Uganda’s financial services sector was the biggest contributor to corporation taxes in 2015, according to the Uganda Revenue Authority.
The financial services sector, which includes the banking, insurance, asset management, microfinance and money lending businesses, yielded overall profits of Ush213.21 billion ($62 million) by December 2015, generating Ush98.47 billion ($28.8 million) in taxes.
Commercial banks and insurance companies benefited from increased lending rates and higher yields on Treasury bills and bonds.
Overall, the energy sector posted a loss of Ush0.54 billion ($157,814) and paid corporation taxes worth Ush19.7 billion ($5.8 million) at the end of December 2015, an outcome attributed to foreign exchange losses on account of a weak shilling that lost nearly 17 per cent against the dollar last year. Many energy firms are exposed to a high import burden composed of heavy duty equipment such as transformers and spare parts.
The information and communication sector, which includes telecommunications firms and other technology services providers, radio, television and print media outlets, computer hardware distributors and book publishers, registered an overall loss of Ush13.03 billion ($3.8 million) by the end of December 2015, and paid corporation taxes of Ush55.94 billion ($16 million) arising from previous income tax arrears accumulated by some firms.
The fuel sector, which includes petrol and diesel retailers and distributors of motor lubricants, posted an overall loss of Ush9.34 billion ($2.7 million) and remitted corporation taxes of Ush13.67 billion ($3.9 million) during the same period, covering accumulated tax arrears.
“The financial sector will continue to reap big profits backed by solid demand for credit within the population. The manufacturing sector however, can only perform better through price cuts for various household products that were rendered more expensive due to the severe currency depreciation experienced last year.
Paul Bwiso, the chief executive officer of the Uganda Securities Exchange, said, “However, consolidation and restructuring efforts could become less common in poorly performing sectors this year because of entrenched ‘control attitudes’ among business owners and the long lag times exhibited by economic cycles.”
Under the manufacturing sector, sugar producers posted the highest overall profit of Ush64.63 billion ($18.9 million) and remitted corporation taxes of Ush24.68 billion ($7 million) at the end of December 2015. Producers of malt and malt liquors came second with an overall profit of Ush40.78 billion ($11.9 million) and contributed corporation taxes of Ush1.02 billion ($298,092).
Widespread outsourcing measures in the telecommunications industry have helped cut costs and improve cash flows. Though telecommunications firms have aggressively stepped up efforts to popularise data services, the impact of these initiatives on revenue growth is still unclear.
Plaxeda Namirimu, a tax director at PricewaterhouseCoopers Uganda, said, “Prospects for new mergers and acquisitions in this industry appear thin despite visible compelling factors.”