is predicated on the conditions that the
underlying tax function is continuously differentiable and homogeneous, preferably
linear homogeneous. Although these may not seem to be particularly demanding
conditions, there are serious doubts about their validity when the aggregate tax to
which it is being applied comprises of a non-constant set of items on which taxes are
being levied. If the estimation is being done over a sufficiently long period of time, it
has been established that for most countries, especially developing countries, the
composition of the tax base exhibits significant change.

4.2.3 Tax effort

According to Bird (1978), Mtatifikolo (1990) and Thac and Lim (1984) the tax effort
of government is computed using the following formula:

Taxeffort = ((buoyancy-elasticity))/elasticity
The difference between the buoyancy and elasticity of tax revenue expressed as a
ratio of the latter is used as an indicator of government tax effort.

33
 CHAPTER FIVE

METHODOLOGY

This chapter gives the methods by which the objectives are addressed. It includes;
variables for the model and proxy bases for individual taxes, model specification, data
type, data collection and analysis.

5.1 Variables that influence tax revenue and proxy bases for individual taxes.

From economic theory variables that influence tax revenue were selected namely;
external grants, inflation rate, gross domestic product, budget deficit, exchange rate,
political stability, openness and individual taxes namely income tax, excise duties,
VAT and import duties. At the same time proxy bases for individual taxes were
identified. The proxy bases that were identified for individual main taxes were as
follows: the proxy base for income tax is domestic factor incomes while import values
for balance of payments are the proxy base for import duties; private final
consumption plus import values are the proxy base for both excise duties and VAT;
Lastly, the proxy base for the overall tax system is GDP.

5.2 Model Specification

After identifying the variables basing on economic theory, then models for elasticity
and buoyancy of Total Tax revenue and of individual tax revenues were specified.
Models for decomposing individual tax elasticity into tax-to-base elasticity and base-
to-GDP elasticity were also specified. The purpose for decomposing individual taxes
is to estimate their adequacy and that of the Total Tax Revenue. When all the
individual Tax revenues are adequate then the Total tax revenue is adequate as well. If
a single individual Tax Revenue is inadequate then automatically makes Total Tax
Revenue inadequate.

Different model equations will be formulated to determine the required elasticities.

Elasticity of TTR to GDP; Elasticity of Individual tax revenue to GDP; Elasticity of
individual Tax Revenue to its base; Elasticity of base of tax to GDP; all these will
need different equations. Buoyancy of TTR to GDP and of Individual Tax Revenue to
GDP will need different equations. There will be seven (7) different equations
including that of computing Tax Effort. Computing Tax Revenue adequacy is
different from computing just Tax Revenue generation.
34
5.2.1 Model Specification for tax buoyancy of total tax revenue

Encova model8 which incorporates both Quantitative and Qualitative variables were
selected to estimate Tax buoyancy and elasticity. The traditional model as shown in
model formulation section (4.2) was first presented before specifying the model
implied by the theoretical analysis of the determinants of tax elasticity and buoyancy
(pp. 29-35). Then after prior considerations the model for tax buoyancy was specified
as follows:
ΔLTTR = α0 +α1 ΔL(GDP)+α2ΔL(B/D)+α3ΔL(Ext.Gr.) +α4ΔL(Un.infl.) +α5ΔLLit.rt)
+ α6 Δ L(Exc.r) + α7 Δ L( (M+X)) +α8D + ut ...................................................... ...................................(1)

Where;
α1 = Buoyancy of tax
Δ = first difference
L = Natural log
X = Exports
M = Imports
TR = Tax Revenue
GDP =Gross domestic product (National income)
B/D= Budget deficit
Ext.Gr. = External grant
Un.Infl. = underlying inflation
Lit.rt = literacy rate
Exc.rt = Exchange rate
D = Dummy for political upheaval
ut = Disturbance term
Note; α1, α5, α6, α7 > 0; α2, α3,α4, α8 < 0.
This model estimates the buoyancy of TTR with respect to GDP. When it comes to
estimating buoyancy of individual Taxes then there is a need to use a different
equation. Since the buoyancy of TTR with respect to GDP is not the same as that of
the individual Tax Revenues, there is a need to use different equations.

8. Ancova model includes both qualitative and quantitative regressors as opposed to Anova models that contain regressors that

are all exclusively dummy or qualitative in nature. Qualitative variables are nominal scale variables and they are as well known

as indicator variables or categorical variables ( Gujarati 2004, pp. 297,304).

35
5.2.2. Model for Buoyancy of Individual Taxes

To get the buoyancy of individual taxes, the following model is used:

LTRi = αo + α1 Δ L(GDP) + α2 Δ L(B/D)+ α3 Δ L(Ext.Gr.) +α4 Δ L(Un.infl.)
+ α5 Δ L(Lit.rt) + α6 Δ L(Exc.r) + α7 Δ L( (M+X)) +α8D + ut ............................................. (2)
Where TRi is the tax revenue of tax i and α1 is buoyancy of individual tax i. The tax
revenue series data for individual taxes were not differenced because they were
stationary in levels. Note; α1, α5, α6, α7 > 0; α2, α3,α4, α8 < 0.

5.2.3 Model for tax elasticity of Total Tax Revenue With respect to GDP

To estimate the elasticity of a tax system, it is necessary to isolate the effect of

discretionary changes in tax policy on tax revenue. The proportional adjustment
approach was utilised. Mansfield (1972) describes this approach (Proportional
Adjustment Approach) as shown in the theoretical Framework pages 29-35.
Therefore the model specified is:
Δ LTTR* = αo + α1ΔL(GDP) + α2ΔL(B/D)+ α3ΔL(Ext.Gr.) +α4 ΔL(Un.infl.) +
α5Δ L(Lit.rt) + α6 Δ L(Exc.rt) + α7 Δ L( (M+X)) +α8D + ut..........................................................(3)
Where; TTR* is the Adjusted Total Tax Revenue and α1 is tax elasticity.
Note; α1, α5, α6, α7 > 0; α2, α3,α4, α8 < 0.

5.2.4 Model for elasticity of individual main taxes with respect to GPD

LTRi* = αo +α1 Δ L(GDP) + α2 Δ L(B/D)+ α3 Δ L(Ext.Gr.) +α4 Δ L(Un.infl.) +

α5ΔL(Lit.rt)+α6ΔL (Exc.r) + α7 Δ L( (M+X)) +α8D + ut .................................................................. (4)

Where TRi* is the adjusted revenue in tax i and α1 is the elasticity of tax i with respect
to GDP. The tax revenue series data for individual taxes were not differenced because
they were stationary in levels. Note; α1, α5, α6, α7 > 0; α2, α3,α4, α8 < 0.

5.2.5 Decomposition of elasticity of individual taxes

Elasticity for individual taxes was decomposed into tax-to-base elasticity and base-to-
GDP elasticity. This was meant to establish the taxes which are elastic or inelastic to
their bases and the bases of taxes which are elastic or inelastic to GDP. Normally a
tax should be elastic to its base and a base should be elastic to GDP. Anything
contrary to this means that there is a problem and a solution to it should be sought.

36
5.2.5.1 Model for Elasticity of individual main Taxes with respect to their bases.

To estimate elasticity for individual taxes to their bases, the same model (4) was used.
Adjustment in the tax revenue for each individual tax as the dependent variable was
considered to estimate its elasticity to its proxy base. Instead of GDP, a Proxy base for
the tax in question was used.
The model was estimated as follows:
LogTRi* = αo + α1 Δ log βi + α2 Δ Ln(B/D)+ α3 Δ Ln(Ext.Gr.) +α4 Δ Ln(Un.infl.) +
α5 ΔLn(Lit.rt)+α6ΔLn(Exc.r)+α7 ΔLn( (M+X)) +α8D + ut ...............................................................(5)
Where TRi * is the adjusted tax revenue of tax i and Bi is tax base of tax i and α1 is
elasticity of individual tax i. Note; α1, α5, α6, α7 > 0; α2, α3,α4, α8 < 0.

5.2.5.2 Model for elasticity of tax base with respect to GDP.

In this case the proxy base for each individual tax was used as dependent variable
against GDP as one of the regressors. It was noted that GDP, Un.infl. Exc.rt and D
affect the tax bases. Then the model was specified as shown below.
Δlogβi =αo+α1 ΔL(GDP)+α2ΔL(Un.infl.)+α3Δ Ln(Exc.r) +α4D +ut .........................................(6)

Where; βi is the base of tax i and α1 is the elasticity of base of tax i with respect to
GDP. α1, α3 > 0 and α2, α4 < 0.

5.2.5.3 Expected Signs for the Coefficients of equations 1,2,3,4 & 5.

Literacy rate is expected to have positive (+) sign because when it increases also tax
revenue increases and vice versa. When inflation increases then tax revenue reduces
therefore it is expected to have a negative (-) sign. External grant is expected to have
a negative (-) sign because when it increases tax revenue reduces. When real
exchange rate rises, tax revenue increases so it is expected to have a positive (+) sign.
That of the budget deficit is negative as it increases the tax revenue reduces. The
expected sign for openness (X+M) is positive (+) and it is known that as it increases
tax revenue increases and vice versa; but that depends on government effort to collect
tax on imports and exports. The coefficient of the dummy is expected to be negative.
The expected signs are also given at each equation. In the situation where the
estimated parameters are negative a symbol for less than zero is used. And where the
parameters are expected to be positive, the symbol for greater than zero is used.
There is a need to find out whether the expected signs are the right ones after running
the regression.

37
5.2.5.4 Computation of tax effort index
Government tax effort was computed as follows:
Tax effort =((Buoyancy-Elasticity)/Elasticity) ……………….. (7).

A tax effort index greater than one implies that a country collected more revenue than
would be predicted given her economic, social and institutional conditions. On the
other hand a tax effort less than one implies that less tax revenue was collected than
would be predicted. A case whereby tax effort is less than one implies that the country
has a high capacity to increase her tax revenue. But a country having tax effort greater
than one has lower capacity to increase her tax revenue. It would therefore be
advisable for her to examine the expenditure side of the budget so as to reduce the
budget deficit other than redesigning the tax system for collecting more tax revenue
(Osoro 1997).

5.3 Types and Sources of Data

Quarterly data was collected for a period of 29 years, that is, 1980-2008 inclusive.
The researcher collected data from the following sources:
From Uganda Revenue Authority (URA), data was collected on tax revenue; Import
duties and income tax. From Uganda Bureau of Statistics (UBOS): data on literacy
rate; domestic factor incomes; private final consumption, National income (GDP) and
inflation rate were gathered.

From the Ministry of Finance, Planning and Economic Development, use was made
of background to the budget booklets to record budget deficits. Also data on tax
revenue, National income (GDP), Import duties and income tax was recorded.
Estimates of discretionary tax changes were obtained from Budget speeches and from
the Tax Policy Department (MFPED).

From Bank of Uganda, data on external grants were collected. Data on exchange rate
and domestic factor incomes were gathered from Bank of Uganda annual and
Quarterly reports.

Data on discretionary changes might affect the results because it is not very easy to be
exact. However, the researcher tried as much as possible to be accurate.

38
5.4 Time series data analysis
Data was processed and analysed using eviews which is one of the statistical packages
for data analysis. Since the data in question is time series, preliminary tests were
carried out to establish normality, multicollinearity and stationarity of the series.
Jarque-Bera test was employed to test for normality, Augmented Dickey-Fully tests
for stationarity and Johansen Co- integration procedure for testing co- integration on
variables. Some variables were transformed into percentages of TTR so as to get a
percentage that is used to compute discretionary tax revenue changes in individual
taxes with reference to the Discretionary changes in the TTR (Appendix 4)

5.4.1 Descriptive statistics

The descriptive statistics were established to get the means, medians, standard
deviations and the normality test for each of the variables.

5.4.2 Multicollinearity test

The correlation matrix for the variables was drawn and analysed. When the
correlation value is very close to zero it is concluded that the variables have no close
relationship. When the R2 of the run regression is high and the partial coefficients of
the regression are statistically different from zero then we are bound to conclude that
there is no multicollinearity.

5.4.3 Unit Root Tests

Using the Augmented Dickey-Fuller (ADF) test for stationarity, unit root tests were
carried out for each variable. The ADF-Test was used on series in level and in the 1st
difference. Conclusions about stationarity were made by comparing the ADF-Statistic
and the Critical values (C.V) at 1, 5 and 10 percent. When the ADF-Statistic is greater
in absolute terms than the critical value, the series is said to be stationary and the
reverse implies non-stationarity. Series that are stationary in levels are integrated of
order zero {1(0)}. While those stationary after the first difference are integrated of
order one {1(1)} and if stationary after the second difference, then the series are
integrated of order two{1(2)} and so on.

5.4.4 Cointegration Tests

Cointegration tests were carried out to verify whether the variables that were non-
stationary had a long run relationship or whether they were cointegrated. When
variables are cointegrated, it means the model containing such variables can be relied
on for policy recommendations. To test for cointegration we find out whether the
39
residuals for a given regression are integrated of order zero [1(0)] or stationary. If
they are stationary [1(0)], although the variables are individually 1(1) or have
stochastic trends, their linear combination cancels out the stochastic trends in these
variables (Gujarati, 2005) and as a result, such a regression would be meaningful and
not spurious.

5.4.5 Running a Regression

After carrying out preliminary tests in line with time series data, and using Ordinary
Least Squares (OLS) method, regression equations numbered 1 up to 6 were run
according to what a researcher wants to find out. Elasticity of individual taxes was
decomposed into elasticity of tax-to-base and elasticity of base-to-income (GDP).
Tax effort was computed using equation (7) as given in the model specification sub-
section.

5.4.6 Testing for Research Hypotheses

Statistic probabilities were used to reject or not to reject the null hypothesis.

40
 CHAPTER SIX

EMPIRICAL FINDINGS

The data collected from different sources outlined in the methodology sub-section 5.3
are presented in appendix 2. These data are subjected to diagnostic tests as shown
below and thereafter regressions are run to determine buoyancy, elasticity and tax
effort of total tax revenue and of the individual main taxes.

6.1 Diagnostic tests for time series data.

The data are subjected to diagnostic tests notably Normality, Stationarity and
Multicollinearity. These tests are meant to verify whether the data are normally
distributed, stationary and have no mutual correlation among the independent
variables and thereafter use it in regressions without fear of getting the spurious ones.

6.1.1 Normality test.

Normality test is carried out on the variables in their log level form. From appendix 1
Table A1.1 (pp 67-68), almost all the variables are normally distributed. The Jarque-
Bera value is low and the probability is high, that is, it is in excess of 50 percent for
every variable. Since the probability is in excess of 50 percent for every variable and
the Jarque-Bera is as low as possible, then it is clear that all the variables are normally
distributed.

When the probability distribution is perfectly normal the Jarque-Bera value is zero.
Whenever its value is nearer to zero the alludes to normal distribution. The Jarque-
bera value is as low as possible when it is less than 0.5. That is so because whenever
it is rounded off the result is practically Zero. The Jarque-Bera is used for this
research because the sample units are enough. When the sample size is not big enough
it is not advisable to use this test. The sample size must be big enough, that is, in
excess of hundred sample units.

The results in appendix show that the probability is in excess of 50 percent for every
variable and the Jarque-Bera is as low as possible, then it is clear that all the variables
are normally distributed. The sample size was big enough because it had one hundred
and sixteen sample units.

