ICTworks

Revenue administrations collect large amounts of data on individuals and firms in the course of their work. Increasingly, this data is digitised. The use of digital technologies has the potential to greatly improve the efficiency and effectiveness of tax administration.

In tax collection, as in so many other areas of activity, the realisation of the potential benefits of digital technologies can be a challenging and drawn-out process. It is not simply a matter of purchasing hardware, designing software and training staff.

Systems may appear to function well, at least for some purposes, but significantly underperform in terms of accuracy, efficiency or effectiveness. Tax administrations have access to large amounts of data, but they do not always manage that data effectively.

The Case of Uganda Revenue Authority Data Quality

The Uganda Revenue Authority (URA) uses automated digital processes to a higher degree than most tax administrations in Africa. In How Clean is our Taxpayer Register? Jova Mayega, Robert Ssuuna, Muhammad Mubajje, Milly I. Nalukwago and Lawrence Muwonge report on Data Management in the Uganda Revenue Authority. They undertook an assessment with the URA to study one important aspect of its own data management practices: the management and accuracy of one of its most important data bases, the taxpayer register. They focus on the taxpayer register for two main reasons.

• Registration of a taxpayer is the building block of tax administration on which hinges the effectiveness of other processes and procedures such as filing, payment, assessment, collection, auditing, reporting
• The integrity of the taxpayer register is fundamental to effective tax administration. It facilitates compliance monitoring

Specifically, the study addresses the following questions:

1. What are the data gaps in the taxpayer register? What are the root causes of these gaps?
2. What challenges does the URA face in maintaining a clean tax register?
3. What can the URA do to ensure and maintain a clean tax register?

To answer the questions, they employed two main research methods: analysis of the taxpayer register, and staff interviews. They accessed the detailed taxpayer register and analysed the data that had been entered on all the variables in the TIN application form.

Our interest was to check the correctness of this information and identify gaps. To identify the root causes as well as the challenges that the URA faces in maintaining a clean tax register, they held interviews and focus group discussions with staff involved in the data management process as well as the data users.

5 Data Quality Issues for Uganda Revenue Authority

They discovered considerable problems of inaccurate data and, primarily as a result of the activities of tax agents, a high level of duplication of the same telephone numbers and email addresses, and possession of multiple taxpayer identification numbers.

These inaccuracies reflect a number of factors, including inadequate design of registration forms and procedures, and the low priority given to verification and the accuracy of the register.

1. Taxpayers supply the URA with wrong information.

The process of applying for a TIN follows self-service principles. The URA largely depends on the information that taxpayers declare. Our analysis showed that vital information, such as address, contact details and bank account details, is often wrong.

For example, 147 TIN holders had bank account numbers recorded as ‘0’. For another 110 they were ‘0000000000’. The home address given for 64 TINs was a building in Kampala called Crested Towers that is in reality unoccupied.

2. Taxpayers have the same contact information.

A total of 581,574 individual taxpayers – 44 per cent of the total number registered – have contact details, especially telephone numbers and email addresses, that are identical to those of at least one other registered taxpayer.

The level of duplication is sometimes high. They found that 16,017 individual taxpayers had recorded the same national identification number; 6,173 had the same passport number; 3,360 shared a single email address; and 1,742 had given the same phone number

3. Possession of multiple Tax Identification Numbers

They were able to identify 29,511 individual taxpayers (2.4per cent of the total) and 27 companies (0.02 per cent of the total number of non-individual taxpayers) who possessed more than one TIN.

4. Outdated Tax Identification Numbers

These are TINs given to taxpayers before the implementation of e-tax in 2009. They are no longer applicable. However, they identified in the taxpayer register, as of the end of June 2018, 185,705 of these outdated TINs belonging to company directors or partners in business partnerships.

5. Inactive taxpayers

A predictable result of the big increase in the numbers of registered taxpayers is an increase in the proportion who are inactive, defined as those who have not engaged in any transaction with the URA over the previous two years. This increase in inactivity is confined almost entirely to individual taxpayers. The rate of inactivity for companies and other corporate bodies has barely changed.

Data Quality Root Causes

There are broadly three immediate causes of the problems they list above with the accuracy of the taxpayer register. Starting with the most specific – and the most easily-remediable – they are:

• The design of the taxpayer registration form: The TIN application form can accept any information entered. Some fields are mandatory, but taxpayers can fill in anything to bypass system requirements.
• The design of the IT system used for registration: At the point of taxpayer registration, the e-tax system does not validate some of the newly declared information against information that might already be in URA databases.
• The behaviour of various categories of people who use the system: They found that three categories of people contribute to the errors found in the taxpayer register: taxpayers themselves, URA staff, and tax agents.
  • Some TIN applicants are simply not honest with their information.
  • Some URA staff are negligent.
  • Unregistered tax agents/brokers offering tax services as a business.

How to Fix Data Quality Issues

The current databases have a number of data gaps, especially in regard to data quality. The URA thus needs to invest significant resources both in the short and the long term to ensure that the already available data is usable and that the new data is of sufficient quality.

• The URA needs to hire staff to deal solely with the registration process and tax register maintenance.
• Registered taxpayers should be required to confirm or amend their details regularly, possibly every two years.
• The government should integrate URA IT systems with those of other government and/or private agencies.
• The URA management needs to address the issue of negligent behaviour of staff responsible for new taxpayer registrations.
• Taxpayers need to be continuously sensitised on how to register for a TIN and how to amend their registration details in case of any changes.

The URA collects a lot of information from taxpayers in the process of administering tax. This information is very useful in guiding decision making, enforcing compliance and also for research purposes.