Government Overspends as Revenue Collection Drops In April-Report

Despite of collecting a total revenue and grants of only Shs 965.8bn, which was below the set target of Shs 1.75 trillion in April 2020, government went an extra-mile of spending over Shs 2trillions, the April 2020 Performance of the Economy report has revealed.

Recurrent items which include payments of salaries, wages and other services took a huge share of over Shs one trillion, representing 77.7% of the program of the month, as most of the government operations except those dealing with COVID-19 pandemic stalled during the partial lockdown.

Domestically financed development expenditures were also higher than programed, according to the report.

This expenditure, accompanied with a huge drop in revenue collection worsened the overall fiscal deficit in April.

“The government operations during April resulted in an overall fiscal deficit of Shs 1,034.14bn which was higher than the programmed deficit of Shs 712.04bn, due to shortfalls in domestic revenue and grants,” reads part of the report, which was released by the macroeconomic policy department of the Ministry of Finance, Planning and Economic Development (MoFPED).

According to the report, both revenue and grants amounted to Shs 965.8bn in April, which was below the set target of Shs 1.75 trillion.

“Both were below their monthly targets, performing at rates of 59.1% and 16.6% respectively,” the report adds.

Breakdown of domestic revenue collections

Both tax and non-tax revenues (NTR) amounted to Shs 937.6bn, indicating a shortfall of over Shs 648bn.

Out of this, Shs 931.4bn was tax revenue while Shs 6.2bn was NTR. “Tax collection registered a shortfall of Shs 547.1bn against the target of  Shs 1.47 trillion,” the report adds.

According to the report, taxes on international trade were also affected due to the negative impact of the COVID-19 pandemic on trade, which led to the reduction in dutiable imports.

International trade transactions performed at 49.4%, which led to a shortfall of Shs 313.9bn.

Both direct and indirect taxes were also affected.

Direct tax collection performed lower than the target by Shs 71.8bn as pay as you earn (PAYE), Corporate tax, withholding tax, Presumptive tax and tax on income rentals performed lower than the set target.

Indirect tax collections on the other hand performed at 66.2%, registering a shortfall of Shs 154.2bn as collection of Value Added Tax (VAT) and Excise Duty on goods like beer, spirits and sugar were lower than anticipated.

The temporary closure of different Ministries, Departments and Agencies (MDAs) from which NTR is charged led to the reduction of NTR to Shs 6.2bn, indicating a performance of 5.8%.