Tax Extract

Development Initiatives Africa as earlier communicated will not be able to write an extra on tax policy due to conflicting information and strategies being adopted by various institutions and countries in response to the current economic crisis, our expertise and reach in this respect is not in position to comprehensively analyze the tax landscape overall.

We would like to note a few lessons learned in the Ugandan context, much as the recession has had an impact on our economy, in our opinion we are witnessing a transforming taxation body in Uganda that has been vigilant in increasing tax collection strategies, institutionalization of systems in terms of administration and technological advancement that are meant to control leakages at the collection points. We have seen vigilance in reporting and monthly accounting to the public through media and overall training of stake holders; we have seen the taxation body open up the taxation records to the legislature. These steps are unprecedented and deserving notable in the changes that have taken place in the management of Uganda Revenue Authority.

We have seen an increase in tax awareness and participation in terms of consultation by interest groups such as importers, exporters, traders, construction workers, employees, and agriculturalist in the taxation policy reform debate. We must also not the role of the media that has taken major steps in reporting and covering issues concerning taxation in the country, we have made a summary of all media reports since last June of issues covered in the media on taxation and it is clear there has been an increase in taxation reports however, it should be noted that the media can do more in terms of investigative journalism on issues such as double taxation, tax incidences, leakages etc..

We have also noted an increase in availing of information and reporting of challenges faced by URA. A case in point, the government that is meant to check the taxation body has unpaid taxes to the institution. This is a double edge sword in that, the government ministries cannot raise their fingers on issues of taxes to Uganda Revenue Authority at the same time the tax body can escape with some improprieties because the governing ministries are equally indebted. A plus for the revenue authority is the involvement of Parliamentarians in pressuring the ministries and government structures to meet their dues is worth noting.

Having briefly made our analysis of the trends, it is worth noting that political institutions usually adopt a strategy of providing satisfactory explanations or even raising the same complaints that the populace and advocacy groups would raise thus satisfying their urge to question or even prescribe more solutions. This therefore calls for those in the media and pressure groups to identify these trickery but also follow them up, if it is true that an institution is facing challenges in terms of efficiency etc, it should be therefore in position to provide to the public measures that are being taken to address the challenges and this should be equally followed up.

Investors

We have also seen an increasing demand from Investors to have more tax holidays of up to even 10 years for them to establish competitive and viable business enterprises. I believe Developing economies should be able to give tax holidays to investors based on some basic fundamentals, number of people the project is hiring locally, amount and cost of raw material being bought from the economy, amounts of energy being consumed and of course the tax expected from the organization once the business enterprise has stabilized. However there are institutions that use almost 60% of their raw material and expertise from outside the governing economy and still request for tax holidays as those enterprises that purely dependent on the governing economy from its raw material to the finished product. There is an inconsistence between these two kinds of investors. Rousseau a social and political theorist was opposed to taxation and prescribed that people should actually work for the state and be exempt from taxes. Therefore countrymen should dedicate their resources and abilities in making a state functional, however with a large state and in the current definition of today’s state this prescription is not possible. However I find one particular issue that is probably important and can be picked up by developing economies from Rousseau’s argument.

If the policy is to exempt Investments from taxations then they should meet the demands of some social amenities such as construction of schools, hospitals, waste management systems, water and environment management systems. This is very important for developing economies because most of its budget goes to meet such costs. An example of the Madhavani group or Mukwano group, The Madhavani group constructed an entire village in Jinja with schools, Hospitals, clinics, Roads etc that are benefiting these communities to date, I believe this kind of investment plan is a clear example of community social responsibility, Of course not all investors have the same capital but they can meet some basic social amenities for communities as needs arise rather than being totally exempted from taxes without meeting any community needs.

Investors of course would argue that it is not their mandate to develop these kinds of services but clearly in the long run, investors will establish brand loyalty but also cultivate or grow a consumer society of their products, of course there other ways of developing a consumer societies based on marketing strategies and advertisement of the 5 P’s (Product, Price,Packaging,Place etc )however these are all based or founded on the producer’s perspective a reverse of this would benefit enterprises more. However if a consumer group was cultivated and grown, then it would actually participate or even partake in the development of the product. Borrow from politicians, they actually depend more on the populace for their growth in terms of systems, ideas and so forth. This is because they institute basics fundamentals and ideals in communities that enable free will and loyalty to their ideals.

Written and Compiled by Edgar Walter Byaruhanga, Exec Director Development Initiative Africa.

Research Materials: 1.Mein Kampf by Adolf Hitler
2. Business Development: