Taxes ought to create 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 fuelling economic activities that guarantee micro and macro stability in a country. When rationally implemented, the above equally result in 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 make businesses rebound and boom to the advantage of its operators and closest stakeholders. Traders in Uganda are indeed considered a special group of tax payers as 2022 URA Report shows that wholesale and retail trade sector contributed the biggest share of tax revenues totalling to Shs6,783.61billion (26.34 percent), followed by manufacturing ( 23.16 percent) and financial sector (10.3 percent).

World over, governments rely on taxes as a legal tool to generate substantial revenues critical to financing public activities but these resources must be jealously shielded from selfish corrupt officials. A survey done by the Inspectorate of Government of Uganda (IGG) and Germany society for international corporation few years ago, did establish that Uganda loses more than Shs10 trillion annually. 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 taxes are diverted to the accumulation of private wealth like it is increasingly becoming common in Uganda, then the anticipated tax benefits will be scanty, and increased tax apathy among the potential taxpayers as is the case with traders in Kampala central business district will be the order of the day.

In the FY2022/23, URA collected a net revenue of Shs25,209.05b (15 percent of GDP) above its target by Shs57.48b, which government used to finance national budget of Shs48,138.68b, leaving a deficit of Shs22,929.63b, financed with external and internal borrowings and non-tax revenues (2022/3 Budget Frame Work Paper - MoFPED). Although URA boasts of over-hitting its annual targets, reports like one recently released by Bank of Uganda showing that almost 75 percent of Ugandans live beyond their means, especially on borrowings should worry the government more than the recently concluded trader’s strikes.

Interestingly also, these developments emerge when government is exerting intense pressure on URA to widen the tax base as if unaware that 64 percent of tax revenues come from regressive indirect taxes whose burden are born by everyone, rich and poor equally, moreover in a country where majority, 70 percent of adult Ugandans are in engaged in a sector that receives less than 5 percent of the national budget. As efforts to include more people in the tax bracket intensifies, the government ought to be mindful of the adverse effects of her inefficiencies recently reflected in the poor performance highlighted by results of the Mid-Term Review (2023 MTR) for National Development Plan 3 (NDP III) which revealed that the country attained only 17 percent of the targets set in the plan halfway into its implementation.

The botched World Bank and IMF induced privatisation policy that left several state owned companies like telecommunications, banks and textiles idle and unproductive should open eyes of our planners to realise 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 (lCBC) whose estimated value is $6.12 trillion is state owned.

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

Uganda’ tax to GDP will remain stunted as long as government continue to target our malnourished private sector as its ‘cash cow’. Ugandan weak and less competitive private sector left our capital intensive contracts in energy, transport, telecommunications, manufacturing and service industry to foreigner investors, largely Chinese thus, exacerbating capital flights.

Relying on foreign state-owned construction companies to implement our capital intensive projects using loans secured from Chinese state-owned banks won’t help us build resilient , independent and self-sustaining economy. We ought to deploy our human resources in the Ministry of Works and Transport to save more resources badly needed by URA. You can’t milk a poorly fed cow and expect enough milk. In the Ugandan case, the owner of the cow is well aware of cow’s condition but naively misleading the caretaker.

Ian Muganzi,Coordinator,  Safety Watch Initiatives Uganda