Civil society organizations (CSOs) have asked government to carry out a cost-benefit analysis to determine whether the country was benefiting from tax incentives.
This financial year, government spent Shs 77bn to pay taxes for Bidco Oil Refineries Ltd, Aya Investments Ltd, Steel and Tube, Cipla Quality Chemicals, Uganda Electricity Generation Company Ltd and Uganda Electricity Transmission Company Ltd.
At least 23 companies will benefit from tax incentives in the coming financial year. Parliamentarians have also raised concern over the manner in which tax waivers are given out.
The incentives are meant to endear Uganda to investors but increasingly, there is a feeling that they are being abused and Ugandans hardly get value for money.
Nelly Busingye, a programme officer at Southern and Eastern Africa Trade, Information and Negotiations Institute (SEATINI), said research suggests that developing countries do not need tax incentives to attract foreign investors.
She said most corporations looked at other parameters such as cost of labour and energy, presence of adequate infrastructure and the country’s overall investment climate in order to invest.
“We recognise that FDI [foreign direct investment] is critical in fostering economic growth and development, we are also aware that tax incentives can promote investments in the country if they are transparent, equitably accessed and properly managed,” she said.
Busingye quoted the International Monetary Fund (IMF) and the World Bank assessments showing that successful countries at attracting investment did not offer tax holidays but, rather, invested in other important factors such as good quality infrastructure, low administrative costs of setting up businesses and political stability.
Christine Byiringiro, a programme officer at Uganda Debt Network, said Uganda’s debt at Shs 38tn could be paid easily if government was not offering tax holidays.
“We should concentrate on priority sectors like education, energy, health and infrastructures; there is no need for tax holidays,” she said.
According to Busingye, preliminary findings from an analysis being conducted by the Tax Justice Alliance coordinated by SEATINI Uganda shows that about Shs 900bn in 2015/16 was tax forgone in the form of tax incentives.
Julius Mukunda, executive director at Civil Society Budget Advocacy Group (CSBAG), said: “In 2016, Members of Parliament (MPs) exempted themselves from paying taxes on their allowances, this alone led to a loss of more than Shs 53 billion annually, we have also learnt that Saccos have been exempted from paying taxes.”