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Uganda losing over 2 Bn Shillings in capital freight annually by foreign based companies – Experts

by District Focus
April 14, 2022
in Business, News
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Uganda losing over 2 Bn Shillings in capital freight annually by foreign based companies – Experts

Panel discustants during the launch of the Fair Tax Monitor Report at Golf Course Hotel on Wednesday.

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BY AMBROSE GAHENE

The Uganda Government is losing over 2 Billion shillings in capital freight annually by foreign based companies who dominate the investment climate in the country, according to economic analysts.

This was revealed during the launch of the Fair Tax Monitor Report by Oxfam and SEATINI Uganda, in collaboration with Tax Justice Alliance Uganda, SOMO, FEMNET and Tax Justice Network Africa,     at Golf Course Hotel in Kampala on Wednesday.

The report was launched under the Fiscal Justice for Women and Girls in Africa project co-funded by the European Union

Daniel Lukwago, a Lead Consultant at the report launch attributed the loss to tax holidays and other incentives accorded to foreign investors, who in turn make huge profits that are ferried out of the country, leaving Uganda with a low tax collection base from struggling indigenous companies.

“Ugandan companies are foreign based and take away over 2 billion shillings annually in capital freight, which negatively affects economic development”, said Lukwago. He added that Uganda has made some milestones in the fight against inequality and poverty, however, there is continued regressivity of the tax system, affecting low-income earners, especially women. He said Indirect taxes contributed to 64.42 percent of Uganda’s Total Tax Revenue in FY 2020/21

Oxfam Uganda Country director, Francis Odokrach, said the Fair Tax Monitor is a research tool that identifies the main bottlenecks within the fiscal policies and systems and assesses their redistributive qualities and makes recommendations for change.

“Tax systems are, globally, seen as putting women at the margins, and not just in terms of how taxes affect income, wealth, and behaviors directly. They are not designed in a way that gives enough attention to the net effect that tax and spending systems combined, both on paper and in practice, have on the immediate needs or strategic priorities that underpin gender inequalities”, he said. He added that Tax laws in Uganda are annually amended with the focus of increasing tax revenue and establishing an “efficient” mode of collecting taxes.

“However, apart from tracking the revenue growth, the government should ascertain the impact of tax amendments on gender and marginalized groups in respect to the widening inequality gap. We, therefore, call on policymakers, through the number of recommendations in this report to Make Tax Fair,” he added.

According to the report, Uganda’s excise duty regime has a degree of progressivity. The top richest households pay more excise duty as a percentage of their consumption than the bottom poor households. However, in some cases, excise duties are regressive because they are usually flat rated, for example, a 0.5 percent levy on mobile money withdrawals.

These tend to affect low-income earners more – especially women, who spend a higher portion of their income on these items. The report further indicates that the tax administration system faces several challenges, which have contributed to Uganda’s failure to meet its annual revenue collection targets.

“These include, among others, low funding of the Uganda Revenue Authority (URA), an increase in taxpayer-to-staff ratio and costly tax and investment incentives which cost Uganda UGX 5,030.45 Bn (US$ 1,354 Mn) or 30 percent of total revenue.

This is more than the total budget allocated to the health, agriculture, water and environment, and social development sectors during the FY 2019/20, according to the latest report on tax expenditure by the Ministry of Finance, Planning and Economic Development”, he added.

Jane Nalunga, the executive director, SEATINI Uganda, said on top of this prevailing tax system, the impact of the Covid-19 pandemic led to a reduction in government revenues and grants of about UGX 2,291bn (US$626m) against a target of UGX 23,529.6bn (US$6.4bn) during FY 2020/21.

“It is possible to change this status quo. Despite Government efforts to increase women representation in fiscal policy formulation, public participation is still weak and low at 22 percent, according to the International Budget Project (IBP) 2019 Open Budget Survey. Therefore, an increase in Public Tax Education remains vital as this empowers citizens to shape transparency and accountability in Uganda,” she said. She pointed out that this should not only be a Civil Society concern, but it is the responsibility of every citizen, to ensure equity and fairness through advocacy for a tax system that allows everyone to pay their fair share of tax.

“Transparent and gender-responsive spending will go a long way to enhance the quality of life of ordinary citizens in Uganda,” she added.

Minister of State for Finance Henry Musasizi launching the Fair Tax Monitor Report at Golf Course Hotel on Wednesday.j

Minister of State for Finance, Henry Musasizi reiterated Government’s commitment to working with Civil Society Organizations to improve on the tax base. He said taxes are critical for revenue mobilization.

 

 

 

 

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