Is the shilling devalued by taxation?

President Museveni is in an unenviable position. He gets appeals from millions of citizens he cannot help. Why?

Regardless of the kind of country he visualised since he started scheming for power, Gen Museveni now presides over a militarist vampire state, and that state imposes on him its own dictates. If the President deviates too far from those rules, his regime would probably collapse.

In short, either he voluntarily abdicates, or he remains hostage to the demands of his militarised establishment and its plundering ways. This sounds paradoxical. How can so powerful a ruler be too handicapped to do the things that would leave him freer, less resented, perhaps even loved, and his country more prosperous?

The drama in which Mathias Mpuuga et al awarded themselves Shs1.7 billion on dubious grounds and the unresolved bitterness of the local/indigenous business community towards Uganda’s tax regime are instructive.

Many well-meaning Ugandans think that the prosperity of all the citizens is a high NRM government priority. This is a big mistake. Far more important is the availability of resources and conduits for feeding the cadres of the regime, and for compromising its opponents.

The pro-citizen principle of having taxes that are affordable is therefore less important than collecting enough taxes to sustain the vampire state and strengthen its muscle.

That explanation also indirectly answers the question traders and other citizens are increasingly asking: What anyway does the government do with the taxes when our roads, hospitals and schools are in such a sorry state?

Ring-fencing power and the raw satisfaction of the vampires hooked into those sectors come before the quality of service.

To that end, after a ruling elite devoid of any humility has listened to the voices of reason calling for cutting the size of government and public expenditure on this greedy behemoth, the NRM insults the public by rolling out a new layer of assistants below the RDC’s and their deputies, as well as indicating a plan to enlarge the 557-member Parliament with even more MPs.

Low on productivity, high on consumption and corruption and the importation of armaments, the economy certainly bothers the NRM, but not as greatly as many people think.

When Zimbabwe was sinking under Robert Mugabe’s feet, his country could still find the money to throw his million-dollar birthday parties. And an economically troubled North Korea is constantly adding to its military strength.

Uganda’s businessmen are lamenting that traders who used to separately import several containers of goods in one consignment have been reduced to sharing one container. But the regime does not necessarily lose sleep because of this. 

After all, there is an argument that a drop in imports of household goods means saving foreign exchange for military hardware and the luxury needs of the ruling class! Just tax the ordinary importers and their customers more heavily to plug the gaps in revenue collection.

I have been pondering something for some time. Should the Uganda shilling be rated at around Shs3,900 to the dollar (as it is now), or nearer to Shs6,000 to the dollar?

As a non-economist, simple mathematical calculations show me that you can apply heavy taxation (using Uganda Revenue Authority) to compensate for a shilling that is artificially kept strong (using Bank of Uganda tools).

Once upon a time, Uganda had two forex windows, plus kibanda (black market). Economists please tell us, has the shilling in effect been devalued for ‘Window Two’ through heavy taxation?

Are well-connected importers (reportedly paying lower taxes) effectively buying forex from ‘Window One’?

Mr Alan Tacca is a novelist, socio-political commentator.
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