Imposing and collecting taxes is a key function of any government. The modern state is best defined by, among other things, its capacity to tax citizens and non-citizens. Often, the weaker the state system in place, the fewer the taxes a government is able to assess, impose and collect.
The failure to have robust and comprehensive taxation regimes has been an integral part of the crisis afflicting African states.
In Uganda in recent weeks, the government has toyed with a few interesting taxation ideas including a suggestion to tax the two preeminent holy books – the Bible and the Qur’an.
Whoever thought of taxing these two books of God must have considered the fact that evangelism is such a thriving business in Uganda involving big money from the rich and small, but collectively equally big money from the poor.
We have spiritual entrepreneurs who freely and legally extort. Perhaps instead of taxing the holy books, it might be better to take taxes from the hefty collections at myriad places of worship by celebrity self-proclaimed men of God and organisations that purport to solve every problem in exchange for a fee – they are, in effect, engaged in business; so, they should be taxed.
Uganda’s tax net is not cast wide enough, which means the tax burden is not evenly spread. We have a few big corporate taxpayers and a small fraction of income earners paying taxes.
Part of the problem is the structure of our economy which is majority Kampala-based with very limited countryside economic activity and value-added production that can be meaningfully taxed. The fraction of the workforce in formal and paid employment is miniscule.
The combination of a big informal economy and subsistence production places the vast majority of Ugandans outside of the reach of the taxman. The problem of a big informal economy reflects the weakness of the state and inefficiency of government – the failure to create a system of legibility so as to easily count, describe and enumerate people in a specific area and what they do or not do.
The percentage of Uganda’s wealth, that is the Gross Domestic Product (GDP), that is collected as taxes annually is paltry – at 13. This is one of the lowest on the African continent; in fact lower than the continent’s average of 19 per cent.
Because we don’t have as many people in the formal workforce who have direct incomes that can be taxed at source and who would feel the tax burden directly, government tends to rely on all sorts of indirect taxes which are easy to collect and are politically risk-free.
So, in the recent weeks, we have heard about plans to introduce new excise taxes on social media and mobile money which is already taxed.
Government is obviously aiming for the easy options because it can’t do the harder work. In the recent past, we have had high taxes slapped on fuel which inevitably increases the cost of production. In turn, the cost of living drives up inflation unless the central bank keeps with its conservative tight monetary policy.
For long, the debate in policy circles involving government technocrats and the external authors of our policies has been about expanding the tax base.
In practice, this means transforming the structure of the economy away from its current agrarian nature and subsistence texture to commercial production and market transactions. It also means having more people in the income-earning category. This debate still rages, but little progress has been made. We are still predominantly an agrarian society with a peasant economy and a subsistence lifestyle.
Paying taxes is part of responsible citizenship. We pay taxes so government can provide those critical goods and necessary services we collectively need but cannot afford as individuals or it would cost us a lot if we tried to do it sole.
Although citizens world over distaste taxation and try to avoid paying, they pay, anyway; partly because they are coerced, but especially when they know their tax money would be put to good use, or if misused, they are sure to get full accountability of their money including at the ballot box.
This is the problem with paying tax in Uganda – a great deal of our tax revenue goes toward funding blatant government malfeasance and a neo patrimonial system whose core goal is to keep Mr Museveni in power. The wastage is so glaring and despicable
As citizens, many of us lead very modest lives, walk on foot or commute in inconveniencing taxis. Why then should we pay taxes that finance a presidential motorcade of dozens of vehicles complete with a mobile toilet?
The long motorcade of big vehicles will, in fact, drive without the chief himself: he will fly a chopper while the motorcade follows him on ground!
Meanwhile, we have a sick healthcare system even with injection of huge donor funds and public education is a mockery of the priceless necessity of acquiring quality education.
The problem is not one of the government imposing new taxes and collecting more revenue, it’s a government that for starters is bereft of legitimacy, has poor fiscal discipline and lacks any sense of prudent budgeting.
The author is an assistant professor of political science at North Carolina State University.