Susan Nakato, Uganda Revenue Authority, presented on "Voluntary Compliance programs for HNWI's" at the HNWI conference, Vienna, 21 - 23 February 2018

1. Voluntary Compliance programs for HNWIs
Presented by Ms Nakato Susan
Uganda Revenue Authority
Theme: ‘High Net-Worth Individuals: The Challenge They
Pose for Tax Administrations, FIUs and Law Enforcement
Agencies’

2. Tables of Content
2
What is Voluntary compliance
4
6
Voluntary compliance programs for HNWI in URA
Key issues to consider when designing VCP
TALKING POINTS
Who is a HNWI in Uganda
Measuring and assessing VCP
5
1
Why target the HNWI3
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3. Profile
a) Masters in Economic Policy and
Management.
b) Bachelors of Statistics
c) 1O year experience in tax
administration.
d) Economists to the African Tax
Outlook – 2016 and 2017.
e) Co author of the HNWI papers with
ICTD- Working paper 45 and 72.
f) Lecturer at a Public university.
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4. Voluntary compliance
 Voluntary compliance
is when the taxpayer
adheres with the tax
laws/rules by declaring
income, filing a return,
and paying the tax due
in a timely manner.
 This is achieved when
there is normal flow of
revenue without any
intervention.
 There is no
enforcement
interventions taken.
What is Voluntary
compliance?
VC programs can include:
 Cooperative compliance
 Tax education aimed at ensuring that
taxpayers have the information and
support they need to meet their obligations
and make claims.
 Service aimed at reducing the taxpayer
costs of compliance such as e-services
 Self-disclose through voluntary disclosure
programs
 Tax amnesties
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5. Who is an HNWI in Uganda
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6. Why target the HNWI
 Low income countries collect very little from
the High Net Worth Individuals (HNWI) and
focus more on corporate entities .
 In most low-income countries, a big
percentage of Personal Income Tax (PIT)
collections come from formal employment,
especially the public sector and Multi
National Enterprises (MNEs).
 Most low income countries have the laws to
tax the (HNWIs) however the laws are rarely
implemented.
The importance of crafting VCP for HNWI
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7. Why target the HNWI
 PIT remains largely un tapped in many developing countries. In Uganda,
It contributed about 22.92% of total tax revenues in FY 2016/17.
 Approximately 72.54% of the PIT was paid by taxpayers in the formal
employment.
 The low performance of the PIT in low income countries is attributed to
weakness in tax administration and structure of the economy, especially
the informal sector ( e.g in Uganda -49% of the economy).
 Its estimated that illicit financial flows in Uganda account for 3% of GDP
compare with 14.05% Tax : GDP for the FY 2016/2017
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8. Facts about HNWI in Uganda
 There are potential HNWIs in Uganda and these are
involved in different and multiple sectors.
 117 HNWI compared to 1 million taxpayers on the
register .
 The HNWI have multiple directorships-16 directorship
in more than 5 top tax paying companies.
 Less aggressive tax planning but massive tax evasion.
 Majority are politicians where some of their companies
are largely non-compliant.
 They invest heavily in real estate. Many are traders but
most of their proceeds are channeled to the real estate
sector (land and buildings).
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9. HNWI sectors in Uganda
These are in all sectors of the economy both
private and public. These include:
1) whole sale and retail sector ,
2) Financial and insurance services,
3) Real estate sector,
4) Professional and technical services
5) Manufacturing,
6) Construction,
7) Public sector,
8) Farming.
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10. Key issues to consider when designing the
VCP.
a) The economic activity of the country
 The characteristic of the HNWI.
 The sectors the HNWI are involved in.
 The level of complexity of their transaction. E.g complex
commercial transaction
b) The extent of tax planning
 Aggressive tax planning schemes Vs tax evasion schemes
c) The political muscle of the HNWI
 Political Vs Economical influential
 instrumental Vs structural power
d) The availability of information
 The level of automation of the information
 The ability to integrate the RA systems with the external systems
 Information exchange platforms -large-scale automated
crosschecking systems
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in many developing countries

11. Key issues to consider when designing the
programs.
e) The economic structure of the country
 Formal Vs informal economies.
 The ubiquity of cash transactions
 The ability to trace transactions.
f) Organizational structure and design
 tax segmentation e.g dedicated units Vs functional model
 Management support
g) Tax capacity of the RAs
 Staff competency and experience
 Staff development and continuity
 Staff levels
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12. Key issues to consider when designing the
programs.
h) Tax accountability and governance
 The level of tax morale
 Equality in taxation
 Corruption levels
i) Mechanisms in place to foster a cooperative compliance approach
 The level of collaboration between HNWI/tax agents and RAs
 The taxpaying culture
 Taxpayer transparency
 Cooperative compliance framework
j) Criteria used to identify the HNWI
 Single threshold Vs multiple threshold
 Income Vs wealth or both
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13. Key issues to consider when designing the
programs.
k) Effectiveness of the revenue administration :
 Clean register
 Process and systems
 Quality services- e- services, service standards
 Clean ledges
l) Tax policy framework and legal system-
 Is the tax policy framework effective
 Is the legal system effective -weakness in the law that lead to tax
planning practices.
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14. Voluntary compliance programs for HNWI
in URA
Voluntary compliance initiatives implemented:
 Formation of the HNWI unit
 360 degree approach
 Criteria-Segmenting HNWI using both wealth
and income
 Taxpayer education and assistance
 Client relationship manager
 Taxpayer’s self reviews- health checks.
 Exchange of information – tax treaties
 Audits- compliance audits
 Inspection actions, i.e. compliance visits,
compliance advisories and returns examinations
 Investigations
The URA compliance
approach is:
 education,
 Service,
 Enforcement.
URA ensures that the
HNWI taxpayers get it
right- a focus on
prevention before
correction-getting things
right at the front end
rather than correcting
things at the back end
through risk reviews
and audits.
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15. Assessing and measuring the success of a
VCP
1. % change in timely filing of tax declarations
2. % change in timely payment of taxes
3. % reduction in arrears
4. % reduction in objections
5. % change in the newly registered taxpayer
6. % change in the accuracy of return declarations
7. % change in the willing taxpayers Vs unwilling taxpayers.
8. % change in tax unpaid as a result of taxpayer noncompliance
9. % change in the number of HNWI flagged for audit.
10. % change in tax revenue leakage through:
 Unregistered businesses
 Tax avoidance
 Illegal tax evasion
 Tax frau
Measures to consider:
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16. Achievements
a) Increase in the newly
registered taxpayers
The HNWI unit was established in
September 2015. 17 HNWIs before
the unit. As at end of June 2017,
there are 117 HNWIs and 239
VIPs. All their profiles have been
updated to include sources of
income that were not declared
originally
b) Improvement in the filling
ratios. From 13% before the HNWI
unit in 2014 to 78% after the
establishment of the unit in 2016 .
c) Revenue collections by the
unit from HNWIs
 By the end of June 2016, the
unit had collected over
USD5.5 million in rental tax,
personal income tax, VAT
and stamp duty. This was a
significant increase when
compared to the USD390,000
that was collected from
individuals in the LTO in FY
2014/15.
 In total, USD11.44 million
had been collected as at
June 2017.
.
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