Browsing by Author "Ayo, Joseph Okello"

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    An assessment of presumptive tax in Uganda: Evaluating the 2020 reform and four alternative reform scenarios using UGAMOD, a tax-benefit microsimulation model for Uganda
    (WIDER Working Paper., 2021-11-12) Waiswa, Ronald; Lastunen, Jesse; Ayo, Joseph Okello; Nalukwago, Milly; Barugahara, Tina; Rattenhuber, Pia
    Presumptive tax, a final tax on business income, was introduced in Uganda in 1997. The latest reform to the regime in July 2020 sought to make the system more progressive, simpler and fairer to small firms. In this work, we evaluate the reform, focusing on its revenue implications based on simulations using UGAMOD, a tax-benefit microsimulation model for Uganda. Our findings suggest that, assuming full compliance, the reform reduces tax revenue potential by between 48-72 per cent from the previous rules. Interviews with staff at the Uganda Revenue Authority point to further challenges with the new rules, including slow implementation, ineffective enforcement and enduring complexity. To address these concerns, we modelled a number of hypothetical reform scenarios, including a 1 per cent and 1.5 per cent flat tax regimes for small businesses with turnover between UGX10-150 million. A low flat tax rate would be a major improvement to the existing presumptive tax regime, as it satisfies the calls for further simplification, is estimated to generate more short-term revenue than the current regime based on the modelling, and has realistic potential to attract more presumptive taxpayers over time.
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    Distributional effects of the COVID-19 pandemic in Uganda
    (WIDER Policy Brief, 2021-04-15) Lastunen, Jesse; Waiswa, Ronald; Ayo, Joseph Okello; Kaidu, Tina; Kavuma, Suzan
    In 2020, the first wave of the COVID-19 pandemic caused an economic crisis that disrupted the Ugandan labour market. How large were the associated income losses across different industries and population groups? To what extent did the general tax-benefit system mitigate the adverse effects of the crisis? UGAMOD, the tax-benefit microsimulation model for Uganda, helps to answer these questions.
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    SOUTHMOD Country report Uganda
    (UNU-WIDER., 2020-05-15) Waiswa, Ronald; Ayo, Joseph Okello; Kavuma, Susan; Gemma, Wright
    Uganda is a landlocked country located in East-Central Africa with a population of about 45.8 million as of 2021 (World Bank 2023), and its capital Kampala is the largest city with a population of 1.68 million. Uganda’s economic performance was greatly affected by the COVID19 pandemic slowing down to a growth of 1.5 per cent in 2020, picked up in 2021 with a growth of 6.0 per cent, and the economy is expected to continue recovering with growth projected at 4.6 per cent and 6.2 per cent in in 2022 and 2023, respectively (African Development Bank 2023). The economic recovery was driven by strong expansion in the mining and construction sectors and a rebound of the services sector, particularly public administration and education.
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    Taxpayer response to greater progressivity Evidence from personal income tax reform in Uganda
    (UNU-WIDER, 2023-06-22) Jouste, Maria; Barugahara, Tina Kaidu; Ayo, Joseph Okello; Pirttilä, Jukka; Rattenhuber, Pia
    We evaluate a major personal income tax reform in Uganda that came into effect in 2012–13, contributing to the scarce literature on the effects of personal income tax reform on employees’ income in a low-income country in Africa. The reform increased the tax-free lower threshold, increased tax rates for higher incomes, and introduced an additional highest tax band for top 1% of income earners. Using the universe of pay-as-you-earn (PAYE) administrative data from the Uganda Tax Authority, we analyse the impact of the reform on reported labour incomes. In the preferred specification, we find very limited support for behavioural reactions. However,heterogeneity analysis reveals that top-income workers in firms handled by ordinary (as opposed to medium or large taxpayer) offices report lower incomes after the reform. We also find suggestive evidence that part of the response may arise from income shifting. The reform managed to raise more revenue and it also led to a limited reduction in after-tax income inequality.
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    The effects of personal income tax reform on employees' taxable income in Uganda
    (WIDER Working Paper., 2021-04-15) Jouste, Maria; Barugahara, Tina Kaidu; Ayo, Joseph Okello; Pirttilä, Jukka; Rattenhuber, Pia
    We evaluate a major personal income tax reform in Uganda that came into effect in 2012-13. The reform increased the tax-free lower threshold, increased tax rates for higher incomes, and introduced an additional highest tax band. Using the universe of pay-as-you-earn administrative data submitted by employers in the formal sector, we analyse the impact on taxable income of the introduction of the additional top tax band. Our results indicate that the elasticity of taxable income in Uganda is larger than in previous results from developed countries. Overall, the additional revenue generated from the introduction of the additional top tax band by far offset the revenues lost from the decreased revenues from employees with medium to lower taxable incomes, despite the large elasticity of taxable income at the top. We contribute to the very scarce literature on the effects of personal income tax reform on employees' income in a low-income country in Africa.