Absence of taxation framework stirring non-compliance – report

Makerere University researchers have revealed that the absence of a taxation framework for informal businesses is the root cause of non-compliance among traders in Uganda.

The findings were from a joint research conducted by eight Makerere University scholars as they assessed the drivers of the shadow economy and its tax implications.

Dr Ismail Kintu, the Principal Investigator (PI) of this research, shared the results during the Thursday dissemination workshop held at Nansana Municipality Council in Wakiso District.

Other researchers include; Prof Eria Hisali (Co. PI), Dr Fred Bateganya, Dr Willy Kagarura, Mr Patrick Lumala, Mr Nicholas Musoke, Ms Marion Atukunda, and Ms Winfred Nalwoga.

The conclusion was derived from findings in the first phase of the research when traders said there is unfairness in the taxation system.

“Traders said the system is unfair to them. So, our research aimed at establishing the meaning of fairness of the tax system from Uganda's context,” Dr Kintu said.

According to research, traders defined fairness as significantly related to voluntary tax compliance to allow people to pay taxes that they can afford.

“If the system can be fair to every taxpayer, in a way that those who earn high pay higher taxes and those having low-income threshold are not taxed at all, it would be okay for everyone,” the research findings suggest.

The researchers developed a framework for taxing the informal economy which was not existing before.

Their framework was designed with key factors including timing for consulting taxpayers and timing for payment of taxes.

They suggest that consultative meetings be convened by Uganda Revenue Authority (URA) and Ministry of Finance and other key stakeholders before taxes are being charged and tax policies are being passed.

“These could provide a fair view about the policies that need to be passed for the fair taxation of the informal economy,” Dr Kintu said.

They want the Ministry of Finance to map out policy gaps in the informal economy and find solutions to bridge them every year.

“If this framework is adopted and the traders be consulted before enforcement and implementing IT tools, it is believed to solve some of the impasse that happens between the tax administrators and the traders,” researchers suggest.

Mr Festo Tandeka, Nansana Municipality town clerk, encouraged the public to have a culture of paying government taxes and suggested the need to set a framework for tax.

“However much we want taxes but you shouldn’t pay off all your earnings in tax. Traders are also allowed to pay it in instalments,” he said.

Mr Shaffic Ali Nsubuga, Nansana Municipality Deputy Resident District Commissioner, asked tax officers to have mercy on taxpayers during enforcement.

He suggested there should be prior notices to the traders before collecting the taxes.

Mr Joshua Mawerere, Kampala City Traders Association Youths representative, said the research is very timely, coming at a time when traders are protesting higher taxes.