Overview:
AEOs are companies or entities accredited by tax authorities to conduct their own tax assessments and evaluations. These entities demonstrate a strong compliance record with tax and trade-related requirements, enabling them to pay taxes independently.
Uganda Revenue Authority (URA) and China have implemented the Authorized Economic Operator (AEO) Mutual Recognition Arrangement (MRA), signed in 2021, enabling URA to gain a comprehensive understanding of unit costs for various products sourced from China. Under the AEO-MRA, the two countries now share trade information on cargo.
This arrangement, which came into operation recently, addresses the issue of inconsistencies in revenue collection caused by URA’s lack of knowledge regarding the actual costs of imported items.
Abel Kagumire, URA Commissioner for Customs, explains that relying solely on taxpayer-provided information has led to potential revenue losses due to inaccurate reporting.
With direct connections to Chinese companies, URA can now verify the actual prices of goods, ensuring accurate revenue collection. “……it is going to be easy for us to know the actual prices because the documentation would change along the way, and where we were supposed to collect 100 percent, we could collect 50 percent or less, so on the revenue side, there is a lot we are going to benefit from the mutual agreement,” he explained.
Language barriers have also posed challenges in revenue collection from China, as invoices often require interpretation. The AEO-MRA will help overcome this issue, streamlining the process and eliminating delays for taxpayers. AEOs are companies or entities accredited by tax authorities to conduct their own tax assessments and evaluations. These entities demonstrate a strong compliance record with tax and trade-related requirements, enabling them to pay taxes independently.
Uganda currently has 118 AEOs, 35 of which are recognized at the East African regional level. Of the 118 AEOs in Uganda, 58 are agents, and 60 are importers and exporters, including 18 self-managed bondholders. Given the trading ties between Uganda and China, the implementation of the AEO-MRA was a natural step.
Patience Rubagumya, Acting Commissioner General of URA, emphasizes the authority’s commitment to ensuring a fair tax regime and addressing concerns of over-taxation raised by taxpayers. URA aims to expand the tax base by addressing tax leakages, expanding the tax register, and enrolling new sectors.
“With 3.3 million our taxpayers register is still very low, as the URA, we are committed to growing that number such everybody has a contribution, because if we have everybody paying their contribution, then the original payers will not be seeing it as a burden because they would be a shared responsibility, we are also looking at people who are trading online, all to endure that we ease the tax burden on the few who are currently on the register,” she said.
Zhang Lizhong, the Chinese Ambassador to Uganda, praises the agreement for facilitating trade between the two countries, which has shown steady growth. Despite the challenges posed by the COVID-19 lockdown, bilateral trade increased by 6.6% last year, amounting to approximately USD 1.14 billion. “Now with this new agreement, trade will be made easier, and I hope that more traders join this group and enjoy this trade facilitation, which is one of many China has to offer.”