41
 6.1.2 Testing for stationarity.
The variables were subjected to ADF test and the results are given in table 6.1.and
table 6.2.
Table 6.1: Unit root test for Variables in Levels
VARIABLE ADF Statistic CV 1% CV 5% CV 10%
LGDP -1.402 -3.052 -2.667 -2.563 (1)
LTTR -3.019 -3.791 -3.342 -3.227 (1)
LB/D -2.902 -3.943 -3.562 -3.043 (1)
LUn.Infl. -1.821 -3.066 -2.675 -2.351 (1)
LExc.rt -2.317 -3.710 -2.930 -2.592 (1)
LVAT -3.723 -4.025 -3.567 -3.213 (0)
LInc.Tax -4.402 -4.083 -3.469 -3.161 (0)
LImp.Dut. -3.986 -4.121 -3.745 -3.234 (0)
LExci.Dut. -4.110 -4.097 -3.865 -3.435 (0)
LDisc.Meas. -1.003 -3.061 -2.654 -2.054 (1)
LLit.rt -2.002 -3.056 -2.754 -2.431 (1)
LExt.Grant -0.679 -3.001 -2.230 -2.006 (1)
LDom.F.Inc. -3.001 -3.978 -3.567 -3.123 (1)
LImp.Values -2.345 -3.893 -3.567 -2.875 (1)
LPriv.F.Cons. -1.987 -3.543 -2.435 -2.025 (1)
L(X+M) -3.009 -3.964 -3.657 -3.342 (1)
LExport values -2.860 -3.987 -3.675 -3.345 (1)

Where; L denotes logarithm and ADF is Augmented Dickey Fuller ; CV denotes

Critical Values; (0) means stationary in levels and (1) means stationary after
differencing once. GDP= Gross Domestic Product; Dom.F.Inc. =Domestic Factor
Income ; Exc.rt = Real Exchange rate; Exci.Dut.= Excise Duties ; TTR = Total Tax
Revenue ; Priv.F.Cons.= Private Final Consumption ; VAT =Value Added Tax ;
Disc.Meas =Discretionary changes in TTR; B/D = Budget deficit
Imp.Values = Import Values ; Inc.Tax = Income Tax ; Lit.rt = literate rate
Un.Infl. = underlying inflation ; (X+M) = Sum of imports and exports ; Imp.Dut. =
Import duties ; Ext.Grant = External Grant

The ADF statistics for four variables are in absolute terms greater than the critical
values for ADF statistic as shown in the table above. They are; Exci.Dut, Imp.Dut,
42
Inc.Tax and VAT. These four are stationary in levels, that is, Exci.Dut and Inc.Tax
are stationary at 1 percent level of significance while VAT and Imp.Dut are stationary
at 5 percent level of significance. For the rest of the variables their ADF statistics are
in absolute terms less than the critical values and therefore each of them has a unit
root.

A corrective mechanism is employed by taking the 1st differences of the non-

stationary variables. After taking the differences of the variables, each variable was
subjected to ADF test and the results are given in Table 6.2

Table 6.2: Unit root test for Variables in Differences.

VARIABLE ADT Statistic CV( 1%) CV( 5%) CV (10%) Status
DLGDP -3.285 -4.203 -3.945 -3.023 (0)*
DLTTR -3.941 -4.230 -3.873 -3.574 (0)**
DLB/D -6.005 -3.987 -2.985 -2.542 (0)***
DLUn.Infl. -4.053 -4.745 -3.585 -3.227 (0)**
DLExc.rt -3.295 -4.321 -3.370 -3.057 (0)*
DLDisc.Meas. -3.252 -4.321 -3.437 -3.123 (0)*
DLLit.rt -4.361 -3.123 -2.765 -2.345 (0)***
DLExt.Grant -3.694 -4.012 -3.482 -3.286 (0)**
DLDom.F.Inc. -5.054 -3.986 -2.987 -2.561 (0)***
DLImp.Values -3.418 -4.342 -3.982 -3.329 (0)*
DLPriv.F.Cons. -4.686 -3.671 -2.732 -2.314 (0)***
DL(X+M) -3.745 -4.119 -3.651 -3.102 (0)**
DLExport values -3.212 -4.031 -3.748 -3.079 (0)*

Notes: (i) L denotes logarithm and ADF is Augmented Dickey Fuller.

(ii) The asterisks ***, **, and * indicate significance at the 1 percent, 5 percent
and 10 percent significance levels respectively.

The results show that all the variables are I(0) after differencing and are significant at
a certain level of significance . Basing on the ADF statistic of each individual variable
and the critical values for ADF , the variables: Pri.F.Cons, Dom.F.Inc, Lit.rt, and B/D
are significant at 1 percent level of significance. Ext.Grant , Un.Infl. TTR and (X+M)
are significant at 5 percent level of significance. GDP, Ext.rt, Disc.Meas., Export
43
values and Import values are significant at 10 percent level of significance.

6.1.3 Testing for Multicollinearity

Table 6.3: Correlation matrix
LTTR LGDP LExcrt LExtGrant LUninfl LLitrt L(X+M) L(B/D)

LTTR 1.000 0.7632 0.6751 0.5734 -0.834 0.6843 0.7563 -0.678

LGDP 0.7632 1.000 0.0345 0.2452 0.1034 0.0345 0.2456 0.1234
LExcrt 0.6751 0.0345 1.000 0.2343 0.0121 0.0451 0.0123 0.0212
LExtGrant 0.5734 0.2452 0.2343 1.000 0.1034 0.0347 0.1123 0.2004
LUninfl -0.834 0.1034 0.0121 0.1034 1.000 0.0245 0.1134 0.0234
LLitrt 0.6843 0.0345 0.0451 0.0347 0.0245 1.000 0.3101 0.0231
L(X+M) 0.7563 0.2456 0.0123 0.1123 0.1134 0.3101 1.000 0.0101
L(B/D) -0.678 0.1234 0.0212 0.2004 0.0234 0.0231 0.0101 1.000
Where; TTR=Total tax revenue ; GDP=Growth domestic product; Excrt=Exchange
rate ; ExtGrant=External Grant ; Uninfl=Underlying inflation ; Litrt=literacy rate ;
X+M=Sum of exports and imports ; B/D=budget deficit.

TTR is highly correlated with the other variables but the variables themselves are
poorly correlated with each other. Their correlations are very close to zero. Therefore
there is no Multicollinearity among the independent variables. Another proof of
absence of multicollinearity is that for the regression in table 6.4, R2 is high and the
partial coefficients are statistically different from zero.

6.1.4 Testing for Cointegration

Unit root test shows that all the variables are unstationary in levels except Excise
duties, Import duties, VAT and income tax as shown in Table 6.1. Then a regression
in log levels is run, that is, TTR is regressed on unstationary basic variables that
influence it namely; GDP, Exchange rate, Inflation ,Budget deficit, External grant,
Literacy rate ,political upheaval and openness(X+M) and the results are shown in
table 6.4. What should be noted is that the variables used are the omes which were
not stationary. Those which are stationary are not used to run a regression for
cointegtration. That sometimes can be confused and then both stationary and
unstationary variables are used. That finally gives wrong results.

44
Table 6.4: In levels LTTR is regressed on independent variables that influence it.
Dependent Variable: LTTR
Method: Least Squares
Sample:1980-1---2008-1V
Variable Coefficients t-Statistic Prob.
C 0.016739 2.177962 0.4543
LGDP 1.582698 3.987343*** 0.0002
LExcrt 0.376552 3.379309*** 0.0000
LExtGrant -0.421201 -9.40310*** 0.0000
LUninfl -1.553781 2.879197** 0.0472
LLitrt 0.389157 -4.329683*** 0.0001
L(X+M) 0.869121 1.847812* 0.0632
L(B/D) -0.786 -3.007* 0.0743
D -0.0367 -2.0967* 0.0932

R2 = 0.9431; ADJ R2 = 0.9002; F. Statistic = 30.76; Prob(F.Statistic) =0.00046

DW=2.1345
The asterisk ***, ** and *denote significance at 1, 5 and 10 percent levels.

The regression results show that there is a relationship between TTR and the
independent variables and the coefficients of the independent variables are
statistically significant as shown in table 6.4. The coefficients of GDP, real exchange
rate, literacy rate, and openness are positive while those of External grant, underlying
inflation, political upheaval and budget deficit were negative just as it was expected
by Economic theory in chapter five, sub-section 5.2.5.3.

The adjusted R2 from the results of the regression is 0.9002 which implies that 90% of
variation in tax revenue is explained by the variables in the model. The F-statistics
strongly rejects the null hypothesis that the regression coefficients are jointly equal to
zero. This means that all the explanatory variables in the model are statistically
significant at a certain level of significant and therefore they are important
determinants of tax revenue in Uganda. The Durban Watson (DW) statistic of 2.1345
indicates that the regression does not suffer from problems of autocorrelation.
Then after the above analysis, the residuals from the regression are subjected to a
normality test. Table 6.5 presents the descriptive statistics of the regression residuals.

45
Table 6.5: Descriptive statistics for regression residuals
RESIDUALS
Observations: 116
Mean -1.19X 10-14
Median 7.747849
Maximum 171.5859
Minimum -153.7664
Std.dev. 66.23382
Skewness 0.119816
Kurtosis 3.234473
Jarque-Bera 0.257585
Probability 0.879156

From the information given in the table 6.5 above, the application of the Jarque-Bera
test shows that the JB statistic is about 0.2576 and the probability of obtaining such a
statistic under the normality assumption is about 88 percent. The JB statistic is low
whereas the probability is as high as possible (it is in excess of 50 percent), therefore
that testifies to the fact that the residuals are normally distributed. The residuals again
were subjected to ADF test and the results are given in table 6.6
Table 6.6:ADF residual results
ADF-stat C.V (1 percent) C.V (5 percent) Status
-3.295147 -2.7275 -1.9642 1(0)

Since the ADF-Statistic is greater in absolute terms than the critical values then the
residuals are stationary. The regression residuals were stationary in levels. This
proves that cointegration has taken place. In this case the regression results given in
table 6.4 are not spurious, though the variables used are unstationary. This shows that
there is a long run relationship between TTR and its determinants.

To prove that cointegration has taken place the residuals for the cointegartion
regression must be subjected to ADF test and Jarque-Bera test. In this case the Jarque-
bera test is used because the sample size is big and it has 116 sample units. These two
tests affirm whether cointegration has actually taken place. If these tests are not used
even if the estimated parameters of the regression are statistically significant, it is not
yet proved whether the regression is spurious or not. The residual term must not be
incorporated in short run model before subjected to the above mentioned tests.

46
6.1.4.1 Jahansen Cointegration test
Table 6.7:Jahansen Cointegration test results
likelohood 5 percent 1percent Hypopthesized
Eigenvalue Ratio Critical Value Critical Value No. Of CE(s)
0.319652 68.64143 62.99 70.05 None*
0.222750 40.14029 42.44 48.45 At most 1
0.163524 21.49275 25.32 30.45 At most 2
0.105853 8.279500 12.25 16.26 At most 3

*(**) denotes rejection of the hypothesis at 5 percent (1 percent) significant level.

Likelihood ratio test indicates 1 cointegrating equation(s) at 5 percent significant level.

From the table 6.7, the likelihood ratio of 68.64143 is greater than the critical value of
62.99. Therefore there is only one cointegrating equation at 5 percent level of
significant.

After carrying out the above tests, estimation of the error correction model follows.
That is the short run model that leads to the long run equilibrium model. It gives the
rate at which adjustment is done towards the long run equilibrium model. When the
speed is in excess of 50 percent then the speed is very high. When it is below 50
percent then the speed is low. Always the coefficient of the residual term incorporated
in the error correction model is negative. The incorporated residual term must be
lagged once.

The coefficient of the residual term in Error Correction model must be statistically
significant. The can be determined by using a t-test. The p-value can also be used to
determine the significance of the coefficient. When the p-value is above 0.05 but less
than 0.10, then the coefficient is significant at 10 percent. When the p-value is above
0.01 and less then 0.05, then the coefficient is statistically significant at 5 percent.
When the p-value is less than 0.01, then the coefficient is significant at 1 percent. Use
of p-values can be more beneficial in determining the statistical significance of the
coefficient than using the t-test. The p-values of the coefficients can be read directly
from the regression line. Whereas the t-test involves some calculations that appeal to
mathematical accuracy and to a good knowledge of inference statistics.

47
6.1.4.2 Dynamic Error Correction Model
Using Johansen Cointegration procedure, an error correction mechanism model that
leads to long run equilibrium is estimated. The lagged residuals from the above
regression denoted by ECT_1 are used as one of the independent variables and the
regression results are presented in Table 6.8.
Table 6.8: ECM for Total Tax Revenue estimated by OLS based on
Cointegration results.
Dependent Variable: ΔLTTR
Method: Least Squares
Sample:1980-1.........2008-1V
Variable Coefficients Sum of t-Statistic Prob.
Coefficients
C 0.006739 0.0067 1.177962 0.2433
ΔLTT_1 0.690228 0.6902 8.825414*** 0.0000
Δ LExcrt 0.365529 4.379309** 0.0231
Δ LExcrt_1 0.225916 0.5914 2.520860** 0.0143
Δ LGDP 1.082698 3.987343*** 0.0002
Δ LGDP_1 0.423773 1.5064 3.513350*** 0.0008
Δ LExtGrant -0.312018 -10.40310*** 0.0000
Δ LExtGrant_1 -0.223442 -0.3135 -6.002063*** 0.0000
Δ LUninfl -.053781 -2.129197** 0.0272
ΔLUninfl_1 -0.09006 -0.1438 -2.003098* 0.0395
Δ LLitrt 0.30915 4.329683*** 0.0001
Δ LLitrt_1 0.10995 0.4191 1.851131*** 0.0089
Δ L(X+M) 0.769121 1.567812* 0.0532
Δ L(X+M) _1 0.120232 0.8893 1.213451* 0.0631

ΔL(B/D) -0.3471 -2.0021** 0.0213

ΔL(B/D)_1 -0.4211 -0.7682 -1.2345** 0.0145

D -0.1348 -0.1348 -1.705427** 0.012

ECT_1 -0.283098 -0.2831 -3.909857*** 0.0002

R2 = 0.9211, ADJ.R2 = 0.9058, F. Statistic = 40.26; Prob (F.Statistic)=0.000000 ;

DW = 2.0457 The asterisk ***, ** and * denote significance at 1, 5 and 10 percent
levels. Where; ECT= error correction term. Δ = the first difference; L = Logarithm ;
B/D = Budget deficit ; Ut= disturbance term ; TTR= Total Tax Revenue; GDP=
Growth Domestic Product ; Excrt= Real Exchange rate; ExtGrant = External Grant;
Uninfl= Underlying inflation; Litrt = literate rate ; X+M = Sum of import values
and export values ; D = Dummy for political upheaval .

48
The adjusted R2 from the results of the model is 0.9058 and that implies 91 percent of
the variation in the tax revenue is explained by the variables in the model. The F-
statistics strongly rejects the null hypothesis that the regression coefficients are jointly
equal to zero. The Durban Watson (DW) statistic of 2.0457 indicates that the
regression does not suffer from problems of autocorrelation.

From table 6.8 the short run Total Tax Revenue equation that leads to long run Total
tax revenue is as follows:
ΔLTTR=0.0067+1.5064ΔLGDP+0.5914ΔLExcrt -0.3135ΔLExtGrant-0.1438ΔLUninfl+

0.4191ΔLLitrt+0.8893 ΔL(X+M)-0.7682ΔL (B/D) - 0.1348D -0.2831ECT_1+Ut

Where; L = logarithm ; B/D = Budget deficit ; Ut= disturbance term

TTR= Total Tax Revenue ; GDP= Growth Domestic Product ; D = Dummy for
political upheaval ; Excrt= Real Exchange rate ; Litrt = literate rate; Uninfl=
Underlying inflation ; X+M = Sum of import values and export values ; Ext.Grant =
External Grant.

From the regression presented in table 6.8 we see that there is a relationship between
total tax revenue and the independent variables. The variables GDP, Excrt, Litrt and
X+M influence TTR positively. For example if GDP increases by 1% Total Tax
revenue increases by 1.5064 percent. A one percent increase in Excrt increases TTR
by 0.5914 percent. An increase of 1 percent in (X+M) increases TTR by 0.8893
percent. A one percent increase in Litrt increases TTR by 0.1992 percent.

On the other hand the variables ExtGrant, B/D, Uninfl and D influence the Total tax
revenue negatively. For example when ExtGrant increases by 1 percent TTR reduces
by 0.3135 percent. If Uninfl increases by 1 percent TTR reduces by 0.1438 percent.
When B/D increases by 1 percent then TTR reduces by 0.7682 percent. Political
upheaval influences TTR negatively and in this case when D increases by 1 percent
then TTR reduces by 0.1348 percent.

The findings disapprove the hypothesis which is, „There is a positive relationship
between total tax revenue and the Budget deficit‟. The coefficient for Budget deficit is
negative. Therefore an increase of 1 percent in budget deficit reduces tax revenue
by .786 percent. We reject the null hypothesis and conclude that there is a negative

49
relationship between total tax revenue and budget deficit. It is stipulated that increase
in budget deficit increases external debt which in turn suffocates investment and
hence a reduction in tax base and tax revenue (Osoro 1997).

The coefficient of error correction term gives the speed of adjustment of each variable
towards its long-run equilibrium value, while the sign of the coefficient gives the
direction of adjustment towards equilibrium. The higher the coefficient of lagged
error term, the faster the speed of adjustment towards equilibrium level. If the sign of
the coefficient is negative, it implies convergence towards the equilibrium in the long-
run. From the table given above the coefficient of the error correction term is -
0.283098 and is significant. It implies rather a low speed of adjustment. This means
that 28 percent of the previous errors in the tax revenue are corrected for in the current
period,„t‟.

6.1.4.3 Test results for the Dynamic Forecasting ability of the Error Correction

Figure :6.1

.04
F or ec ast: DLT T RF
.03 Actual: DLT T R
F or ec ast sample:1980Q1 2008Q4
.02 Adjuste d samp le: 1980Q1 2008Q4
Includ ed obse r vation s: 115
.01
Root Mean Squared Error 0.005536
.00 Mean Absolute Error 0.004227
Mean Abs. Percent Error 152.1770
-.01 Theil Inequality Coefficient 0.255101
Bias Proportion 0.000000
-.02 Variance Proportion 0.094873
Covariance Proportion 0.905127
-.03

-.04
80 83 86 89 92 95 98 01 04 06 08

D L TTR F ± 2 S.E.

Theil inequality Coefficient from figure 6.1 whose value is 0.255101 is close to zero.
That means the estimated ECM has a fairly good forecasting ability and therefore its
results are reliable. Good forecasting ability of the model can be decided by looking at
the figure. If the blue line is between the two red lines, then the model has a good
forecasting ability. In the figure above, the blue line lies between the two lines
therefore the model has a good forecasting ability. Its results are reliable and therefore
can be used for policy formulation.

50
6.2 Buoyancy, elasticity and effort of main taxes for pre-reform period 1980-1990.
In this sub-section regression equations 1, 2, 3 and 4 in chapter 5 are run to estimate
buoyancy and elasticity of TTR and of the individual main taxes. The results are
shown in tables 6.9 and 6.10. To decompose elasticity of individual taxes into tax-to-
base and base-to-GDP elasticity, regression equations 5 and 6 in chapter 5 are run and
the results are presented in Tables 6.11 and 6.12. To estimate tax effort equation 7 in
chapter 5 is used and results are given in table 6.13.

6.2.1 Buoyancy of Total tax revenue and of the main taxes

Equations (1) & (2) in chapter 5 are used to estimate buoyancy of TTR and of the
main taxes and the results are given in table 6.9.
Table 6.9: Buoyancy of TTR and of the main taxes 1980-1990
TAX Buoyancy t-ratio Prob. R-squared DW
Overall tax(TTR) 1.398** 33.676 0.0213 0.954 1.465
Income Tax 1.347*** 49.788 0.0035 0.978 2.226
Import Duties 1.659*** 13.945 0.0000 0.975 1.965
Sales tax 1.291*** 19.619 0.00256 0.959 2.279
Excise duties 1.433*** 12.817 0.00561 0.988 1.985

All taxes are relatively buoyant. The TTR and income tax are significant at 5 percent
level of significance. Import values, VAT and Excise tax are significant at 1 percent
level of significance.

6.2.2 Elasticity of total tax revenue and of the main taxes

Equations (3) and (4) in Chapter 5 are used to compute elasticity of TTR and of the
main taxes and results are presented in table 6.10.
Table 6.10 :Elasticity of TTR and of the main taxes for the period 1980-1990
TAX Elasticity t-ratio Prob. R-squared DW
Overall tax(TTR) 0.748 12.375 0.11234 0.956 1.558
Income Tax 0.809 9.473 0.2578 0.937 1.267
Import Duties 1.357*** 10.806 0.0067 0.978 1.054
Sales tax 1.048*** 14.892 0.0000 0.989 1.078
Excise duties 0.706 6.605 0.2478 0.870 1.299
The overall tax system is inelastic (0.748). Income tax (0.809) and excise duties
(0.706) are inelastic. But import duties and Sales tax are elastic and significant at 1

51
percent level of significance.

6.2.3 Decomposition of elasticity of the main taxes into tax-to-base elasticity and
Base-to-income elasticity 1980-1990.
Regression equation (5) in chapter 5 is used to estimate tax-to-base elasticity of the
main taxes and the results are presented in table 6.11.
Table 6.11: Tax-to-base elasticity
TAX Elasticity t-ratio Prob. R-squared DW
Income Tax 0.579 12.985 0.1589 0.979 1.691
Import Duties 1.078*** 9.980 0.00032 0.954 1.256
Sales tax 1.079*** 13.048 0.0000 0.975 1.998
Excise duties 0.983** 7.853 0.0457 0.887 1.278

Income tax is inelastic while Import duties and VAT are elastic at 1 percent level of
significance. In this case as domestic factor incomes grow, income tax revenue drags
behind. This means that a lot of income is not tax netted.

Regression equation (6) in chapter 5 is used to estimate base-to-income elasticity of

the main taxes and the results are presented in table 6.12.
Table 6.12: Base- to- income elasticity
ITEM VALUE Elasticity t-ratio Prob. R-squared DW
Dom.F.Income 1.740*** 20.654 0.00045 0.987 2.716
Import values 1.276*** 35.054 0.00067 0.998 2.347
Import values + 0.976 98.209 0.24671 0.842 1.796
Priv.F.Cons
Import values + 0.983 97.509 0.13671 0.832 1.692
Priv.F.Cons

Domestic factor incomes and import values are elastic to GDP at 1 percent level of
significance. Private final consumption plus import values are inelastic to GDP. That
implies that the bases for sales tax and excise duties do not grow as GDP grows.
There is a need to broaden those bases. Usually when the base is inadequate that leads
to inadequate TTR. It is always advisable that government determines the adequacy
of the bases of individual taxes. If an individual Tax Revenue is adequate it has to be
elastic to its base and in turn the base must be elastic to GDP.

52
6.2.4 Computation of tax effort for pre-reform period 1980-1990
Equation (7) in chapter 5 is used to estimate tax effort of TTR and of the main taxes
and the results are presented in table 6.13.

Table 6.13: Effort indexes for period 1980-1990

TAX Effort
Overall tax(TTR) .869
Income Tax .665
Import Duties .223
Sales tax .232
Excise duties 1.03

There is low government tax effort that is below a unity for Sales tax (.232) and
import duties (.223). Excise duties (1.03) have high tax effort above a unity. Tax
effort for all the taxes except Excise duties is below that of the average country which
is 1.1. Strategies are needed to increase tax effort. Since almost all taxes have tax
effort below unity, it is evidence of country‟s high tax potential.

6.3 Buoyancy, elasticity and effort indexes for post-reform period 1991-2008
In this sub-section regression equations 1, 2, 3 and 4 in chapter 5 are run to estimate
buoyancy and elasticity of TTR and of the individual main taxes. The results are
shown in tables 6.14 and 6.15. To decompose elasticity of individual taxes into tax-to-
base and base-to-GDP elasticity, regressions equations 5 and 6 in chapter 5 are run
and the results are presented in Tables 6.16 and 6.17. To estimate tax effort , equation
7 in Chapter 5 is used and results are given in table 6.18.

6.3.1 Buoyancy of Total tax revenue and of the main taxes

Equations (1) & (2) in chapter 5 are used to estimate buoyancy of TTR and of the
main taxes and the results are given in table 6.14. There is a need to compute
buoyancy of individual taxes and of TTR differently. That is done by using different
equations. The buoyancy of each Tax Revenue is used in the computation of Tax
effort. The difference between buoyancy and elasticity written as percentage of
elasticity gives the tax effort of that individual tax or TTR. Normally the Tax effort
should be 1.1 or more. When it is below unity then more government effort is needed.

53
Table 6.14: Buoyancy of TTR and of the main taxes for 1991-2008
TAX Buoyancy t-ratio Prob. R-squared DW
Overall tax(TTR) 1.403*** 16.224 0.0024 0.984 1.634
Income Tax 2.413*** 15.667 0.0000 0.976 1.767
Import Duties 0.763 11.674 0.1234 0.959 1.807
VAT 1.475** 18.041 0.0124 0.988 2.437
Excise duties 1.503** 7.895 0.0356 0.877 1.936

TTR and income tax were buoyant at 1 percent level of significance. VAT and Excise
duties were buoyant at 5 percent level of significance. That is attributable to tax
reforms made in this period. Import duties (0.763) were not buoyant. That might be
due to tax evasion, corruption and perhaps smuggling.

6.3.2 Elasticity of total tax revenue and of the main taxes

Equations (3) and (4) in Chapter 5 are used to compute elasticity of TTR and of the
main taxes and results are presented in table 6.15.
Table 6.15: Elasticity of TTR and of the main taxes for 1991-2008
TAX Elasticity t-ratio Prob. R-squared DW
Overall tax(TTR) 0.654 9.293 0.1235 0.921 2.317
Income Tax 2.089*** 15.442 0.0012 0.973 1.872
Import Duties 0.483 8.676 0.2412 0.911 2.356
VAT 1.307** 16.376 0.0234 0.965 2.008
Excise duties 0.308 3.829 0.3217 0.876 1.312

Income tax performed well. It was elastic (2.089) to GDP at 1 percent level of
significance. The favourable response might have come about as a result of the new
income Act that was enacted in 1997. Vat also responded very well. It is elastic at 5
percent level of significance. TTR, import duties and Excise duties are inelastic.

6.3.3 Decomposition of the elasticity of the main taxes 1991-2008.

Regression equation (5) in chapter 5 is used to estimate tax-to-base elasticity of the
main taxes and the results are presented in table 5.16. Decomposition is done to
determine the adequacy of TTR and of individual tax revenue. If individual Taxes are
not decomposed then there is no way adequacy of tax can be computed. Computing
adequacy of TTR entails first computing adequacy of individual taxes.

54
Table 6.16: Tax-to-base elasticity for period 1991-2008.
TAX Elasticity t-ratio Prob. R-squared DW
Income Tax 1.032*** 19.825 0.0012 0.987 1.647
Import Duties 0.345 2.698 0.2101 0.813 2.247
VAT 1.652*** 9.579 0.0000 0.892 2.904
Excise duties 0.425 3.406 0.1234 0.934 1.261

Income tax and VAT were elastic to their bases at 1 percent level of significance.
Excise duties and import duties were inelastic to their bases.

Regression equation (6) in chapter 5 is used to estimate base-to-income elasticity of

the main taxes and the results are presented in table 6.17.

Table 6.17: Base-to-income elasticity for period 1991-2008

ITEM VALUE Elasticity t-ratio Prob. R-squared DW
Dom. F. Income 2.034*** 15.706 0.0001 0.983 1.963
Import values 0.748 3.746 0.2231 0.656 1.352
Import values + 0.954 17.089 0.1231 0.987 1.735
Priv.F.Cons
Import values + 0.965 17.089 0.1125 0.976 1.726
Priv.F.Cons

Although VAT did well in the post-reform period its base has lagged behind the
growth in income as shown by low base-to-income elasticity of 0.954 compared to
tax-to-base elasticity of 1.652. The base of VAT did not grow in line with income.
Private final consumption and import values are inelastic to GDP.

6.3.4 Computation of tax effort for main taxes for period 1991-2008
Equation (7) in chapter 5 is used to estimate tax effort of TTR and of the main taxes
and the results are presented in table 6.18. The buoyancy of each Tax Revenue is used
in the computation of Tax effort. The difference between buoyancy and elasticity
written as percentage of elasticity gives the tax effort of that individual tax or TTR.
Normally the Tax effort should be 1.1 or more. When it is below unity then more
government effort is needed.

55
Table 6.18 : Tax Effort for 1991-2008.
TAX EFFORT
Overall tax(TTR) 1.145
Income Tax .155
Import Duties .5797
Vat/sales tax .1285
Excise duties 3.23

Tax effort for Income tax (.155) and Vat (.1285) is very low.
Excise duties (3.23) and TTR (1.145) have a high tax effort that was beyond that of
an average country tax effort which is 1.1.

6.4.0 Estimation of buoyancy, elasticity and effort of taxes for both Pre- and
post-reform periods combined 1980-2008.
In this sub-section regression equations 1, 2, 3 and 4 in chapter 5 are run to estimate
buoyancy and elasticity of TTR and of the individual main taxes. The results are
shown in tables 6.19 and 6.20. To decompose elasticity of individual taxes into tax-to-
base and base-to-GDP elasticity, regressions equations 5 and 6 in chapter 5 are run
and the results are presented in Tables 6.21 and 6. 22. To estimate tax effort equation
7 in chapter 5 is used and the results are given in table 6.23.

6.4.1 Buoyancy for Total Tax Revenue (TTR) and for individual taxes.
Equations (1) and (2) in Chapter 5 are used to estimate buoyancy of the Total Tax
Revenue (TTR) and of individual taxes and the results are presented in Table 6.19
below.
Table 6.19: Buoyancy indexes of TTR and individual taxes for Period 1980-2008.
TAX BUOYANCY t-ratio Prob. R-squared DW
Overall tax(TTR) 1.322*** 75.428 0.0023 0.988 1.833
Income Tax 1.584*** 32.853 0.0001 0.997 2.502
Import Duties 1.504*** 19.835 0.0005 0.976 1.716
Vat/sales tax 1.349** 37.339 0.0267 0.962 1.912
Excise duties 1.413** 24.723 0.0187 0.991 1.722

All taxes were buoyant and their indexes were in excess of a unity. TTR, Income Tax
and Import duties were buoyant at 1 percent level of significance. Vat and Excise

56
duties are buoyant at 5 percent level of significance. The high buoyancy coefficients
show the impact of discretionary measures that were introduced between 1980 and
2008.

6.4.2 Elasticity of TTR and individual taxes for period 1980-2008.

Equations (3) and (4) in chapter 5 are used to estimate elasticity of TTR and of
individual taxes. The results are recorded in Table 6.20.
Table 6.20 :Elasticity of TTR and individual main taxes for period 1980-2008.
TAX Elasticity t-ratio Prob. R-squared DW
Overall tax(TTR) 0.747 29.281 0.1235 0.987 1.503
Income Tax 0.839 13.571 0.3256 0.906 1.940
Import Duties 1.423*** 18.789 0.0012 0.921 2.493
Vat/sales tax 1.127** 30.007 0.0235 0.981 2.085
Excise duties 0.718 15.048 0.1324 0.988 1 .894

The elasticity of Uganda‟s overall tax system for the period 1980-2008 was 0.747.
That shows that the tax system in Uganda is inelastic. For every 1 percent rise in GDP
during 1980-2008, the Uganda tax system yields only a 0.747 percent increase in tax
revenue. The overall tax elasticity is affected by low tax-to-base elasticity of income
tax which is 0.734 and low base-to-income elasticity of excise duties and Vat/sales tax
which are 0.756 and 0.983 respectively (Table 6.19 & Table 6.20).

6.4.3 Decomposition of elasticities of the main taxes into tax-to-base Elasticity

and Base–to-income elasticity for period 1980-2008.
Regression equation (5) in chapter 4 is used to estimate tax-to-base elasticity of the
main taxes and the results are presented in table 6.21.

Table 6.21: Tax-to-base elasticity of the main taxes

Tax Elasticity t-ratio Prob. R-squared DW
Income Tax 0.734 18.169 0.1253 0.894 2.439
Import Duties 0.985 16.726 0.2134 0.956 1.001
Vat/sales tax 1.247*** 29.769 0.0041 0.901 2.118
Excise duties 1.236*** 14.093 0.0017 0.935 1.992

Vat and Excise duties are elastic to their proxy bases at 1 percent level of significance.
But income tax and import duties are inelastic to their proxy bases.
57
Regression equation (6) in chapter 5 is used to estimate base-to-income elasticity of
the main taxes and the results are presented in table 6.22.
Table 6.22: Base-to-income elasticity of the main taxes
ITEM VALUE Elasticity t-ratio Prob. R-squared DW
Dom.F.Income 1.601 34.572 0.0012 0.889 1.715
Import values 1.205 30.012 0.0153 0.971 1.974
Import values + Priv.F.Cons 0.983 77.961 0.1143 0.908 2.095
Import values + Priv.F.Cons 0.756 67.098 0.3234 0.999 1.593

From Tables 6.21 & 6.22, the low tax-to-base elasticity of Income tax (0.734) with
high proxy base-to-income coefficient (1.601) alludes to a big proportion of untaxed
or uncollected revenue. There was low tax-to-base elasticity of import duties (0.985)
but with high base-to-income elasticity (1.205). That signifies that a lot of import
volumes are not tax netted. The base which is the import values has grown in line
with growth in GDP but growth in revenue has lagged behind the growth in the tax
base.

