2016 ICT4D Conference

Tax issues and poor governance issues hurting Ugandan economy
By Patrick Jaramogi
Uganda is a country with a very young population with the vast majority (65%) below the age of 18, and with an overwhelming percentage of people living below the poverty line of USD1.9 (UGX6, 175). It is therefore extremely urgent to rethink the fiscal system, the people who contribute to the revenue basket and who benefits from the collected revenues. The fact that the burden of taxation is carried mainly by the poor, while the rich enjoy the incentives cannot be ignored.

As a journalist who has been reported on Tax Justice and Governance, the issue of Fair Tax Monitor (FTM) is paramount in pursuit of revealing how fair or "regressive") Uganda's taxation system is. As I join others attending the ICTAD conference I need to underscore more study I have got as u report on these related issues. Basing on my winning of the inaugural Capacity for Research and Advocacy for Fair Taxation (CRAFT) OXFAM Journalism Award (2013), and attending the Tax Justice training organsied by Oxfam Novib and Tax Justice Network - Africa (TJN-A) in Naivasha Kenya, it is just imperative that I join and share my experience at this conference so we can get to the bottom of the Tax issues in Uganda.

Within the agreed common research framework mentioned above, the subsequent indicators were proposed to uncover the degree of fairness of the tax system: structure of tax system, distribution of tax burden and progressivity, revenue sufficiency, tax exemptions, effectiveness of the tax administration, government spending priorities and transparency and accountability. I anticipate that my experience and findings emanating from Uganda's contextual analysis will yield tangible impact in three areas: the citizens will be equipped to demand accountability from their duty bearers; the civil society will be provided a threshold against which to appreciate the country's taxation matters in the lens of "pro-poor-ness" to further advocacy campaigns; and finally that stakeholders, including government agencies, will have full grip on the taxation and expenditure gaps in order to influence policy decision processes.

Uganda's legal framework taxation system is well knitted in the supreme law of the Uganda - the constitution and support regulations that include Income Tax Act, VAT Act, Public Finance Management Act-2015, EAC customs tariff among others. The implementation of these regulations is mainstreamed through the central government with the lower governments providing a level of support on collection of some avenues such as ground rent, trading licenses etc.

Uganda's comprehensive and all around fiscal legal framework is properly documented as such being of great advantage, emphasis should therefore be put on the active implementation of the tax laws. Harmonization of institutional roles and responsibilities on some tax-heads is a necessity in the short and long run.
Let us take a look at the tax-head such as ground-tax by Local Governments, rental-tax by Central Government (URA) and property-tax by ethnic dynasty authorities (Kingdoms) has created elements of "double-taxation" in the eyes of taxpayers but also increased the burden on individuals.

In order to estimate the extent of the tax burden, taxes are isolated into two taxes (direct and direct taxes) in terms of taxes paid directly by the registered taxpayers or those transferred to the final consumer. Part of taking this direction of demarcation of taxes is so because of prevailing argument that direct taxes are more progressive in comparison to indirect taxes (consumption taxes) which tend to be regressive. In accordance to this argument, it is believed that direct taxes are a strong tool to test the progressivity and fairness of a tax system.

From this the descriptive analysis undertaken of Uganda's direct and indirect taxes, it was evident that the share of direct taxes (paid by companies and individuals directly) to total revenue in Uganda had increased by over 7 percentage points since FY 2005/06 and currently stood at 32 percent (with CIT contributing 17percent to overall revenue and PAYE 14percent). Indirect taxes on their side contributed 21percent and import taxes contributed 42.8percent in FY2014/15 alone. The glaring statistics depict Uganda's high dependency on international trade and the revenues arising therein making the country vulnerable to the shocks - this will curtail the domestic revenue mobilization sustainability in the long-run.

While the taxpayer register has grown from 17,083 in FY2009/10 to 762,809 representing a staff-to-taxpayer ratio of 1:357 (for only operational staff), the load on each staff is seemingly hefty. It is important therefore that the Uganda Revenue Authority lobbies for its institutional capacity building through increasing the numbers. The quality of the personnel should be bridged through intentional financing of in-depth specialised training in international taxation, transfer pricing, audit function to enable them deter and detect tax evasion and avoidance schemes

As earlier mentioned, there are critical improvement in Uganda's fiscal regulation and frameworks. What remains is for the government to see to it that the implementation of the papers is followed through from end-to-end. Instances where corruption has been perceived present in the tax-responsible offices, the institutions with the powers of execution against such abuse of office should take immediate action. The office of the Prime Minister, the Anti-Corruption Court, and Office of the Auditor General, Tax-tribunals, Commercial courts and many others should be approached by the whistle blowing agencies and individuals to minimize tendencies of bribery and corruption in the revenue collection.

The analysis conducted shows observable pronounced interest and commitment by the government to her social contract of prioritizing social and commitment service delivery however in the recent years the expenditure priorities have changed. The government of Uganda has shifted towards infrastructural development, especially in areas of mineral development, security, energy, roads, railway and other modes of transport. Whether or not this poses a risk to widening service delivery gaps (in Health, Education, Agriculture and Social protection), time will tell but likely so.

Based on the resource envelope and respective allocations, the country has been lagging behind on the actualization on a set of international commitments and ratifications. These include: the Maputo 2000 declaration (10 percent to Agriculture- yet only 2.9 percent of the budget was appropriated in FY 2013/14), Abuja declaration (15 percent to health, yet only 8.9 percent was allocated in FY 2013/14), Dakar framework (Education for All), etc. It is important that country falls back to the commitments made in the ratifications since the government and her people are held accountable

The first layer of accountability and transparency is availing accessible information and based on this indication , there are tangible improvements. Tax-matter appointed bodies have endeavored to share information although the gaps are widening on the authenticity of the data in terms of quality, integrity and updated-ness of such information or data. Although the channel may be accessible by the minority and on the premise that most information is untranslated into understandable basic language local or otherwise, the information may not be as useful. Uganda Revenue Authority has shown presence in the media and has been engaged through ta-hubs/clinics within communities to ensure that enough information is shared.

By law, the revenue authority is required to be audited by the office of the Auditor general in as much as it has built its internal audit capacity. The extent to which the results of the audits are published remains wanting and further follow-ups on emanating issues by Parliament and cabinet also continue