KAMPALA, June 18 (Reuters) - Uganda, under pressure to boost tax receipts, plans to amend banking laws to give the state revenue collector greater access to depositors’ bank accounts to verify tax compliance.
Currently, tax authorities can only gain access to bank accounts of a firm or individual through a court order.
“Companies must comply with their tax obligations ... if there’s nothing to hide, we don’t see why anyone would have a problem with URA (tax authority) looking at their finances,” Jim Mugunga, the finance ministry’s spokesman told Reuters on Tuesday.
The east African country must raise extra domestic revenues to finance its public spending after foreign donors cut off direct budget support following allegations of corruption.
In the 2013/14 (June-July) financial year, the government plans to spend 13.1 trillion shillings ($5.04 billion). Domestic revenues are expected to account for 81 percent of that amount.
Mugunga said the amendments would be pursued in the next financial year starting in July, and that the government expects the measure to encourage companies to become more “transparent, tax-compliant and accountable.”
Commercial banks are critical of the plan.
“We foresee a situation where customers ... will become hesitant to use banks a lot more. That will work against the government’s goal of growing the ‘banked’ population,” a banker who declined to be named told Reuters.
The banker said the move could undermine bank-customer confidentiality and scare away existing and would-be customers who will instead keep their money elsewhere.
Stephen Kaboyo, managing director at Alpha Capital Partners, a fund manager, said while companies could use bank secrecy to avoid tax obligations, measures to deter such behaviour also needed robust safeguards to prevent abuse.
“Bank secrecy is a fundamental tenet of any banking system. Customers may be reluctant to entrust their financial dealings if the confidentiality is not guaranteed,” he said.
$1 = 2600.0000 Ugandan shillings Editing by James Macharia and Jane Merriman