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Tuesday, October 16, 2018


In recent weeks those who have been agitating against new taxes, have argued that the government does not deserve their money because it is corrupt to the bone and it will not be unlike throwing good money after bad.

Last week parliament amended the excise duty act which retained mobile money but reduced its rate 0.5 percent and only on withdrawals. They also retained the tax on social media services, which had attracted a disproportionate amount of noise given the relatively few users compared to mobile money services.

When the two taxes were initiated government had projected that about sh400b would be collected. 

The downward revision in the mobile money rates and incidences of taxes will reduce that significantly.

In July after one month of implementation URA announced they had collected sh27b for both.

The opposers of the new taxes point to poor government services delivery, wasteful spending on questionable projects and the lavish lifestyles of poorly paid technocrats as evidence that their hard earned taxes are going to waste.

"First of all as was reported there are only about million out of 11 million workers paying income tax, hence our low revenue collections to GDP of about 14 percent. The sub-Saharan average is a lowly 18 percent...

In sub-Sahara Africa the highest revenue collector is Lesotho with 42 percent of GDP.

Clearly there are too many people not carrying their weight, yet they earn incomes.

And the opposers may have got it backwards. In order to see an improvement of services and a lowering of corruption we need to pay more taxes not less.

First off because we pay so little tax in relation to the total economic activity inside our borders government this year will spend sh800,000 per Ugandan. Of this sh400,00 comes from our taxes and the rest from loans and grants.

The amount government commits to spending is pitifully small compared to the countries we dream of living in like Finland where government spends the equivalent of sh40m per citizen or Norway sh107m or even South Africa where it splurges sh77m per person.

And when you break down our budget even further government has earmarked sh57,000 for health, of this only sh20,000 per Ugandan will actually be spent on health worker wages and medicines. 

Clearly we expect too much from our budget. And this before we factor in corruption.

Its obvious government is working with too little money, spreading all around and doing little effectively.

"Interestingly if you did a cursory comparison of countries’ revenue collections to GDP and
Transparency International’s corruption index, the argument can be made that the countries which pay the least taxes in relation to their GDP are also among the most corrupt in the world...

And the opposite seems to be true, the countries with the highest revenue levels are the least corrupt.

So on onside of this possible correlation are the backwaters of the world like Chad, Nigeria, Democratic Republic of Congo and yours truly, Uganda, while on the other side of the pendulum you have Denmark, New Zealand, Finland, Sweden and Switzerland.

It makes sense. If you are a country that to deliver services has to rely on its people for revenue rather rely on donor monies or huge commodity exports, maximisation of collected revenues in the way of service delivery will be critical.

If you collect people’s taxes and don’t deliver your political longevity will be that much shorter. To collect more revenues you not only have to tax people adequately but you also have to make sure more and more people, ideally everybody is paying their dues.

But if you are a country like our own, where only one out of 11 million workers are paying taxes, the political noise that the payers may muster can easily be drowned out by the indifference of the non-payers.

Hence you have a situation where MPS, paid through the treasury, decampaign an initiative to broaden the tax base.

It is true, those few who pay taxes are up to their eyelashes in tax. What is needed is for more and more people to carry the burden.

"Taxes is a political time bomb wherever you go. No one wants to pay taxes even in Finland or Sweden. The difference is that in those countries they have the mechanism and political will to enforce tax laws, compliance is not voluntary...

This is not to say there is no corruption in those countries, but because everyone has an interest in getting more value for their money in taxes, this tempers public officials’ greed. Their officials are not necessarily more morally upright than our goons, it’s just that they know that wages of sin are as good as death.

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