Kampala, Uganda | THE INDEPENDENT | Politicians are stifling the growth of tax revenues by encouraging their constituents to engage in activities that amount to tax evasion. This is according to the Uganda Revenue Authority.
This has made it difficult for the government through URA to increase the tax revenues to the required levels of at least 17% of the GDP. Uganda’s tax revenues of around 20 trillion shillings a year amount to about 13% of the total value of the economy which both the government and development partners like International Monetary Fund and the World Bank, agree that it is too low to lead to sustainable economic growth.
As a result, the country continues to rely on debt to meet its budgetary requirements, a situation that could be dangerous if not controlled early enough.
Last financial year, the government launched the IMF-supported five-year Domestic Revenue Mobilization Strategy, which among others would ensure the registration of more taxpayers especially the informal sector to widen the tax base.
Despite efforts like the partnership between the URA, Uganda Registration Services Bureau and the local governments to boost registration of new taxpayers, the increased URA tax education campaigns, and expansion of its outreach network, little has been achieved.
Last year, government-commissioned Makerere University College of Business and Management Studies for a study into the successes and/or failures of the URA methods, under the theme, “The Interrogation of Tax Education Gaps in the Informal Sector and How they Can Be Leveraged in Broadening the Tax Base”.
It is estimated that there are about 8.6 million Ugandans employed in the informal sector, though the researchers think that this could have grown to 9 million people due to the effects of the Covid-19 pandemic in the economy.
But in total, there are just about 1.5 million registered taxpayers in the country.
Prof Hisali Eria says URA’s tax education structure focuses on some of the things that government has done, but that most of them do not relate with the local person doing informal business.
He prefers that education material should include rural social services like health centres to deal with the perception of the public and also what the cost is when someone does not pay due to taxes among others.
Kampala City Traders Association chairman Everest Kayondo says that the efforts to increase tax revenues or even to formalize businesses is being hindered by politicians who he says encourage the would-be taxpayers to remain informal and avoid taxes.
He says the politics of populism are conflicting with the efforts to economic development. Kayondo says for example that mobilizing the informal sector practitioners into associations without encouraging them to formalize is counterproductive.
He also says that sometimes the way the URA enforces tax payment discourages people from registering for tax purposes because it increases their obligations to the state while the informal and unregistered entrepreneur has less to worry about.
URA officials also agree that some politicians are discouraging taxation, citing areas along the borders.
The politicians in these areas claim that if government abolished smuggling for example, the residents would starve because that is their main source of livelihood.
Patrick Kandole, local government and local revenue mobilisation consultant with USAID programs says the problem with Uganda is that there is no cost for non-compliance or informality, while there is no inventive for formalizing businesses and paying taxes.
URA tax supervisor Robert Wamala defends URA’s tax education record saying it is based on research, adding that the study left out many initiatives that the tax-body has been implementing.