The Uganda National Association of Builders, Suppliers, and Engineering Contractors (UNABSEC), in collaboration with the Uganda Revenue Authority (URA) and the National Cement Company Uganda, have convened a symposium aimed at offering essential insights into tax regulations and compliance requirements.
The event held under the theme: “Enhancing Tax Compliance and Efficiency in the Construction Sector through Dialogue” is also focused on addressing the unique challenges encountered by contractors, suppliers, builders, manufacturers, and all stakeholders within the construction industry.
During the discussion, Mr. Gerald Wamoma, a principal economist in the tax policy department of the Ministry of Finance, Planning, and Economic Development, who also represented the PSST, noted that the purpose of the symposium is to raise public awareness regarding tax compliance.
He stressed that in the construction sector, the ministry collaborates with UNABSEC, which serves as a revenue agency collecting taxes from suppliers of building materials.
He went on to emphasize that they maintain a stable tax regime, particularly in vital sectors such as construction, ensuring that all parties responsible for remitting taxes adhere to compliance requirements.
He mentioned that while there are incentives available for certain products, tax compliance within the construction sector remains relatively low.
“In the construction, we do not tax machinery which is imported incase its not available in the country,” he added.
The symposium organized organized in collaboration with URA was initiated to educate their members, many of whom are new to the business landscape, about the importance of tax compliance.
Mr. Jamesone Olonya, the president of UNABSEC, told journalists during an interview that the symposium is significant as the construction sector ranks second only to agriculture in its contribution to the national’s GDP.
UNABSEC is a 31-year-old non-profit organization that serves as a national trade association, representing more than 440 builders, suppliers, contractors, and various companies and organizations involved in the construction sector in Uganda.
“Our core purpose is commitment to improve performance in the Construction Industry by championing better regulation and enhancing operational integrity, and have continuity. We are dedicated to fostering growth and sustainability in the construction, improving job site safety, expanding the use of technologies and techniques and strengthening the relationships between contractors, clients and the government. Therefore, we are the principle interface between the construction Industry, the public, development partners and government,” he added.
He pointed out several challenges confronting the industry, such as withholding tax and the Electronic Fiscal Receipting and Invoicing System (EFRIS), among others.
He said the mandate of URA necessitates the use of EFRIS for all transactions, which presents a considerable obstacle for contractors.
This he said was particularly true in rural areas, where many suppliers of construction materials are not registered with URA or EFRIS.
He observed that this lack of compliance drives up material costs in various regions, as contractors often incur additional expenses to locate EFRIS-compliant suppliers or risk facing penalties.
“URA’s requirement for companies to act as agents for the 6% Withholding Tax places an additional financial burden on Providers. Many local suppliers are unfamiliar with this tax obligation and are often unprepared or unwilling to pay it. As a result, Providers are left to cover the tax themselves in order to remain compliant with URA and continue operating,” he explained.
Olonya observed that this situation has resulted in considerable financial pressure on members, impacting their liquidity and the long-term viability of their businesses.
He highlighted the problem of excessive penalties, emphasizing that members face difficulties due to the substantial fines levied on primary taxes.
“A particular member attempted to make the tax payment, only to find that the URA system was inaccessible due to technical difficulties towards the end of December 2023. As a result, the member incurred penalties, and interest continues to accrue on these penalties,” he added.
He proceeded to allege that certain officials within the URA are engaged in corrupt practices, which has a considerable impact on their service providers.
Additionally, he pointed out that their members encounter issues related to excessive tax assessments and unwarranted delays in the evaluation process.
“URA officials often deliberately inflate tax assessments in order to extort bribes from companies, creating a culture of corruption and undermining the integrity of the tax system. The deliberate delays in assessing taxes result in additional storage costs for Providers importing materials, adding to their financial burden and causing frustration and project delays,” he noted.
He pointed out that the insufficient grasp of tax regulations and available incentives for providers leads to widespread confusion and suboptimal tax practices.
He expressed support for the tax education clinic at the symposium, believing it would address several challenges.
Olonya also mentioned that the protracted and complicated processes for resolving tax disputes or securing tax refunds deter contractors from pursuing remedies when problems occur.
He called on the government to establish a more effective method for collecting taxes from the construction sector, as many contractors, particularly in rural areas, struggle with proper bookkeeping.
“I request government to look for a more conducive way to withhold the 6% tax and also sensitive about all the URA dynamics especially to the low providers,” he said.
Regarding the issue of substandard work in Uganda, he stated that as UNABSEC, has established internal mechanisms to oversee their legitimate members out of the 1,700 contractors in the country.
He noted that it has come to their attention that some substandard work is being carried out by contractors who are not affiliated with them.
He used the platform to encourage all contractors to join their organization and seek guidance from various entities.
Hafsa Sseguya, a supervisor of tax education at URA in the central region, mentioned that they are currently engaged in a tax dialogue with UNABSEC, one of their stakeholders that brings together contractors, engineers, builders, and suppliers to raise awareness in the sector about tax education and to bridge the tax knowledge gap.
She said their goal is to educate the construction sector on tax compliance, specifically when and how to comply.
She stressed that with the shift towards digital processes, it is crucial to demonstrate their digital applications and address any digital challenges that may cause delays in project execution.
Mrs. Kiara Binta Nkuranga, a member of the UNABSEC board, stated that this marks the inaugural tax dialogue focused on the construction sector, aimed at providing tax education to its members.
Mariam Namiya, the acting Executive Director of UNABSEC and also a board member, emphasized that the symposium was organized to tackle the challenges faced in the construction sector, particularly regarding tax issues.
