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Taxes ought to create a safe and conducive business environment

Principally, a tax never returns to its specific payer in equal measure or proportionately, hence the term non quid pro quo - commonly used to describe taxes in economics.

However, businesses, being the main source of public revenues, benefit greatly when taxes are invested to formulate sound economic policies capable of fueling economic activities that guarantee micro and macro stability in a country.

When rationally implemented, the above equally result into increased production and employment, savings, stable prices, consumption, cheap capital, more exports and tax collections, minimal foreign debts and less foreign interference, suppressed crime and enhanced national image all of which help to make businesses rebound and boom to the advantage of their operators and closest stakeholders.

Traders in Uganda are indeed considered a special group of taxpayers. URA’s annual report for 2022 shows that wholesale and retail trade sector contributed the biggest share of tax revenues, totaling Shs 6.7 trillion (26.34 per cent), followed by manufacturing (23.16 per cent) and the financial sector (10.3 per cent).

World over, governments rely on taxes as a legal tool to generate substantial revenues, critical to financing public activities. However, these resources must be jealously shielded from corrupt officials.

A survey done by the Inspectorate of Government of Uganda (IG) and the German International Cooperation (GIZ) few years ago, established that Uganda loses more than Shs 10 trillion annually to corruption.

Taxation, user fees utilities, procurement and budgeting, natural resources, health care and several others are some of the mentioned government departments where public revenues are stolen by those meant to safeguard them.

When public officials steal tax revenues for their selfish interests, like it is increasingly becoming common in Uganda, then the anticipated tax benefits will be scanty. Also, there will be increased tax apathy among the potential taxpayers as is the case with traders in downtown central business district, otherwise known as Kikuubo.

In the FY2022/23, URA collected a net revenue of Shs 25,209.05bn, (15 per cent of GDP) above its target by Shs 57.48bn.
Although URA boasts of exceeding its annual targets, reports like one recently released by Bank of Uganda (BOU) show that almost 75 per cent of Ugandans live beyond their means. Many of them are surviving on loans, which should worry government more than the recently-concluded traders’ strikes.

Interestingly also, these developments emerge when government is exerting intense pressure on URA to widen the tax base as if it is unaware that 64 per cent of tax revenues come from regressive indirect taxes, whose burden are borne by everyone.

As efforts to include more people in tax bracket intensifies, government ought to be mindful of the adverse effects of her inefficiencies, which were recently reflected in the poor performance highlighted by results of Mid-term Review (2023 MTR) for the third National Development Plan (NDP III).

The report revealed that the country attained only 17 per cent of the targets set in the plan half way into its implementation. This alone sends cautious signal to the taxman to reduce their speed.

The botched World Bank and IMF-induced privatisation policy that left several state-owned companies in the telecommunications, banks and textiles industries idle and unproductive should open the eyes of our planners to realize that governments globally still engage in profit-driven investment from which sizeable taxes are collected.  

The world’s largest bank, the Industrial and Commercial Bank of China Ltd (ICBC), whose estimated value is $6.12 trillion, is state-owned.

With the majority of casual labourers unable to meet the threshold for income tax due to the absence of minimum wage, and then close to 75 per cent of national budget allocated to recurrent expenditure, it means government is not creating a sufficient new tax base, rendering URA’s mission almost impossible.

Uganda’ tax-to-GDP will remain stunted as long as government continues to target our malnourished private sector as its cash cow. Uganda’s weak and less competitive private sector left our capital-intensive contracts in energy, transport, telecommunications, manufacturing and service industry to foreign investors, largely Chinese. This only exacerbated capital flight.

Relying on foreign state-owned construction companies to implement our capital-intensive projects using loans secured from Chinese state-owned banks will not help us build resilient, independent and a self-sustaining economy. We ought to deploy our human resources in the ministry of Works and Transport to save more resources, which are urgently needed by URA.

You can’t milk a poorly fed cow and expect enough milk. In Uganda’s case, the owner of the cow is well aware of the cow’s poor condition.

The writer is the coordinator of Safety Watch Initiatives Uganda (SAWI).

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