6.4.4 Computation of tax effort of Total tax revenue and of individual main taxes
for period 1980-2008.
Equation (7) in chapter 5 is used to compute tax effort and the results were given in
table 6.23.
Table 6.23 : Tax effort for each tax for period 1980-2008
TAX EFFORT
Overall tax(TTR) .7697
Income Tax .8879
Import Duties .0569
Vat/sales tax .1890
Excise duties .9679

The government effort index is below unity. The average country should have an
effort index of 1.1. Therefore government tax effort is quite below that of an average
country.

58
 CHAPTER SEVEN

CONCLUSIONS AND RECOMMENDATIONS

In this chapter a summary related to the study problem and objectives is given. The
summary basically presents the analysis of buoyancy, elasticity and tax effort of total
tax revenue and of the individual tax revenues for; Pre-reform period (1980-1990),
post reform period (1991-2008) and whole period combining the Pre- and Post-reform
periods (1980-2008). Suggestions in terms of possible policy options and further
research are also provided.

7.1 Summary
Based on the findings of this study, there is a negative relationship between total tax
revenue and the budget deficit (Table 6.8). Also total tax revenue is negatively
affected by external grants and the underlying inflation (Table 6.8).

For the pre-reform period (1980-1990), all the taxes were buoyant (Table 6.9). Only
import duties and sales tax were elastic but total tax revenue, income tax and excise
duties were inelastic (Table 6.10). When elasticity of individual taxes was
decomposed, income tax and excise duties were inelastic to their bases (Table 6.11).
All the taxes except excise duties had tax effort of less than one (Table 6.13).

In the period after the reforms (1991-2008), all the taxes were buoyant except import
duties and the buoyancy was higher than in the period before the tax reforms (Table
6.14).Income tax and VAT were elastic but other taxes were inelastic and their
elasticity declined (Table 6.15). When elasticity of individual taxes was decomposed
income tax and VAT, they were elastic to their bases. However excise duties and
import duties were inelastic (table 6.16). There was a big gap between tax-to-base
elasticity and base- to- GDP elasticity of income tax (Tables 6.16 & 6.17). The base
of VAT was inelastic to national income while that of income tax was elastic (Table
6.17). Total tax revenue and excise duties had tax effort that was more than one but
the rest had tax effort that was less than one (Table 6.18).

When the two periods pre- and post reforms were combined (1980-2008), all the taxes
were buoyant (Table 6.19). For the whole period TTR was inelastic (table 6.20).
When elasticity of individual taxes was decomposed, there was low tax-to-income

59
elasticity for income tax and low base-to-income elasticity for excise duties and VAT
(Tables 6.21 and 6.22). For the whole period tax effort was less than one (Table 6.23).

7.2 Conclusion
Total tax revenue is negatively related to the budget deficit, that is, as total tax
revenue increases the budget deficit decreases and vice versa. Similarly, increase in
external grants and underlying inflation reduces total tax revenue and vice versa. That
implies budget deficit, external grants and underlying inflation affect the Total Tax
Revenue.

Excise duties were inelastic to GDP, to their base and the base was inelastic to GDP
in both the pre- and post- reform periods. That means that a lot of tax was not
collected and the tax base is narrow and therefore needs broadening. That also implies
that the two periods were characterised by inadequate Total Tax revenue.

With the exception of import duties, the buoyancy of taxes was higher in the post
reform period than in the pre-reform period. That is attributed to discretionary
measures that were undertaken in the post reform period. Low buoyancy of import
duties was attributed to corruption, tax evasion and smuggling. It is also shown very
clearly that the reforms increased the tax effort indexes. In the post reform periods
they were relatively higher than in the pre-reform period.

Income tax performed better in the post reform period because of the new income tax
of 1997. But there was a big gap between tax-to-base elasticity and base-to-GDP
elasticity of income tax. That means a lot of tax is not netted. VAT as a replacement
of Sales tax performed better but its base needs broadening because it is inelastic to
GDP. VAT revenue is elastic to the base but the base itself is inelastic to GDP.
Inadequacy of VAT alludes to inadequacy of Total Tax Revenue.

Considering the whole research period (1980-2008), it is concluded that Uganda has
generally an inelastic tax system and a tax effort which is less than one. Therefore the
tax system in not revenue enhancing. That also implies the whole period was
characterised by inadequate Total Tax Revenue. The tax system needs redesigning so
as to increase tax revenue generation. Inadequate tax revenue generation testifies to
the fact of the persistence of national budget deficits in Uganda.

60
7.3 Policy Recommendations
Uganda in general has a tax effort which is less than one (Tables 6.12 & 6.23). That
implies it has a high tax potential. The country should redesign her tax system in order
to increase her tax revenue. The government can widen the tax bases by introducing
new taxes to items or activities that are not taxed. It can raise tax rates where it is
appropriate so as to mobilise more tax revenue that can help in the reduction of the
national budget deficit.

There was overwhelming evidence of a big gap between tax-to-base and base-to –
income elasticity for income tax. It is an indication of untaxed potential revenue in
public hands that leads to inadequate Total Tax Revenue. The government should
come up with policies that put all domestic factor incomes under the tax net. That will
increase tax revenue and eventually a reduction in national budget deficit.

The government should fight tax evasion and inefficiency in revenue administration,
and do away with exemptions so as to increase tax- to- base elasticity and the
buoyancy of import duties. That will lead to increment in tax revenue and eventually
to a reduction in the national deficit.

There is a need to increase excise tax revenue. That can be achieved through
expanding the tax base whereby private final consumption plus import values grow in
line with growth in GDP. Reducing taxes on consumable products and narrowing
down unemployment rate can increase private final consumption. That may result into
increment in excise tax revenue that leads to reduction in the national budget deficit.

VAT was supposed to be more revenue enhancing than sales tax. But the base-to-
GDP elasticity for this tax is low. The growth in the base for this tax did not grow
proportionately to growth in the national income. In this case the tax base lagged
behind the growth in the national income. The base can be broadened if the
government improves efficiency in tax administration, abolish some exemptions and
fight against corruption. If that is achieved then more tax revenue will be collected
and that will help to reduce national budget deficit.

The government should increase its effort in domestic revenue mobilisation through
proper and just tax administration and education of the masses about the usefulness of

61
tax revenue. In cases where taxes are inelastic to their proxy bases but the bases
elastic to national income, more effort should be made to boost the taxes‟ yields
towards their proxy bases. The government should make it a policy to estimate tax-to-
base elasticity and base-to-national income elasticity of every tax annually so as to
determine which taxes are revenue enhancing and which are not.

The country faces two problems given in the back ground; the inadequate tax revenue
and the expansive government expenditure. What policies should be recommended to
avert the problems? Osoro (1997) says that some economists and policy makers think
that low tax collection causes persistent deficits. They say that such deficits would be
eliminated or substantially reduced by policies that would raise tax revenue. Other
economists hold that rapid increase in public spending rather than poor tax collection
is the cause of the high growth and persistence of budget deficits. This group argues
that efforts to raise taxes will fail to reduce the deficit if they do not go hand in hand
with measures to reduce public spending. In line with this, the Uganda government is
recommended to reduce the budget deficit by limiting spending on available resources
in addition to measures meant for tax revenue mobilisation.

7.4 Suggestions for further research

This study has considered budget deficit with reference to inadequate tax revenue or
domestic tax revenue. It has not been all exhaustive. Inadequacy of domestic tax
revenue is not the only cause of budget deficit. Research about other causes of budget
deficit in Uganda should be carried out. Research should be carried out in line with
expansive government expenditure, corruption in government departments etc., as
causes of national budget deficit.

62
 REFERENCES

Agbeyegbe T. D., Stotsky J. and Asegedech W. (2005) ,Trade liberalization,

exchange rate changes, and tax revenue in Sub-Saharan Africa, Department of
Economics, Hunter College and The Graduate Center, City University of NY, NY,
United States

Akinlo A. E. (2006) Macroeconomic Factors and Total Factor Productivity in Sub-

Saharan African Countrie International Research Journal of Finance and Economicss
ISSN 1450-2887 Issue 1

Ariyo, A. (1997); „Productivity of the Nigeria Tax System.‟ Africa Economic

Research Consortium Research paper, No. 67.

Ayoki M., Obwona M. & Ogwapus M. (2008) ,Tax Reforms and Domestic Revenue
Mobilisation in Uganda, Fountain Publishers, Kampala

Ayoki M.,(2007), “Tax performance in poor countries”, Country report Uganda.

IPRA Working paper No.21.

Bollinger P.(2005), Fiscal Capacity, Effort and burden, Policy Research Project,
Fiscal Capacity of Texas Cities.

Bolnick B.R (2002), Demographic effects on tax ratios in developing countries, Duke
University, Durham, NC 27706, USA.

Byrne (1983), „Data cleaning aand adjustment process, journal of public economics,
21(1983):257-94.

Chipeta, C. (1998) „Tax Reforms and tax Yield in Malawi‟, AERC research paper
No.81, Nairobi.

Christodoulakis N.M. (1994), Tax collection lags and the revenue maximising
inflation, Athens university of economics and business,76, patission Street, Athens
104 34 , Greece.

Fjeldtad,O and Rakner, L.(2003). Taxation and tax reforms in developing counties:
Illustrations from sub-Saharan Africa. Bergen: Chr. Michelsen institute.

Gassama H.N (2004); „Elasticity and Buoyancy of the tax system in Liberia.‟ MA
Dissertation submitted to the University of Botswana, Gaborone.

Ghura D. (1998), Tax Revenue in sub-Saharan Africa: Effects of economic policies

and corruption, IMF working paper.

Ghura Dhaneshwar, (1998), “Tax revenue in Sub Saharan Africa: Effects of economic
policies and corruption”, IMF Working paper 98/135 (Washington: IMF).

Ghura, D. (1998) „Tax Revenue in Sub-Saharan Africa: Effects of economic policies

and corruption‟, IMF Working Paper.

Goode(1984), Tax effort in developing countries, Econometrica 49 (1984):185-202.

63
Government of Uganda (GOU)(1980-2008), Background to the budget 1980/81,
1981/82...2008/09, MFPED, Kampala.

Gujarati D.N (2003); Basic Econometrics, 4th edition, united States military academy,
West point, Mc Graw Hill, New York.

Hulten (1993), „Methods for estimating elasticities‟, institute of development of

studies, Sussex.

Jayasundera P.B (1991), „Buoyancy and elasticity of taxes‟ in report of the taxation
commission, 1990, printed on the orders of the government of Sri Lank.

Joergen R., Lotz and Elliott . Morss (1970), “Economic Development and Cultural
Change”, Journal of Economics, 18, No.3,328-341,University of Chicago Press

Kiwanuka C.K.(2004), „Taxation and investment in Uganda structure and trend‟, A

presentation to business forum in London, U.K for investment opportunities in
Uganda.

Kusi, K.N. (1998); „Tax reform and revenue productivity in Ghana.‟

AfricanEconomic Research Consortium Researc Paper, No. 74.

Lewis S.R and Mokgethi D.N.(1983); „Botswana‟s econom,y since independence‟,

Tata Mcgraw-Hill publishing company limited, new Delhi.

Mansfield,C.Y.(1972) „Elasticity and buoyancy of a tax system- A method applied to

Paraquay‟, IMF Staff papers, vol.19.

Matundu O. (1995); „Evaluation of the revenue performance of the Namibian Tax

System‟ MA Dissertation submitted to the university of Botswana, Gaborone.

Milambo(2001), „Elasticity and buoyancy of a tax system‟,illustrations from sub-

Saharan Africa, Bergen: Chr. Michelsen institute.

Mtatifikolo F.P. (1990); „An Economic Analysis of tanzania‟s Tax Performance

Experiences since the 1973 tax Axt.‟ Eastern Africa Economic Review.

Muriithi, M.K and Moyi, E.D.(2003) „Tax Reforms and Revenue Mobilization in
Kenya‟, AERC Research paper 131,AERC,Nairobi.

Murtuza Dalal (2009) : “Uganda Tax guide”, PKF international ltd.

Musgrave R.A (1969); „Public finance in theory and practice, 5th Edition, McGraw-
Hill book Co-singapore.

Mutambi, B. (2004) „Tax Reforms and Revenue productivity in Uganda‟, draft report.

Njoroge (1993), „Revenue productivity of tax reforms in Kenya,‟ An African

economic paper No. 23.

Okollo A.K (2001); „An analysis of excise taxation in Kenya.‟ An African Economic
Policy Paper, No. 73.

64
Ole (1975), „Income elasticity of tax structure of Kenya for period from 1962/63-
1972/73‟, An African Economic policy paper, No. 65.

Osoro N.E (1993) „ Revenue productivity implications of Tax Reform in Tanzania‟,

Research Paper No. 20, AERC, Nairobi.

Osoro N.E (1997), „Public spending, taxation and deficits‟, AERC, research paper
number 62.

Parthasarathi Shome (1988), „On the Elasticity of developing Country tax Systems‟,
Economic and Political Weekly.

Prest, A.R. (1962) „The sustainability of the Yield of Personal Income in the United
Kingdom‟, Economic Journal, vol.72.

Richard Rose(1985), Maximizing Tax Revenue while Minimizing Political Costs,

Journal of Public Policy, Vol. 5, No. 3, Taxation pp. 289-320 Cambridge University
Press

Singer (1968), „Techniques for data analysis, Journal of African Economics, No. 7.

Tanzi Vito, (1981), “ A Statistical Evaluation of taxation in Sub-Saharan Africa”.

Washington: International Monetary Fund, pp. 45-50.

Tanzi Vito, (1992), Structural factors and tax revenue in developing countries: A
decade of evidence, in “Open Economics: Structurral Adjustment and Agriculture”,
Ed.by Ian Goldinand L. Alan Winters (Cambridge University Press), pp. 267-281
Working Paper, WP/97/107, September.

Teera Joweria M.,(2003), “Determinants of tax revenue share in Uganda” University

of Bath, Department of economics.

Teera, J.M. (1998); „Tax performance: A comparative study.‟ Bath, university of Bath.

Thac D.C and Lim D.(1984); „Papua new Guinea‟s tax performance, 1965-1997‟,
world development 12(4): 451-459.

Tsegaye (1993), „Buoyancy and Elasticity of Tax system‟, IMF Staff papres Vol.31.
Uganda Revenue authority, (2008). “Uganda‟s taxation policy; Implications for
poverty reduction and economic growth”, Review report No.9.

Wojciech Kopczuk (2003); „Tax Bases, Tax Rates and the Elasticity of Reported
income.‟ Department of economics, University of British Columbia, New York.

Yaqub M. (1994); „The causes and consequences of budget deficit in Pakistan‟,

Economic review.

