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Kleptocracy distressing us with more taxes

Ministers at State House

Ministers at State House

The Covid-19 global pandemic plunged all the world economies into an unavoidable crisis because of lockdowns and travel bans which severely affected the big and small shots in the business sectors worldwide and Uganda has not been spared either.

No country has escaped the effects of Covid-19 and this has led to the closure and shutdown of businesses, an increase in unemployment and loss of incomes. These effects have been more hostile among the middle- and low-income earners.

Across the world, the caring governments did their best to implement several strategies to mitigate the effects of the pandemic; while others did more, some kleptocratic governments did nothing especially in Africa. 

Apart from over-borrowing to spend on brutality against opposition in the name of fighting the pandemic, distribution of posho (imagine borrowing to buy food), expired milk and rotten beans to a handful of the population - nothing has been put in place to ensure that businesses stay afloat and people are relieved of debts that accrued due to the pandemic.

We went into a total lockdown for close to 3 months and during this time, businesses came to a standstill. Schools, arcades and other non-essential sector-based businesses were closed.

The resulting effect was that businesses laid down workers since without income, they could not afford to keep them on the payroll. Surprisingly, in other sectors regardless that businesses were not working, landlords still demanded full payment of rent, especially the arcade owners. All this further plunged our economy into a deeper crisis.

Financial institutions were not immune to the resulting effects of the travel bans, lockdown and closure of business. That said, the biggest loser continues to be the ordinary citizen.

The vampire government of Uganda has absolutely done zero to ensure that our economy not only survives the effects of the pandemic but thrives as well. However, the recent tax proposals are a thing to worry about the performance of this economy; - if we are not careful, we are likely to sink further into the bottomless abyss.

Well, most of us must be pondering about how to escape from this? 

There is an ongoing debate between fiscal austerity and fiscal stimulus. Opponents of austerity worry about contractionary effects on the economy. Opponents of stimulus worry about indebtedness and moral hazard.

Proponents of austerity believe that only balancing government budgets and shrinking national debts and an increase in tax revenues. Having an insight on the merits and demerits of both, I am a firm believer that without a large fiscal stimulus, the continued imposition of more taxes on the citizenry the already bruised economy will remain stuck in a crisis for years to come.

I am one of those who believe that recovery from the crisis requires fiscal stimulus rather than squeezing the living lights out of depressed taxpayers to generate more revenue through a heavy tax burden imposed by merciless hyenas of this government.

Let us put things in perspective; a stimulus fiscal policy would require the government to bail out its citizens through sending them money. That is what the Cares Act in the US essentially did; businesses received checks from the government so that they could survive amidst the pandemic.

For example, if the government sends Shs 20,000,000 to a business that employees 20 people, the business in turn uses this money to pay their employees Shs 1,000,000 and in turn they use the money to buy food, send a child to school, fix their car - in theory essentially the initial Shs 20,000,000 creates Shs 60,000,000 of economic activity.

The business, the employees, and other stakeholders will all have a benefit of this money passing through their hands. On the other hand, if we apply austerity, that means the government is encouraged to levy more taxes on businesses and people, the most likely effect of a heavy tax burden is that businesses may be forced to cut spending thereby laying off labour to comply with tax obligations, prices of essential goods may also increase- this will lead to reduced economic activity and in the end government will have little to collect in taxes.

I call upon all the relevant stakeholders to take a step back and study the implications of austerity, look at what happened in Ecuador and other countries that embraced austerity vs. the countries that embraced fiscal stimulus like the U.S during the 2008 recession.

The truth is that any fiscally-driven recovery policy is bound to have reformist implications. That is why the austerians are so against it, and why even those who accept the theoretical case for a stimulus insist on implementing it through monetary policy alone.

Up to now I cannot manage to think how the rest of us were affected by the lockdown as the Covidpreneureship brigade accumulated wealth, swam in enjoyment and still want to squeeze more tax out of us. What spirit of greed possessed these people?

Mutubalemu amagezi.

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