Taxes are taking a toll on women’s businesses

Many of the taxes Ms Kabwoho is complaining about emanate from erratic valuation determined by tax officials or people purported to be working for tax authorities.

This explains why each time she exports or imports any product/produce across the border she is subjected to different charges.     

Taxes

According to Ms Kabwoho, such unexplained taxes and related charges deprive budding women entrepreneurs of the opportunity to grow their business beyond small scale.

 This explains why even after years of doing cross border trading between Uganda and Democratic Republic of Congo (DRC), Ms Kabwoho, like many cross border women traders, still lives from hand to mouth.

“It is about orders to pay for revenue and charges I don’t comprehend,” Ms Kabwoho narrates to Daily Monitor hours before the recent ground-breaking ceremony for the construction Border Export Zone (Market) and One Stop Border Post (OSBP) at Mpondwe in Kasese district.

She continued: “All we are asking for is some help in terms of tax harmonisation if not reduction.”

Ms Kabwoho predicament cuts across the Micro, Small and Medium Enterprise (MSMEs) sector.

 For example, the fate of Ms Sofia Nantongo, a city salonist rests on the hands of the taxman.  With Covid-19 depleting her capital and accumulated savings, the last thing she wants to hear is a knock on the door by the taxman.

But should the several Tax amendment Bill 2021 currently before parliament be passed in its current form, the tax burden will only worsen for MSMEs.     

Then there is Dorothy Kimuli, the proprietor of D&M International. The processor of Chili Sauce and Tomato Ketchup is trying to recapture the market she lost as a result of the ongoing pandemic.

 She cites taxation regimes, lack of affordable financing, late payment by government and capacity gaps which deprive most women entrepreneurs a fair shot at several high-value procurement bids/deals.

The three women entrepreneurs like many of their colleagues, all ply their trade under the MSMEs sector which according to trade minister Amelia Kyambadde is the anchor upon which the country’s economic development is premised.

This sector (MSMEs) where women role is crucial although underestimated, remains a key drivers in fostering wealth and job creation with over 2.5 million employments, making it the largest employer in the country.

Women-owned b usinesses  remain informal

A study by Civil Society Budget Advocacy Group (CSBAG) indicates that nearly 35 per cent of micro, small and medium enterprises in the country are being operated by women, most of whom want to do their businesses the right way by registering. But due to much taxes and other related charges, most of which are not clearly known to them, most women businesses still operate informally, according to a study by CSBAG.

However, Ms Sophie Nampewo Njuba, a budget policy specialist is of the view that collection and management of the taxes is crucial in deepening compliance.

She attributes the high informality in the economy to gaps in the tax regime that is unfriendly to MSMEs sector.  

According to Ms Nampewo, the many charges MSMEs are subjected to such as trading licence, garbage collection fee and market dues among others have not been properly explained.

Coupled with the presumptive taxes that most MSMEs are subjected to, the burden on MSMEs shoulders is overwhelming, pushing up the cost of business. 

Presumptive taxation involves using indirect methods to compute tax liability, where the taxable income is calculated based on assumptions instead of actual revenue.

Difficulty in accessing finance

According to the executive director of CSBAG, Mr Julius Mukunda, more women entrepreneurs than men struggle to access financing because often time they do not have the necessary collateral that financial institution requires before giving out a loan.

For that, Mr Mukunda, who is also a senior budget and policy analyst, wants to see women enterprises benefiting from tax incentives just like most foreign businesses do in this country.

For this to happen, government should reduce the incentive threshold to a yard stick that makes sense to the domestic MSMEs.

“I am in favour of educating our people in informal operations and setting about basic book keeping because that is an important step into slowly but steadily introducing them into formal business operations. I don’t think presumptive taxes are helpful right now. Since they are not well structured, they are more of a burden to the MSMEs where women are mostly involved,”Mr Mukunda says.

He continues: “It is also about time a desk is created at Uganda Revenue Authority (URA) to solely handle business established by women. Part of this unit will be to help women get into the taxation bracket without being burdened as it is the case right now.”       

Taxman

In an interview, Mr Asadu Kigozi Kisitu, the Assistant Commissioner Field Services, URA, says that the Simplified Trade Regime (STR) - an arrangement by regional member states to formalise and improve the performance of the small scale cross border traders and enable them to benefit from the regional preferential treatment will soon be concluded and implemented.

He also says attempts to simply taxes to MSMES will be intensified with a view to harmonise distortion.

Taxation

Presumptive taxation

Presumptive taxation involves using indirect methods to compute tax liability, where the taxable income is calculated based on assumptions instead of actual revenue.