Zaake, J (2000) „Tax Reform policies: The Experience of Uganda‟, unpublished

paper.z

65
 APPENDICES

APPENDIX 1: DIAGNOSTIC RESULTS

Table A1.1 : Descriptive statistics for variables in log level form
Lgdp LTTR LB/DGDP Lun.Infl. LExc.rt Lvat
Mean 6.275060 5.70170 1.119702 2.105207 6.462863 4.707595
Median 7.352441 6.075504 1.252763 2.084429 7.005528 5.017081
Maximum 8.784912 8.132736 2.459589 3.719166 7.567800 7.162080
Minimum 0.231112 3.523415 -1.203973 0.058269 3.075790 2.269028
Std.Dev 2.670070 1.625494 0.841632 0.903586 1.269848 1.616366
Skewness -1.148923 -0.10309 -0.786943 0.003459 -1.18277 -0.05627
Kurtosis 2.849542 1.447447 3.554886 2.362777 3.209400 1.497960
Jarque-Bera 0.776901 0.257585 0.417046 0.490706 0.82467 0.367891
Probability 0.68175 0.879156 0.811782 0.782428 0.665421 0.84091
Observations 116 116 116 116 116 116

Table A1.1: Cont…………………

LInc.Tax LImp.Dut LExci.Dut. LDisc.Meas. LLit.rt LExt.Grant
Mean 3.889595 3.768622 3.492103 2.668028 -0.6419 8.7022350
Median 4.166665 4.176539 3.924149 2.565718 -0.5276 8.163941
Maximum 6.283966 5.057582 5.209978 3.763523 -0.3566 11.43258
Minimum 1.562346 1.543298 1.378766 1.098612 -1.1711 7.769379
Std.Dev. 1.781700 1.100668 1.548267 0.803882 0.2690 1.026599
Skewness -0.06172 -0.31176 -0.215961 -0.230255 -0.6479 1.558781
Kurtosis 1.454523 1.617127 1.294219 1.841921 2.0442 4.548801
Jarque-Bera 0.495101 0.727001 0.234513 0.450345 0.57123 0.34672
Probability 0.812301 0.595421 0.687123 0.79284 0.80345 0.74052
Observations 116 116 116 116 116 116

66
 Table A1.1 : Cont…………………………..

LDom.F.Inc Export values LImp.Values LPriv.F.Cons

Mean 8.153399 8.2355887 8.786776 7.738031
Median 8.501470 8.6115612 8.947546 7.536897
Maximum 9.869051 10.180031 10.67586 9.193194
Minimum 6.084499 7.520653 7.402452 6.113682
Std.Dev. 1.289482 1.001235 1.017361 0.959705
Skewness -0.231747 -0.015412 -0.024372 0.084060
Kurtosis 1.519844 1.646123 1.751659 1.845837
Jarque-Bera 0.45672 0.404561 0.45321 0.56432
Probability 0.78134 0.690123 0.68012 0.56856
Observations 116 116 116 116

67
APPENDIX 2: Series of data after carrying out Diagnostic tests stated in the
Methodology
Yr Gdp(BILL) TR(Bill) TR%GDP G.Exp. B/D B/D%GDP
1980-1 200.07 9.02 1.02 20.20 8.02 0.35
1980-11 206.03 8.08 1.08 30.16 9.52 1.01
1980-111 201.50 6.30 1.03 10.04 6.31 0.37
1980-1V 205.30 10.50 1.03 20.47 7.12 1.17
1981-1 224.02 9.03 1.01 20.03 7.01 1.11
1981-11 232.00 12.01 1.12 15.05 10.00 0.59
1981-111 221.05 6.00 1.05 20.03 6.02 1.10
1981-1V 236.01 8.04 1.10 14.01 8.01 0.60
1982-1 220.20 9.01 1.07 16,17 4.05 0.3
1982-11 232.05 12.02 1.20 16.20 6.03 0.7
1982-111 352.05 10.01 1.03 18.40 3.01 0.4
1982-1V 102.20 8.03 1.01 14.10 5.04 0.6
1983-1 230.02 10.05 1.09 17.02 6.21 0.3
1983-11 248.10 9.40 1.01 16.02 5.22 0.4
1983-111 208.30 11.15 1.20 14.03 5.21 0.5
1983-1V 270.10 11.20 1.10 23.05 8.23 0.8
1984-1 237.04 9.02 1.00 17.05 8.00 0.6
1984-11 230.30 10.02 1.10 20.02 8.01 0.7
1984-111 242.40 11.01 1.15 22.02 8.03 1.1
1984-1V 236.10 12.04 1.20 25.05 9.01 1.2
1985-1 230.00 8.06 1.00 16.20 3.10 0.6
1985-11 237.01 9.05 1.05 17.10 8.10 0.7
1985-111 238.00 12.04 1.10 23.05 9.07 0.9
1985-1V 244.00 14.03 1.40 24.20 10.10 1.0
1986-1 232.00 7.12 1.10 20.10 7.00 0.8
1986-11 237.01 9.51 1.11 21.02 7.10 0.9
1986-111 241.00 13.14 1.20 24.04 9.10 1.0
1986-1V 244.00 14.21 1.20 26.12 12.10 1.0
1987-1 232.30 9.10 1.02 20.00 7.50 0.95
1987-11 234.20 10.20 1.20 22.00 8.10 0.95
1987-111 238.10 12.10 1.20 25.05 11.10 1.05
1987-1V 238.20 13.10 1.30 26.10 12.15 1.15
1988-1 237.05 8.30 1.05 13.10 1.01 0.1
1988-11 233.20 10.15 1.10 15.20 1.11 0.3
1988-111 230.40 12.05 1.20 17.03 3.11 0.3
1988-1V 238.30 14.10 1.40 19.60 5.10 0.4

68
 1989-1 468.07 19.10 1.20 40.04 17.30 1.0
1989-11 460.04 21.10 1.20 45.12 20.20 1.1
1989-111 464.03 24.07 1.20 48.10 23.10 1.2
1989-1V 470.02 25.30 1.21 50.11 23.204 1.2
1990-1 660.02 30.12 1.05 180.10 29.30 1.10
1990-11 667.04 33.11 1.20 182.10 31.10 1.10
1990-111 669.10 34.24 1.40 183.00 32.01 1.20
1990-1V 674.30 36.32 3.20 184.10 33.10 1.30
1991-1 890.10 40.10 1.10 118.14 60.02 1.2
1991-11 893.16 42.10 1.20 120.30 69.02 1.5
1991-111 897.10 48.16 2.18 124.20 72.04 2.1
1991-1V 900.20 50.10 3.00 126.10 78.10 3.0

1992-1 1360.30 68.10 1.20 110.10 40.22 0.5

1992-11 1368.20 70.10 1.22 115.14 42.22 0.5
1992-111 1370.12 72.10 2.03 117.04 43.14 1.0
1992-1V 1378.12 72.30 3.12 120.10 44.20 1.1

1993-1 1760.22 90.10 1.24 170.20 70.12 1.0

1993-11 1764.21 93.10 1.31 171.20 75.12 1.0
1993-111 1765.11 94.05 2.21 172.40 78.14 1.1
1993-1V 1768.12 96.10 3.11 173.03 80.10 1.2
1994-1 2350.04 120.23 1.02 190.11 60.40 0.2
1994-11 2351.04 126.20 2.02 193.22 63.30 0.4
1994-111 2352.03 128.14 2.11 197.21 64.07 1.0
1994-1V 2353.01 132.42 3.12 200.42 66.20 1.1
1995-1 2800.21 150.20 1.20 200.02 50.04 0.2
1995-11 2805.10 152.15 2.20 210.02 54.10 0.3
1995-111 2808.23 154.20 3.20 218.04 58.14 0.7
1995-1V 2810.31 155.15 3.21 228.10 62.20 0.8
1996-1 3000.20 180.20 2.02 200.2 20.12 0.1
1996-11 3090.05 183.40 2.02 210.0 21.22 0.2
1996-111 3094.05 186.12 2.10 212.1 22.10 0.2
1996-1V 3184.10 186.20 4.10 220.2 23.14 0.2
1997-1 3000.40 200.03 2.01 210.11 7.04 0.1
1997-11 3008.22 200.12 2.01 214.05 8.03 0.1
1997-111 3009.11 206.02 2.01 216.12 10.02 0.05
1997-1V 3016.20 206.12 5.00 218.11 11.01 0.05
1998-1 3500.11 230.02 2.11 293.03 30.40 0.1
1998-11 3520.01 239.04 2.14 296.03 31.11 0.2
1998-111 3526.12 242.12 2.21 297.01 32.11 0.2
1998-1V 3546.11 248.10 5.12 299.04 33.21 0.4

69
 1999-1 3000.04 200.00 2.12 280.20 70.31 0.2
1999-11 3400.08 250.00 2.12 283.20 77.13 0.6
1999-111 3403.08 254.00 2.30 285.30 79.21 0.7
1999-1V 3800.04 304.00 5.00 288.17 86.22 0.8

2000-1 3670.10 375.05 2.11 384.11 82.31 0.3

2000-11 3670.10 377.05 2.23 386.25 84.11 0.5
2000-111 3672.12 379.02 2.31 388.40 85.12 0.7
2000-1V 3672.20 379.03 5.12 389.13 86.20 0.8
2001-1 4080.21 310.10 2.20 495.11 178.10 1.1
2001-11 4083.32 312.10 2.20 497.51 179.20 1.1
2001-111 4085.21 314.00 2.30 498.12 180.30 1.1
2001-1V 4086.12 315.05 5.11 499.24 181.13 1.1
2002-1 4520.11 358.10 2.11 520.21 156.01 0.5
2002-11 4523.10 359.10 3.01 522.11 158.13 0.7
2002-111 4524.01 360.10 3.01 524.12 159.12 1.1
2002-1V 4526.11 361.12 4.12 524.25 160.01 1.2
2003-1 5034.10 420.20 2.10 945.23 497.01 1.6
2003-11 5037.10 423.30 3.10 947.21 498.02 2.0
2003-111 5039.02 425.21 3.13 948.23 499.05 3.1
2003-1V 5042.10 426.10 4.05 949.22 501.00 3.2
2004-1 5910.05 490.21 1.30 575.11 50.31 0.1
2004-11 5913.01 499.21 2.20 577.21 52.32 0.1
2004-111 5915.02 501.03 4.01 579.22 54.14 0.3
2004-1V 5916.00 508.32 5.11 580.12 56.12 0.4
2005-1 6295.40 584.30 1.11 1150.02 540.11 1.2
2005-11 6297.31 587.23 2.21 1154.02 541.01 2.1
2005-111 6298.12 589.11 4.30 1157.00 542.12 2.2
2005-1V 6299.11 592.10 5.10 1158.03 543.10 3.1
2006-1 7340.10 705.40 2.30 1340.01 605.02 1.2
2006-11 7345.10 709.10 3.20 1344.02 609.12 2.0
2006-111 7349.01 711.12 4.10 1346.10 612.10 2.1
2006-1V 7354.20 713.30 4.12 1348.03 613.00 3.0
2007-1 8700.20 841.05 2.10 1890.12 1014.12 2.3
2007-11 8701.20 850.01 3.10 1893.12 1017.13 2.4
2007-111 8702.30 852.04 4.00 1895.12 1019.12 3.0
2007-1V 8703.05 861.00 4.01 1898.13 1022.02 4.0

Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of
Uganda; Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda
annual and Quarterly reports; World Bank and IMF publications.
Gdp=Gross domestic product.

70
TTR= Total Tax Revenue.
TRGDP=TTR as % of Gdp.
B/DGDP=Budget Deficit as % of Gdp.
B/D = Budget deficit
G. Exp=Government expenditure.

71
Appendix 2: Cont……………………..
Yr Un.Infl. Exc.rt Vat VatGdp VatTR Inc.Tax

1980-1 5.01 18.15 2.13 0.2 5.40 1.13

1980-11 6.00 19.30 2.22 0.2 6.20 1.21
1980-111 7.00 20.20 2.22 0.3 8.30 1.21
1980-1V 9.00 22.30 3.10 0.4 9.00 1.33
1981-1 6.05 19.10 2.12 0.25 5.20 2.13
1981-11 7.04 20.05 2.31 0.25 6.30 2.22
1981-111 8.00 21.05 2.34 0.25 7.10 2.31
1981-1V 10.00 22.00 5.21 0.25 9.21 2.32

1982-1 2.00 26.11 3.21 0.1 5.22 1.23

1982-11 2.02 27.11 3.32 0.3 7.31 1.24
1982-111 2.03 28.10 3.33 0.5 8.12 1.41
1982-1V 2.04 29. 00 5.12 1.0 9.11 2.01

1983-1 1.00 54.01 3.42 0.3 6.23 1.20

1983-11 1.01 57.01 4.54 0.4 7.40 1.30
1983-111 1.02 59.01 5.00 0.5 8.22 1.40
1983-1V 1.03 62.00 5.02 0.6 9.04 2.00

1984-1 2.00 126.10 3.03 0.2 8.21 1.0

1984-11 2.01 127.10 4.04 0.4 9.34 1.1
1984-111 2.01 128.13 5.01 0.6 11.21 1.2
1984-1V 2.02 129.01 6.01 0.7 12.13 3.0
1985-1 2.11 26.00 4.01 0.4 8.42 3.0
1985-11 2.22 27.00 4.02 0.5 9.32 3.1
1985-111 2.23 29.00 4.04 0.5 11.11 3.2
1985-1V 2.31 30.00 6.10 0.6 12.11 3.6

1986-1 3.03 3.22 4.10 0.3 10.11 1.11

1986-11 4.02 5.21 4.10 0.3 10.15 1.15
1986-111 6.10 6.11 4.10 0.5 10.22 1.21
1986-1V 7.02 7.12 6.00 0.7 10.51 1.52
1987-1 5.10 13.00 4.10 0.3 10.01 1.00
1987-11 5.10 14.00 4.10 0.4 10.01 1.00
1987-111 5.11 16.00 4.20 0.6 10.01 1.01
1987-1V 6.00 17.00 6,00 0.7 11.00 3.00

72
 1988-1 2.02 40.10 4.11 0.4 10.11 1.11
1988-11 2.02 42.10 4.12 0.4 10.11 1.11
1988-111 2.10 44.10 4.12 0.6 10.11 1.23
1988-1V 4.13 44.11 6.13 0.7 11.10 1.32

1989-1 2.12 80.02 4.10 0.3 8.20 2.10

1989-11 2.12 81.10 5.04 0.6 8.21 2.12
1989-111 2.12 85.02 7.12 0.6 8.21 2.13
1989-1V 5.02 86.02 8.01 0.7 9.21 3.11
1990-1 9.02 138.11 9.20 0.4 6.30 3.14
1990-11 6.01 139.10 9.30 0.5 7.20 3.22
1990-111 5.13 140.11 10.10 0.6 8.20 3.31
1990-1V 7.01 141.01 11.01 0.7 10.00 5.20
1991-1 8.12 240.13 10.22 0.2 5.23 4.23
1991-11 10.10 245.12 11.11 0.4 6.32 5.10
1991-111 11.01 248.12 13.12 0.6 7.21 6.21
1991-1V 12.00 250.00 14.21 0.7 8.20 8.10
1992-1 5.40 300.20 19.41 0.3 6.21 9.23
1992-11 6.12 300.20 20.11 0.6 7.34 10.12
1992-111 7.23 300.40 21.22 0.7 8.12 11.12
1992-1V 9.11 301.01 23.10 0.9 10.00 13.10
1993-1 2.20 272.30 25.22 0.5 5.06 11.21
1993-11 2.30 275.20 26.11 0.6 7.02 12.22
1993-111 2.40 277.01 28.54 0.7 8.01 13.21
1993-1V 3.01 278.10 29.01 0.9 9.07 14.13
1994-1 1.11 230.14 36.23 0.7 5.24 13.20
1994-11 1.12 232.22 37.41 0.7 7.12 15.20
1994-111 1.13 234.23 38.22 0.8 8.42 17.10
1994-1V 3.10 236.00 39.11 0.9 9.00 19.00

1995-1 2.21 250.11 45.42 0.7 6.41 15.12

1995-11 2.22 350.12 46.21 0.7 7.11 16.12
1995-111 2.32 250.42 47.21 0.8 8.11 17.12
1995-1V 5.22 251.11 49.11 0.9 9.10 19.02

1996-1 1.10 263.02 52.04 0.05 5.20 20.11

1996-11 1.12 264.02 54.02 0.05 7.20 21.01
1996-111 1.12 265.03 55.02 0.05 8.00 23.01
1996-1V 1.13 266.01 56.01 0.15 9.10 24.11

