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Winners and losers from tax exemptions

By Cissy N. Kagaba

Why should Sembule Group chokes on debts while BIDCO is awarded a tax holiday of 25 years?

The Auditor General’s report to parliament this month put the Ministry of Finance on the spot for gross abuse of tax payer’s money when it decided to settle tax obligations for a string of for-profit companies in total disregard of the established procedures. Such strange actions show that impunity is becoming the order of doing business in our country.

The government’s granting exemptions to certain companies is supported by the Investment Act, 1991 which aims to stimulate employment and development. However, in most cases such decisions have denied Ugandans quality services because the billions in foregone taxes would have been used, for example, to provide medicines in hospitals. Instead, they are ploughed back by the same companies. Even when losses are made, our dear patriotic government is ready to bail them out at the expense of its citizens.

The failure by the Ministry of Finance officials to explain why billions of monies were dished out is laughable and a clear indication that the process is not well managed and leaves the minister of Finance with wide discretionary powers to determine who benefits.

This, in the process, has promoted the patronage system and well-connected companies have benefited to the detriment of those that would have qualified. The unnecessary exemptions have also contributed to the narrowing of the tax base and loss of tax revenue.

Once cannot help noticing the irony between BIDCO and Sembule Group of Companies. While Sembule, one of Uganda’s oldest manufacturing businesses, chokes on debts and faces a risk of losing Shs27 billion in investments, our government is more interested in the new kid on the block; BIDCO whom it awarded a tax holiday of 25 years. Where is the fairness and justice in all this, considering that currently there isn’t any reliable research findings that can clearly point out the positive and sustainable impact of tax exemptions or incentives in advancing socioeconomic development.

Government ought to comply with good governance systems by designing a transparent process and procedure for managing and granting tax exemptions. This is the time to reduce the powers of the Finance Minister over tax exemptions. The minister ought to be held accountable by making it possible for him or her to explain their decision to parliament.

Apologies by the Ministry of Finance officials will not return the lost billions. Parliament should this time round cease its rhetoric of threats and ensure that tax payer’s monies are refunded.

Cissy N. Kagaba is the executive director of the NGO, Anti-Corruption Coalition Uganda.

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