73
 1997-1 0.25 285.21 63.31 0.05 6.06 25.21
1997-11 0.26 287.12 64.21 0.05 7.01 26.23
1997-111 0.27 288.01 66.31 0.05 9.01 27.31
1997-1V 0.28 289.21 67.20 0.15 10.04 29.13
1998-1 0.33 339.01 78.11 0.05 6.31 35.11
1998-11 0.42 340.00 80.12 0.05 8.00 36.11
1998-111 1.01 341.01 81.01 0.05 9.00 38.11
1998-1V 1.02 342.00 82.02 0.15 10.21 39.10
1999-1 1.01 376.12 84.11 0.05 7.01 38.33
1999-11 1.01 377.31 85.01 0.05 8.01 39.23
1999-111 1.03 379.13 86.01 0.05 9.01 40.21
1999-1V 3.00 380.21 88.00 0.05 10.01 41.02
2000-1 1.21 439.31 92.05 0.05 6.31 48.02
2000-11 1.21 440.20 93.05 0.05 8.20 49.06
2000-111 1.22 441.11 94.05 0.05 9.00 51.03
20001V 1.31 442.30 95,05 0.05 10.20 52.01
2001-1 0.77 337.22 105.30 0.05 7.20 63.13
2001-11 0.86 339.31 107.20 0.05 8.20 64.13
2001-111 0.95 440.01 109.20 0.05 9.10 65.12
2001-1V 0.95 438.02 110.10 0.15 10.01 67.10

2002-1 0.60 469.22 122.13 0.05 7.13 78.31

2002-11 0.60 470.21 123.13 0.05 8.11 79.31
2002-111 0.61 471.23 124.11 0.05 9.11 80.21
2002-1V 0.61 472.20 126.10 0.15 10.10 82.11
2003-1 1.00 482.23 141.21 0.1 6.21 99.11
2003-11 1.01 483.21 143.10 0.1 8.21 100.11
2003-111 1.01 484.22 144.10 0.1 9.21 101.00
2003-1V 2.00 485.20 145.11 0.2 10.21 102.00
2004-1 0.51 433.22 165.21 0.1 6.31 103.13
2004-11 0.52 434.22 164.20 0.1 8.20 106.02
2004-111 1.00 435.01 167.21 0.2 10.10 107.02
2004-1V 1.00 435.23 168.20 0.2 12.10 109.00
2005-1 1.01 454.02 193.31 0.1 8.02 116.10
2005-11 1.01 456.01 195.30 0.1 10.02 117.01
2005-111 1.01 457.01 196.10 0.1 11.02 118.10
2005-1V 1.02 458.01 197.21 0.1 12.00 119.00
2006-1 2.02 443.00 230.02 0.1 9.03 118.01
2006-11 2.02 444.00 231.01 0.1 11.03 120.01
2006-111 2.02 446.00 232.02 0.1 12.01 121.01
2006-1V 2,02 447.00 233.01 0.2 13.02 122.00

74
 2007-1 1.02 422.13 282.13 0.1 8.40 126.01
2007-11 1.03 423.11 283.11 0.1 9.30 129.00
2007-111 1.03 425.11 285.11 0.2 10.10 127.01
2007-1V 2.01 426.10 286.00 0.3 11.10 130.00
2008-1 1.02 480.10 320.23 0.1 9.31 132.31
2008-11 1.02 482.10 322.12 0.2 10.30 133.30
2008-111 1.03 483.10 323.11 0.3 11.20 134.20
2008-1V 3.00 484.00 324.12 0.3 13.10 136.10
Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of
Uganda; Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda
annual and Quarterly reports; World Bank and IMF publications.
Un.Infl=Underlying Inflation
Exc.rt=Exchange rate
Vat=Value added tax
VatGdp=Vat as % of Gdp
VatTR=Vat as % of TTR
Inc.Tax=Income Tax

75
 Appendix 2: Cont…………
Yr Inc.T.Gdp Inc.TaxTR Imp.Dut. Imp.Du.Gdp Imp.Du.TR Exci.Dut. Exc.Du.Gd
p

1980-1 0.05 2.1 2.02 0.3 2.01 2.12 0.05

1980-11 0.05 2.2 2.03 0.4 2.02 2.21 0.05
1980-111 0.1 2.3 2.03 0.5 2.03 2.32 0.05
1980-1V 0.2 2.3 5.01 0.7 2.03 2.32 0.05
1981-1 0.1 2.10 3.00 0.4 3.00 0.9 0.05
1981-11 0.1 2.11 3.02 0.4 3.00 0.9 0.05
1981-111 0.1 2.11 3.03 0.4 3.00 0.9 0.1
1981-1V 0.3 3.10 3.03 0.4 3.01 0.9 0.1
1982-1 0.1 2.02 3.02 0.2 2.22 1.2 0.25
1982-11 0.1 2.02 3.03 0.3 2.23 1.3 0.25
1982-111 0.2 2.03 3.03 0.4 2.32 1.3 0.25
1982-1V 0.3 5.01 4.01 0.6 4.11 3.1 0.25
1983-1 0.2 2.03 3.20 0.3 2.20 1.20 0.1
1983-11 0.2 3.02 3.20 0.4 2.20 1.30 0.1
1983-111 0.2 3.03 3.21 0.5 2.20 1.31 0.1
1983-1V 0.2 4.01 5.10 0.6 5.20 3.10 0.1
1984-1 0.1 3.02 3.01 0.3 2.21 0.7 0.1
1984-11 0.1 3.03 3.02 0.4 2.22 0.8 0.1
1984-111 0.2 3.03 3.02 0.5 2.23 1.2 0.1
1984-1V 0.2 4.01 6.01 0.5 4.21 1.2 0.1
1985-1 0.1 2.02 3.02 0.3 2.11 0.8 0.25
1985-11 0.1 2.03 3.02 0.3 2.21 0.9 0.25
1985-111 0.1 2.03 3.02 0.9 2.23 1.1 0.25
1985-1V 0.2 5.01 6.02 0.9 5.10 1.1 0.25
1986-1 0.2 3.01 4.02 0.5 2.12 1.13 0.1
1986-11 0.2 3.02 4.02 0.7 2.23 1.22 0.2
1986-111 0.2 3.03 4.02 0.8 2.23 1.22 0.3
1986-1V 0.2 3.03 6.01 0.9 4.01 1.31 0.5
1987-1 0.1 2.00 4.02 0.4 3.00 1.13 0.1
1987-11 0.1 2.00 4.02 0.5 3.00 1.23 0.1
1987-111 0.2 2.01 4.03 0.6 3.01 1.31 0.2
1987-1V 0.3 4.00 7.01 0.8 3.01 1.32 0.2
1988-1 0.1 2.20 1.11 0.1 2.12 1.20 0.1
1988-11 0.1 2.20 1.12 0.1 2.12 1.20 0.1
1988-111 0.1 2.20 1.13 0.1 2.13 1.21 0.1
1988-1V 0.2 4.10 1.32 0.2 4.11 1.30 0.2

76
 1989-1 0.1 2.11 2.02 0.1 2.02 1.13 0.1
1989-11 0.1 2.12 2.02 0.1 2.11 2.00 0.1
1989-111 0.3 2.21 2.12 0.3 2.11 2.01 0.1
1989-1V 0.3 4.12 3.02 0.3 4.01 2.11 0.2
1990-1 0.1 2.11 3.11 0.1 2.01 3.10 0.1
1990-11 0.2 2.12 3.11 0.2 2.01 3.10 0.2
1990-111 0.2 2.13 3.11 0.2 2.02 3.11 0.2
1990-1V 0.3 4.01 4.11 0.2 4.01 3.11 0.2
1991-1 0.1 3.00 5.11 0.2 2.21 3.01 0.1
1991-11 0.2 3.05 5.11 0.2 2.31 3.01 0.1
1991-111 0.3 3.05 5.21 0.2 2.31 3.01 0.2
1991-1V 0.3 4.00 6.11 0.2 5.11 6.00 0.2
1992-1 0.2 3.10 8.22 0.2 3.13 4.12 0.1
1992-11 0.2 3.11 9.12 0.2 3.22 4.22 0.1
1992-111 0.3 3.11 10.22 0.3 3.23 4.32 0.1
1992-1V 0.5 6.10 11.12 0.4 4.11 6.12 0.2
1993-1 0.2 3.10 11.21 0.2 3.02 8.21 0.25
1993-11 0.2 3.20 12.11 0.3 3.02 10.12 0.25
1993-111 0.3 3.20 14.12 0.3 3.02 11.12 0.25
1993-1V 0.5 4.10 15.12 0.5 5.02 12.21 0.25
1994-1 0.2 3.20 14.11 0.2 3.21 12.10 0.25
1994-11 0.3 3.21 16.01 0.2 3.21 12.10 0.25
1994-111 0.3 3.21 17.01 0.4 3.21 12.31 0.25
1994-1V 0.5 3.10 18.01 0.5 3.22 14.10 0.25
1995-1 0.2 2.01 17.23 0.2 3.10 15.03 0.2
1995-11 0.2 2.02 18.21 0.2 3.10 16.02 0.3
1995-111 0.3 2.02 19.21 0.3 3.10 17.03 0.3
1995-1V 0.4 4.01 21.21 0.5 3.10 19.01 0.4
1996-1 3.00 2.23 16.12 0.7 2.20 24.01 0.8
1996-11 3.00 2.31 17.12 0.8 2.21 25.00 0.8
1996-111 3.10 2.32 19.02 0.9 2.21 27.00 0.9
1996-1V 3.10 5.13 20.01 0.9 3.20 28.00 1.1
1997-1 2.10 3.03 18.02 0.5 2.10 27.22 0.7
1997-11 2.30 3.11 19.01 0.7 2.20 28.22 0.8
1997-111 2.30 3.12 20.02 0.7 2.21 29.22 1.1
1997-1V 5.10 4.02 21.00 0.8 3.10 31.12 1.2
1998-1 2.00 3.12 20.13 0.5 2.02 32.11 1.00
1998-11 3.00 3.13 23.11 0.6 2.02 32.21 1.10
1998-111 4.00 3.13 25.11 0.7 2.02 32.22 1.10
1998-1V 5.00 5.11 28.13 0.7 4.01 33.11 1.20

77
 1999-1 2.00 3.21 24.03 0.2 2.11 32.12 0.6
1999-11 2.10 3.21 26.02 0.4 2.11 32.12 0.9
1999-111 2.10 3.22 27.01 0.8 2.11 32.12 1.1
1999-1V 5.00 6.11 28.03 0.8 5.10 35.01 1.2
2000-1 2.00 4.10 32.01 0.3 3.10 31.12 0.7
2000-11 2.00 4.10 35.00 0.4 3.20 31.12 0.8
2000-111 2.10 4.10 36.00 0.5 3.20 31.22 0.9
2000-1V 5.00 6.00 37.00 0.9 3.20 32.11 1.3
2001-1 3.00 5.11 29.01 0.4 2.12 34.01 1.00
2001-11 3.00 5.21 29.10 0.5 2.12 34.12 1.00
2001-111 3.10 5.21 29.10 0.5 2.12 34.12 1.10
2001-1V 3.10 5.21 30.01 0.8 3.01 37.01 1.10
2002-1 3.00 5.01 33.02 0.2 2.01 35.02 1.00
2002-11 3.00 5.11 33.02 0.4 2.11 36.02 1.10
2002-111 3.00 5.11 33.02 0.6 2.12 38.01 1.10
2002-1V 3.10 7.01 34.01 0.8 3.01 39.02 1.10
2003-1 3.10 5.21 33.21 0.20 1.20 44.12 1.10
2003-11 3.10 5.21 33.32 0.40 1.30 44.13 1.20
2003-111 3.20 5.21 33.32 0.70 1.30 33.13 1.20
2003-1V 3.20 8.10 34.10 0.70 3.10 45.01 1.20
2004-1 3.1 5.20 32.22 0.2 2.12 40.03 1.10
2004-11 3.2 5.21 33.22 0.3 2.22 41.02 1.10
2004-111 3.3 5.21 35.21 0.4 2.22 43.01 1.10
2004-1V 3.3 8.21 36.22 0.5 2.22 44.03 1.20
2005-1 3.00 4.01 34.12 0.3 2.01 38.30 0.7
2005-11 3.00 5.00 36.11 0.4 2.01 39.30 0.8
2005-111 3.01 7.00 37.11 0.5 2.01 40.20 0.9
2005-1V 4.00 8.00 38.01 0.9 5.00 41.10 1.5
2006-1 3.10 6.01 35.21 0.7 3.02 43.01 1.10
2006-11 3.20 6.02 36.20 0.7 3.02 44.00 1.10
2006-111 3.20 6.11 37.20 0.8 3.02 46.00 1.20
2006-1V 3.20 7.01 38.20 0.9 4.02 47.00 1.20
2007-1 3.20 6.02 36.03 0.6 2.11 43.01 1.10
2007-11 3.20 6.03 37.02 0.7 2.11 45.01 1.20
2007-111 3.20 6.03 38.01 0.8 2.12 46.01 1.20
2007-1V 4.00 8.01 39.03 0.9 3.11 47.00 1.20
2008-1 3.20 6.21 38.10 0.2 2.00 44.03 1.1
2008-11 3.30 6.21 39.11 0.1 2.01 45.02 1.2
2008-111 3.30 6.22 40.00 0.3 2.01 46.03 1.3
2008-1V 4.10 8.11 41.00 0.4 4.00 48.01 1.3

Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of Uganda;

78
Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda annual and Quarterly
reports; World Bank and IMF publications.

Imp.Dut=Import Duties
Inc.TaxTR=Income Tax as percent of TTR ; Exci.Dut=Excise Duties
Imp.Du.Gdp=Import Duties as percent of Gdp ; Exci.Du.Gdp=Excise Duty as percent of Gdp
Inc.T.Gdp=Income Tax as percent of Gdp
Imp.Du.TR=Import Duties as percent of TTR

79
Appendix 2: cont……………………………………….

Yr. Exc.D.TR Disc. Lit.Rt Ext.Grant Ext.Gr.Gdp Dom.F.Inc Imp.Values

Meas.
1980-1 1.02 1.1 0.01 590 5.30 139 440
1980-11 2.02 1.2 1.11 591 6.20 140 443
1980-111 3.02 1.3 0.11 502 8.10 141 441
1980-1V 3.02 1.3 0.12 594 9.30 142 444
1981-1 3.01 0.7 0.01 876 6.03 148 473
1981-11 3.02 0.7 0.11 880 7.02 149 474
1981-111 3.02 0.8 0.11 882 9.01 150 475
1981-1V 3.01 0.8 0.12 884 10.03 151 476

1982-1 2.02 1.20 0.01 781.01 5.00 166 446

1982-11 2.03 1.20 0.11 783.02 5.00 167 447
1982-111 2.03 1.20 0.11 782.03 5.01 168 448
1982-1V 5.01 3.10 0.12 784.03 6.00 170 449
1983-1 2.01 0.8 0.07 737.03 7.03 170 408
1983-11 2.02 0.9 0.07 738..02 8.02 172 409
1983-111 2.03 1.0 0.08 740.01 9.03 173 411
1983-1V 2.03 1.0 0.09 741.03 10.01 174 412
1984-1 1.03 1.00 0.02 837.02 6.03 108 495
1984-11 2.03 1.00 0.10 838.02 7.02 109 496
1984-111 3.01 1.10 0.10 839.02 9.01 110 497
1984-1V 3.02 2.00 0.10 840.02 10.03 112 499
1985-1 3.00 1.20 0.10 872.01 3.03 194 467
1985-11 3.00 1.20 0.10 874.01 4.02 195 468
1985-111 3.01 1.20 0.10 875.00 6.01 197 470
1985-1V 4.00 4.20 0.10 876.00 7.03 198 471
1986-1 3.00 2.00 0.10 717.02 5.02 195 494
1986-11 3.01 2.00 0.10 718.02 6.01 197 495
1986-111 3.01 2.00 0.10 720.02 7.02 198 496
1986-1V 5.00 2.10 0.10 721.02 9.01 199 497

1987-1 3.00 1.20 0.10 593.30 7.03 195.20 492

1987-11 3.01 1.20 0.10 594.10 8.02 199.10 494
1987-111 3.01 1.20 0.10 596.10 9.03 202.10 496
1987-1V 3.01 2.10 0.10 597.20 11.01 203.10 497

80
 1988-1 2.00 1.20 0.11 815.30 4.10 222 446
1988-11 2.00 1.30 0.12 816.20 6.00 223 449
1988-111 2.01 1.30 0.13 818.10 7.00 224 451
1988-1V 5.00 3.10 0.13 819.30 8.00 226 452
1989-1 2.01 2.10 0.11 782.21 5.20 442 1736
1989-11 2.02 2.10 0.12 784.11 5.20 443 1737
1989-111 2.03 2.10 0.13 785.11 5.20 445 1738
1989-1V 2.03 5.00 0.13 786.11 8.10 446 1740
1990-1 2.02 5.1 0.11 1962.03 5.02 454 1416
1990-11 2.12 5.2 0.12 1963.02 5.03 457 1419
1990-111 2.12 5.2 0.13 1965.01 5.03 459 1421
1990-1V 3.02 6.1 0.13 1966.03 6.01 460 1422
1991-1 2.00 4.2 0.11 2361.1 4.02 645 653
1991-11 2.11 6.2 0.11 2365.1 4.02 647 654
1991-111 2.11 7.1 0.11 2368.1 4.12 648 655
1991-1V 2.11 8.2 0.21 2369.2 6.02 649 657
1992-1 1.11 5.10 0.11 782.21 4.22 904 1691
1992-11 1.11 6.00 0.11 784.11 4.22 906 1695
1992-111 2.21 7.00 0.11 785.11 4.22 907 1696
1992-1V 2.22 9.10 0.21 786.11 7.21 908 1699
1993-1 2.03 5.00 0.11 704.22 5.00 1015 1920
1993-11 2.03 5.10 0.11 705.22 5.00 1017 1922
1993-111 2.12 5.10 0.11 707.21 5.00 1018 1923
1993-1V 5.01 5.10 0.21 708.22 5.01 1019 1924
1994-1 2.22 6.10 0.10 633.22 3.02 1229 1699
1994-11 2.32 7.00 0.10 634.21 3.03 1230 1700
1994-111 2.32 8.10 0.20 635.22 3.03 1231 1697
1994-1V 3.12 10.00 0.20 636.11 5.01 1232 1698
1995-1 2.22 8.00 0.10 811.11 3.02 1389 2467
1995-11 2.32 9.00 0.10 812.01 3.03 1391 2468
1995-111 2.32 11.00 0.20 813.11 3.03 1392 2470
1995-1V 4.11 12.00 0.20 814.00 6.01 1393 2471

1996-1 3.01 3.00 0.10 775.23 4.01 1510 2196

1996-11 3.01 3.00 0.10 776.22 4.02 1511 2198
1996-111 3.11 3.00 0.20 777.23 4.02 1513 2199
1996-1V 5.00 3.01 0.20 778.21 6.01 1314 2200

81
 1997-1 3.01 3.00 0.11 992 4.02 1715 2450
1997-11 3.12 3.00 0.12 994 4.02 1716 2451
1997-111 3.12 3.01 0.13 995 4.02 1718 2452
1997-1V 5.01 4.00 0.23 996 7.02 1719 2454

1998-1 3.11 2.00 0.11 1016 5.02 1843 2467

1998-11 3.11 2.00 0.12 1017 5.03 1845 2468
1998-111 3.21 2.10 0.13 1018 5.03 1846 2470
1998-1V 4.10 4.00 0.23 1019 8.01 1847 2471

1999-1 3.10 2.0 0.11 1413 5.22 2244 4956

1999-11 3.10 2.0 0.11 1416 5.23 2245 4957
1999-111 3.11 2.0 0.21 1418 5.23 2247 4959
1999-1V 4.00 5.0 0.22 1419 7.21 2248 4960
2000-1 2.10 3.00 0.11 1992 4.12 2506 4614
2000-11 2.10 3.00 0.11 1993 4.22 2508 4615
2000-111 2.11 3.00 0.21 1994 4.22 2509 4617
2000-1V 5.00 3.10 0.22 1996 7.11 2510 4618
2001-1 2.01 3.20 0.11 1901 4.02 2574 4697
2001-11 2.01 3.20 0.11 1902 4.02 2576 4699
2001-111 2.11 3.20 0.21 1903 4.02 2577 4700
2001-1V 5.00 4.20 0.22 1904 7.02 2578 4701
2002-1 2.02 7.00 0.1 2048 6.01 2969 10823
2002-11 2.13 7.00 0.2 2049 6.02 2970 10824
2002-111 2.13 7.10 0.2 2050 6.03 2972 10825
2002-1V 4.01 9.00 0.2 2051 6.13 2973 10826
2003-1 2.11 7.10 0.10 3167.20 6.02 3309 8140
2003-11 2.12 8.10 0.20 3168.10 6.03 3310 8142
2003-111 2.12 9.00 0.20 3169.20 6.03 3311 8143
2003-1V 4.11 11.00 0.20 3170.10 7.01 3312 8144
2004-1 2.20 10.00 0.10 3136 4.22 3586 2029
2004-11 2.30 10.00 0.20 3137 4.32 3587 2030
2004-111 2.30 10.00 0.20 3139 4.32 3588 2031
2004-1V 4.10 10.10 0.20 3140 7.12 3590 2033
2005-1 2.20 8.20 0.11 23068 6.02 3905 3112
2005-11 2.20 10.20 0.12 23069 6.03 3908 3113
2005-111 2.20 11.10 0.23 23071 6.03 3910 3115
2005-1V 5.20 12.10 0.23 23072 7.01 3911 3116

82
 2006-1 2.01 9.10 0.11 2717.3 6.02 4167 3926
2006-11 2.02 10.00 0.12 2719.2 6.03 4168 3927
2006-111 2.02 11.00 0.23 2720.1 6.03 4170 3929
2006-1V 5.01 13.00 0.23 2721.3 9.01 4171 3930

2007-1 2.22 7.00 0.11 16268.01 6.00 4731 4959

2007-11 2.32 7.00 0.12 16269.00 6.00 4732 4960
2007-111 2.32 7.10 0.23 16270.00 6.01 4733 4961
2007-1V 4.12 9.00 0.23 16272.00 9.00 4735 4963
2008-1 2.11 7.00 0.1 19706 5.03 4829 4735
2008-11 2.11 7.10 0.2 19707 6.02 4830 4736
2008-111 2.12 7.10 0.2 19709 8.01 4831 4737
2008-1V 5.01 10.00 0.2 19710 9.03 4833 4738

Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of
Uganda; Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda
annual and Quarterly reports; World Bank and IMF publications.
Exc.D.TR= Excise Duty as % of TTR
Disc.Meas =Discretionary Changes in TTR
Lit.Rt=Literacy rate
Ext.Grant =External Grant
Ext.Gr.Gdp=External grant as % of Gdp.
Dom.F.Inc= Domestic Factor Income
Imp.Values=Import Values

83
Appendix 2: Cont……………………

Yr. Export values Priv. F. Cons. Budgeted TTR Polit. Inst.

1980-1 440 112 9.10 1
1980-11 441 113 9.10 1
1980-111 443 115 9.10 1
1980-1V 444 116 12.10 1

1981-1 473 140 10.00 1

1981-11 474 141 10.00 1
1981-111 475 143 10.10 1
1981-1V 476 144 12.00 1

1982-1 446 110 11.10 1

1982-11 447 112 11.10 1
1982-111 448 114 11.10 1
1982-1V 449 116 14.00 1

1983-1 408 219 12.10 1

1983-11 409 220 12.10 1
1983-111 411 221 12.10 1
1983-1V 412 222 12.10 1
1984-1 495 234 12.10 1
1984-11 496 236 12.20 1
1984-111 497 237 12.20 1
1984-1V 499 238 14.10 1
1985-1 467 245 15.00 1
1985-11 468 246 15.10 1
1985-111 470 247 15.10 1
1985-1V 471 249 15.10 1
1986-1 494 270 16.10 1
1986-11 495 272 16.10 1
1986-111 496 273 16.10 1
1986-1V 497 274 17.10 1
1987-1 493 418 16.10 0
1987-11 494 419 16.10 0
1987-111 496 420 16.20 0
1987-1V 497 422 18.10 0

84
 1988-1 448 440 15.10 0
1988-11 449 442 15.10 0
1988-111 450 443 15.10 0
1988-1V 451 444 15.10 0
1989-1 1736 467 25.05 0
1989-11 1737 468 25.05 0
1989-111 1738 470 25.05 0
1989-1V 1740 471 28.05 0
1990-1 1418 668 37.01 0
1990-11 1419 668 37.02 0
1990-111 1420 670 37.11 0
1990-1V 1421 671 39.01 0
1991-1 653 1419 50.01 0
1991-11 654 1420 50.01 0
1991-111 655 1421 50.01 0
1991-1V 657 1422 50.11 0

1992-1 1693 654 76.02 0

1992-11 1695 655 77.02 0
1992-111 1696 656 78.02 0
1992-1V 1697 657 79.01 0
1993-1 1920 2456 103.12 0
1993-11 1922 2457 104.12 0
1993-111 1923 2458 105.02 0
1993-1V 1924 2459 106.02 0
1994-1 1696 2146 156.11 0
1994-11 1698 2147 157.01 0
1994-111 1699 2148 158.00 0
1994-1V 1700 2149 159.00 0
1995-1 2467 2233 176.11 0
1995-11 2468 2234 177.01 0
1995-111 2470 2236 179.01 0
1995-1V 2471 2237 180.00 0
1996-1 2196 2240 193.10 0
1996-11 2198 2241 194.10 0
1996-111 2199 2242 195.10 0
1996-1V 2200 2244 197.00 0
1997-1 2450 1354 206.01 0
1997-11 2451 1355 207.11 0
1997-111 2452 1356 208.01 0
1997-1V 2454 1358 209.01 0

85
 1998-1 2467 273 247.00 0
1998-11 2468 274 248.11 0
1998-111 2470 275 250.10 0
1998-1V 2471 276 251.00 0

1999-1 4956 320 298.11 0

1999-11 4957 322 299.01 0
1999-111 4959 323 301.00 0
1999-1V 4960 324 302..00 0
2000-1 4614 345 324.11 0
2000-11 4615 346 326.01 0
2000-111 4617 347 327.00 0
2000-1V 4618 349 328.00 0
2001-1 4697 358 394.31 0
2001-11 4699 359 395.21 0
2001-111 4700 360 396.11 0
2001-1V 4701 361 398.31 0
2002-1 10823 307 468.12 0
2002-11 10824 308 469.12 0
2002-111 10825 309 471.11 0
2002-1V 10826 310 472.02 0

2003-1 8140 523 508.12 0

2003-11 8144 524 509.12 0
2003-111 8142 526 511.01 0
2003-1V 8143 527 511.01 0
2004-1 2029 593 548.01 0
2004-11 2030 594 549.01 0
2004-111 2031 595 551.01 0
2004-1V 2033 596 552.00 0
2005-1 3112 940 758.12 0
2005-11 3113 942 759.11 0
2005-111 3115 943 761.11 0
2005-1V 3116 944 762.02 0
2006-1 3926 1521 923.11 0
2006-11 3927 1522 924.01 0
2006-111 3929 1523 926.00 0
2006-1V 3930 1524 927.00 0
2007-1 4959 1770 1298.32 0
2007-11 4960 1772 1299.21 0
2007-111 4961 1773 1301.11 0
2007-1V 4963 1774 1302.32 0

86
 2008-1 4735 2265 1231.20 0
2008-11 4736 2266 1232.20 0
2008-111 4737 2267 1233.20 0
2008-1V 4738 2269 1234.20 0
Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of
Uganda; Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda
annual and Quarterly reports; World Bank and IMF publications.

Priv.F.Cons=Private Final consumption

Polit.Inst=Political instability

Budgeted TTR=Budgeted Total Tax Revenue

87
Appendix 3: Discretionary changes in revenues of Total tax, Income tax, Import
duties, excise duties and Vat. (After carrying out Diagnostic tests on Data series).
Yr. D1T D2Inc D3Imp. D4Exc. D5Vat
1980-1 2.10 0.10 0.21 0.10 0.60
1980-11 2.21 0.10 0.12 0.20 0.30
1980-111 2.30 0.10 0.41 0.20 0.41
1980-1V 2.30 0.20 0.51 0.20 0.61

1981-1 0.61 0.02 0.12 0.10 0.11

1981-11 0.71 0.02 0.22 0.10 0.20
1981-111 0.80 0.04 0.22 0.10 0.20
1981-1V 0.90 0.08 0.22 0.11 0.30

1982-1 1.11 0.21 0.20 0.21 0.23

1982-11 1.21 0.41 0.20 0.31 0.33
1982-111 2.21 0.41 0.20 0.40 0.72
1982-1V 2.22 0.50 0.20 0.60 0.81
1983-1 0.91 0.02 0.12 0.20 0.21
1983-11 0.92 0.02 0.12 0.21 0.31
1983-111 0.92 0.11 0.12 0.21 0.31
1983-1V 1.01 0.12 0.22 0.51 0.41
1984-1 1.00 0.20 0.11 0.21 0.21
1984-11 1.00 0.21 0.21 0.21 0.41
1984-111 1.10 0.21 0.31 0.40 0.52
1984-1V 2.00 0.42 0.31 0.50 0.62
1985-1 1.21 0.21 0.21 0.10 0.51
1985-11 2.20 0.22 0.51 0.21 0.51
1985-111 2.20 0.32 0.51 0.31 0.91
1985-1V 2.20 0.41 0.60 0.31 1.00
1986-1 2.02 0.21 0.21 0.21 0.71
1986-11 2.03 0.32 0.32 0.21 0.71
1986-111 2.03 0.72 0.42 0.30 0.80
1986-1V 2.04 0.82 0.52 0.40 0.90
1987-1 1.11 0.12 0.02 0.21 0.41
1987-11 1.21 0.22 0.11 0.31 0.61
1987-111 1.22 0.32 0.12 0.31 0.72
1987-1V 2.22 0.32 0.12 0.40 0.82
1988-1 0.90 5.01 0.60 0.00 0.00
1988-11 0.91 5.02 0.70 0.00 0.00
1988-111 0.91 5.02 0.80 0.00 0.00
1988-1V 1.00 7.01 0.90 0.00 0.00

88
 1989-1 3.10 9.01 4.21 2.01 1.01
1989-11 3.11 9.02 4.31 2.11 1.01
1989-111 3.20 9.11 4.31 2.11 1.01
1989-1V 4.10 12.01 5.11 3.01 3.00
1990-1 3.12 5.01 2.11 8.21 2.00
1990-11 3.12 5.12 2.12 10.21 2.00
1990-111 3.12 5.12 2.13 11.11 2.00
3.12 8.01 2.23 12.10 2.00
1990-1V
1991-1 3.00 6.21 2.11 4.12 2.02
1991-11 3.10 6.21 2.21 4.12 2.02
1991-111 3.11 6.21 2.22 4.12 2.02
1991-1V 3.11 9.11 4.11 5.01 2.12
1992-1 2.21 5.11 3.01 0.00 0.01
1992-11 2.32 5.21 3.01 0.00 0.01
1992-111 2.32 5.21 3.11 0.00 0.11
1992-1V 3.11 6.10 5.01 0.00 0.11

1993-1 0.41 1.11 0.40 2.01 0.71

1993-11 0.41 2.21 0.41 2.02 0.81
1993-111 0.51 2.21 0.80 2.11 0.90
1993-1V 0.52 2.22 0.90 4.01 0.90

1994-1 1.13 4.11 1.20 4.00 0.90

1994-11 2.23 4.12 1.20 4.10 0.90
1994-111 2.31 4.12 1.21 4.11 0.91
1994-1V 2.32 6.11 3.20 4.11 0.91
1995-1 1.00 0.00 1.10 1.10 1.11
1995-11 1.00 0.00 1.21 1.10 1.21
1995-111 1.00 0.00 1.21 1.21 1.21
1995-1V 1.10 0.00 1.21 2.21 2.10
1996-1 1.21 3.11 0.21 2.11 3.10
1996-11 2.22 3.11 0.21 2.12 3.11
1996-111 2.22 3.02 0.31 2.12 3.11
1996-1V 2.22 3.02 0.60 5.11 4.10
1997-1 0.21 0.00 0.72 0.00 0.00
1997-11 0.21 0.00 0.91 0.00 0.00
1997-111 0.21 0.00 0.91 0.00 0.00
1997-1V 0.50 0.00 0.91 0.00 0.00

89
 1998-1 0.32 0.00 2.01 0.31 0.00
1998-11 0.42 0.00 2.02 0.41 0.00
1998-111 0,52 0.00 2.02 0.51 0.00
1998-1V 0.92 0.00 2.02 0.70 0.00

1999-1 0.005 0.00 0.12 0.31 0.00

1999-11 0.005 0.00 0.22 0.41 0.00
1999-111 0.005 0.00 0.22 0.41 0.00
1999-1V 0.005 0.00 0.22 0.51 0.00
2000-1 0.62 0.31 1.11 0.31 1.00
2000-11 0.91 0.41 1.22 0.41 1.01
2000-111 0.92 0,50 2.33 0.51 1.11
2000-1V 0.92 1.10 2.33 1.12 1.11
2001-1 0.31 0.51 0.00 2.00 0.00
2001-11 0.40 0.70 0.00 2.10 0.00
2001-111 0.50 0.80 0.00 2.10 0.00
2001-1V 0.60 0.90 0.00 4.00 0.00
2002-1 0.20 0.31 0.31 0.31 0.00
2002-11 0.21 0.42 0.42 0.41 0.00
2002-111 0.30 0.42 0.52 0.61 0.00
2002-1V 0.40 0.52 0.62 0.70 0.00
2003-1 0.22 0.41 0.00 2.00 0.11
2003-11 0.31 0.51 0.00 2.01 0.12
2003-111 0.31 0.60 0.00 2.11 0.12
2003-1V 0.41 0.70 0.00 2.11 0.12
2004-1 0.32 1.10 1.10 2.1 3.1
2004-11 0.42 1.10 2.10 2.1 3.2
2004-111 0.62 2.10 2.10 2.1 4.2
2004-1V 0.62 2.10 2.20 2.2 5.2
2005-1 0.41 1.10 1.10 2.11 3.1
2005-11 0.51 1.10 2.20 2.11 3.2
2005-111 0.70 1.00 3.20 2.11 4.2
2005-1V 0.70 2.00 3.20 4.00 5.2
2006-1 1.10 1.10 1.00 2.11 3.10
2006-11 1.20 1.20 1.00 2.20 4.20
2006-111 1.30 1.20 2.00 2.20 4.20
2006-1V 1.30 2.20 2.00 4.10 5.20
2007-1 1.10 0.80 1.10 1.10 2.1
2007-11 1.20 0.90 1.10 1.20 3.2
2007-111 1.20 0.90 1.10 2.21 4.2
2007-1V 2.20 0.90 1.20 2.21 5.2

90
 2008-1 1.01 1.00 1.1 1.11 2.2
2008-11 1.02 1.00 1.1 1.21 2.3
2008-111 2.02 1.10 2.0 2.31 2.3
2008-1V 2.02 2.00 2.1 2.32 4.1

Source: Uganda Revenue Authority; Ministry of finance, planning and economic development; Bank of
Uganda; Statistical abstract, Budget speeches, Background to the Budget series, Bank of Uganda
annual and Quarterly reports; World Bank and IMF publications.

D1T=Discretionary changes in Total Tax Revenue. D5Vat..Discretionary Changes in Vat

D2Inc=Discretionary changes in Income tax
D3Imp=Discretionary changes in Import Duties
D4Exc=Discretionary changes in Excise tax.

91
Appendix 4: Actual and adjusted tax revenues in billion Uganda shillings, 1980-2008.
Yr Overall Tax Income tax Import Duties Excise Duties Vat/sales tax
Actual ADJ. Actual ADJ. Actual ADJ. Actual ADJ. Actual ADJ.
1980-1 5.10 3.00 0.32 0.12 1.01 0.90 0.52 0.31 1.21 1.00
1980-11 5.20 3.00 0.42 0.22 1.02 0.90 0.72 0.41 1.22 1.00
1980-111 5.30 3.01 0.62 0.32 1.03 0.90 0.82 0.52 1.22 1.00
1980-1V 5.30 5.00 0.72 0.42 1.03 1.20 0.92 0.62 1.22 1.01
1981-1 6.21 4.00 0.42 0.31 1.21 1.00 0.62 0.31 1.12 1.01
1981-11 6.22 4.00 0.52 0.42 1.22 1.00 0.72 0.41 1.22 1.01
1981-111 6.22 4.11 0.62 0.53 1.23 1.00 0.82 0.61 2.22 1.01
1981-1V 7.11 4.11 0.62 0.63 1.23 1.01 0.92 0.71 2.22 2.02

1982-1 8.01 3.20 0.53 0.40 1.00 1.10 0.92 0.52 2.11 1.12
1982-11 7.01 3.21 0.71 0.40 1.00 1.20 0.92 0.72 2.11 1.22
1982-111 7.01 3.21 0.82 0.50 1.01 1.30 0.92 0.82 2.21 1.32
1982-1V 7.11 6.10 0.93 0.60 2.00 1.30 0.92 0.92 2.22 2.32
1983-1 7.12 5.01 0.61 0.31 1.10 1.12 0.90 0.72 1.11 2.00
1983-11 7.22 5.01 0.72 0.42 1.10 1.22 0.90 0.72 2.02 2.00
1983-111 7.22 5.01 0.83 0.62 1.10 1.32 0.90 0.82 3.02 2.01
1983-1V 9.12 5.10 0.93 0.72 2.00 1.32 1.21 0.92 3.02 2.01
1984-1 8.02 6.11 0.92 0.30 1.12 1.02 0.90 0.60 2.21 1.02
1984-11 8.03 6.11 0.93 0.50 1.22 1.02 0.90 0.90 2.22 2.02
1984-111 8.03 6.12 0.93 0.80 1.32 1.02 0.91 0.90 2.22 3.02
1984-1V 11.01 9.11 1.21 0.90 2.32 2.02 1.20 0.90 4.11 3.02
1985-1 9.00 7.01 1.00 0.61 1.01 1.00 1.12 0.71 3.12 2.01
1985-11 9.01 7.01 1.00 0.71 1.02 1.00 1.22 0.90 3.22 2.01
1985-111 9.11 7.02 1.00 0.82 2.03 2.00 1.22 0.90 3.32 2.01
1985-1V 12.00 8.01 1.01 0.92 2.03 2.00 1.22 0.90 3.32 4.00
1986-1 8.02 7.22 1.01 0.92 1.21 1.10 1.20 0.90 3.11 2.12
1986-11 8.02 7.32 1.02 0.92 1.22 1.10 1.20 0.90 3.12 2.22
1986-111 8.02 7.32 1.03 0.92 2.23 2.00 1.20 0.90 3.22 2.22
1986-1V 8.11 10.12 2.03 1.22 2.23 2.10 1.20 1.20 5.11 5.11
1987-1 10.22 9.02 1.12 1.01 1.02 1.12 1.21 1.00 4.11 3.02
1987-11 10.32 9.02 1.22 1.02 2.02 1.22 1.22 1.00 4.11 3.03
1987-111 10.32 9.02 1.32 1.02 2.02 2.32 1.22 1.01 4.21 3.03
1987-1V 12.12 11.01 2.32 1.02 2.02 2.32 1.22 1.01 4.22 5.01
1988-1 11.10 8.20 1.02 1.11 1.11 1.11 1.11 1.02 4.12 4.12
1988-11 11.10 8.20 1.12 1.21 2.22 2.11 1.20 1.03 4.12 4.12
1988-111 11.20 8.20 2.02 1.22 2.23 2.12 1.30 1.03 4.12 4.12
1988-1V 11.20 11.10 2.02 1.22 2.23 2.22 1.30 1.11 6.12 6.12
1989-1 22.12 12.02 3.02 1.11 6.02 4.32 1.11 1.12 7.03 7.01
1989-11 22.12 12.11 3.02 1.21 6.02 4.32 2.01 1.12 7.12 7.02
1989-111 22.22 12.11 3.11 1.21 6.02 4.21 2.02 2.12 7.13 7.02
1989-1V 23.11 14.01 3.11 2.21 7.02 7.11 2.11 2.22 9.01 7.11

92
 1990-1 33.22 14.11 4.11 1.11 12.12 9.01 3.10 1.12 9.11 8.22
1990-11 33.23 14.11 4.21 1.11 12.12 9.02 3.10 1.22 9.20 8.22
1990-111 33.23 14.21 4.21 2.00 12.22 9.02 3.11 2.22 9.20 8.22
1990-1V 34.11 15.10 5.10 2.11 13.12 9.02 3.11 2.22 11.10 9.22
1991-1 45.11 15.02 6.03 1.01 19.01 12.11 3.01 1.11 12.12 9.01
1991-11 45.11 15.11 6.12 2.02 19.01 12.11 3.01 1.11 12.12 9.11
1991-111 45.12 15.12 6.13 2.03 19.01 12.11 3.01 2.21 12.21 9.11
1991-1V 45.12 17.01 9.01 2.03 19.01 13.10 6.00 2.22 12.21 11.00
1992-1 70.10 21.11 12.01 2.02 30.00 16.11 4.22 2.01 20.21 16.20
1992-11 70.20 21.21 12.01 2.02 30.10 16.21 4.22 2.01 20.21 16..21
1992-111 70.20 21.22 12.01 2.12 30.10 16.21 4.22 2.10 20.21 16.21
1992-1V 72.10 21.22 14.00 4.02 31.00 19.11 6.12 2.10 23.21 17.10
1993-1 93.11 26.11 14.12 3.01 36.12 19.00 10.22 4.10 27.22 20.10
1993-11 93.11 26.11 14.12 3.01 36.13 19.01 10.22 4.11 27.22 20.10
1993-111 92.12 26.12 14.12 3,01 36.13 19.10 10.22 4.11 27.22 20.20
1993-1V 94.01 26.22 17.11 4.01 37.01 22.00 11.12 4.11 27.22 22.11
1994-1 126.23 29.10 19.11 3.21 46.20 11.10 12.11 4.12 37.22 27.02
1994-11 126.32 29.10 19.20 3.21 46.20 21.20 12.20 4.12 37.32 27.11
1994-111 126.31 29.11 19.30 3.22 46.20 31.20 12.20 4.21 37.32 27.12
1994-1V 128.13 31.10 19.30 4.11 46.20 30.20 14.10 4.21 39.11 29.01
1995-1 152.20 31.01 20.10 3.21 56.11 27.00 16.02 5.21 46.21 32.11
1995-11 152.20 31.10 20.10 3.30 56.20 27.00 16.03 5.21 46.31 32.11
1995-111 152.20 31.00 20.11 3.30 56.21 27.01 16.03 5.21 46.32 32.21
1995-1V 155.10 33.00 23.10 5.10 58.10 28.00 19.01 5.21 49.11 33.10
1996-1 183.21 33.01 27.01 4.00 67.21 32.11 26.00 7.10 54.02 32.11
1996-11 183.30 33.01 27.12 4.00 67.21 32.12 26.00 7.11 54.03 32.11
1996-111 183.31 33.10 27.13 4.00 67.21 32.12 26.00 7.20 54.03 32.21
1996-1V 186.10 33.10 27.13 5.00 68.10 32.22 26.01 7.20 55.01 33.11
1997-1 203.03 35.20 32.11 5.11 66.10 32.10 28.22 7.21 65.10 38.20
1997-11 203.03 35.20 32.20 5.11 66.11 32.11 28.22 7.21 65.21 38.20
1997-111 203.11 35.21 32.20 5.21 66.11 32.11 28.22 7.21 65.31 38.20
1997-1V 203.12 35.21 35.11 5.22 68.00 35.00 31.12 10.21 65.31 41.10
1998-1 239.02 38.02 42.02 6.12 72.11 32.10 32.11 9.01 80.01 47.20
1998-11 239.12 38.11 42.02 6.22 72.12 32.11 32.21 9.11 80.12 47.20
1998-111 239.12 38.12 42.02 6.22 72.23 32.11 32.22 9.11 80.12 47.20
1998-1V 241.02 40.01 44.01 8.12 72.23 35.00 33.11 9.12 81.01 50.10

1999-1 252.00 38.01 45.10 7.01 75.02 34.00 32.12 9.01 85.01 51.11
1999-11 252.00 38.01 45.11 7.10 75.12 34.01 32.12 9.11 85.01 51.21
1999-111 252.00 38.11 45.11 7.10 75.12 34.10 32.12 9.11 85.11 51.21
1999-1V 252.00 40.01 45.20 7.11 77.01 36.00 35.01 9.12 88.00 51.22
2000-1 277.01 39.21 55.01 8.20 85.00 36.10 31.12 8.20 93.00 53.21
2000-11 277.02 39.21 55.02 8.20 85.10 36.11 31.12 8.20 93.10 53.21
2000-111 277.11 39.21 55.02 8.20 85.10 36.20 31.22 8.21 93.10 53.21
2000-1V 279.01 39.22 58.01 11.20 85.11 36.20 32.11 9.20 95.00 54.21

93
 2001-1 312.02 41.02 72.01 11.10 84.12 36.10 37.01 8.12 107.20 63.11
2001-11 312.11 41.02 72.10 11.21 84.02 36.10 34.02 8.22 107.20 61.21
2001-111 312.11 41.12 72.10 11.31 84.12 36.01 34.12 8.22 107.20 61.21
2001-1V 315.01 43.02 72.11 11.31 84.11 36.01 34.11 9.11 110.20 61.22
2002-1 359.10 45.12 89.01 13.00 93.21 38.21 37.01 8.02 123.12 70.01
2002-11 359.10 45.12 89.01 13.00 93.21 38.21 37.02 8.02 123.12 70.01
2002-111 359.11 45.21 89.01 13.00 93.22 38.21 37.02 8.02 123.12 70.11
2002-1V 361.11 45.21 92.00 16.01 94.11 41.21 37.02 11.02 126.11 73.01
2003-1 423.20 50.10 116.00 17.10 103.11 42.01 44.12 9.12 143.10 82.12
2003-11 423.20 50.10 116.00 17.11 103.21 42.11 44.13 9.12 143.11 82.22
2003-111 423.21 50.20 116.01 17.21 100.21 42.12 44.13 9.22 143.21 82.22
2003-1V 425.20 50.20 116.01 18.10 100.22 42.12 45.01 11.11 144.10 83.11
2004-1 445.20 56.01 119.02 17.00 112.01 42.01 47.01 9.02 149.00 84.01
2004-11 445.30 56.01 119.03 17.01 112.01 42.01 44.02 9.02 149.01 84.01
2004-111 445.31 56.10 119.03 17.01 112.10 42.00 44.03 9.02 149.01 84.01
448.10 56.11 121.01 20.00 115.00 45.00 44.03 12.02 151.00 85.00
2004-1V

2005-1 447.20 64.10 120.00 18.00 113.20 44.01 46.00 10.21 158.02 86.22
2005-11 447.30 64.11 120.00 18.00 113.30 44.01 46.00 10.22 158.02 86.22
2005-111 447.31 64.11 120.01 18.01 113.30 44.02 46.01 10.22 158.02 86.22
2005-1V 449.10 64.11 122.00 21.00 114.10 47.01 47.00 10.22 158.02 89.21
2006-1 467.22 65.02 125.00 19.01 141.10 45.11 47.00 11.22 160.01 99.00
2006-11 467.23 65.03 125.01 19.01 141.01 45.11 47.01 11.22 160.02 99.01
2006-111 467.23 65.03 125.01 19.01 141.10 45.12 47.01 11.22 160.02 99.01
2006-1V 470.11 67.01 126.00 22.00 144.00 47.11 49.00 12.21 161.01 101.00
2007-1 496.11 75.00 133.00 21.01 144.12 47.12 49.01 14.11 169.11 102.01
2007-11 496.11 75.01 133.00 21.02 144.12 47.22 49.01 14.20 169.11 102.00
2007-111 496.11 75.00 133.00 21.02 144.12 47.32 49.02 14.30 169.11 102.00
2007-1V 499.01 75.00 133.01 22.01 144.12 47.32 51.01 14.30 169.12 104.00
2008-1 499.22 80.02 141.01 22.02 149.01 49.00 49.22 17.01 170.10 105.02
2008-11 499.22 80.02 141.11 22.02 149.11 49.00 49.23 17.02 170.10 105.02
2008-111 499.22 80.02 141.11 22.02 149.11 49.01 49.23 17.02 170.10 105.02
2008-1V 501.21 81.02 144.00 23.01 149.11 51.00 52.21 17.02 170.20 106.01
Source: Uganda Revenue authority and Ministry of Finance, Planning and Economic Development.
Note: Adjusted revenues are computed figures using the proportional adjustment.

94