This week tax collector Uganda Revenue Authority (URA)
celebrated 25 years of its existence, a laudable milestone not only because of
the passing of the years but of how the institution has developed over the
years.
After years of decay the old revenue office at the finance
ministry had collapsed and would have been unable to meet the challenges of a
society in urgent need of funds to for recovery. That being said it still had
some human resource many of whom continued into URA and formed the initial
backbone of the now autonomous tax collector.
The atmosphere at the time was a new government trying to
find its feet.
The tussle between the command economists – mostly bush war
veterans and the liberal economists – mostly technocrats in the finance
ministry and central bank had only just been decided in the latter’s favour.
"Among many urgent reforms needed – breaking up government monopolies, liberalising the markets in everything from produce to currencies, was the urgent need to collect revenues...
The tax man has never been a popular member of society. It
did not help that improved revenue collection was a condition for engagement
for the donors especially the World Bank and IMF – the favourite punching bag
for the post-colonial administrations on the continent.
As a condition for support it made sense to insist on better
revenue collections, otherwise how would the donors get their money back?
In its first year of operation they collected sh180b or just
under $180m, which figure is up to sh11.2 trillion in the last financial year
or about $3.4b.
"The more than 60-fold jump in collection during the period is laudable in itself and reflects not only the growth in the economy but the increasing effectiveness and efficiency of the Authority....
Interesting too is
how we in those 25 years we have shifted away from reliance on taxes
from external trade to domestically generated revenue. Can you believe that
coffee exports were our biggest source of revenue at one time?
These improvements have not come without sweat, tears and
even blood. Tax payers have fought the URA on the introduction of VAT, resisted
the paying of road licenses and continue to weave and dodge against paying any
number of taxes.
While there is cause for chest thumping about how much more
tax we collect as ratio to GDP, which comes in at 13 percent, it below the Sub
Saharan Africa average of 13.8 percent, and well behind Kenya at 18.4 percent,
Mauritius 19 percent and South Africa 26.9 percent.
Increased revenue collection is critical to finance
infrastructure, health and social services. But more importantly to wean us off
aid, allowing us to determine and follow up on our own priorities.
"A need to collect more domestic resources will also improve our politics. As it has been because government was being financed externally – at one time more than eight in every ten shillings in our budget was from donor assistance, they did not have to negotiate with the population raise revenues. ..
As long as you could tick off some perfunctory targets like reducing the number
of people living on a dollar day the aid taps would continue to flow. But to
raise taxes there has to be a negotiation with the locals and they need to see
some return on their money before they willingly pay up, that takes greater
negotiation skills than is needed with dealing with donors, which leads to
democracy.
So clearly URA is at the center of determining the future of
this country.
Of course URA has little leverage over what goes into the
tax code and is often criticised for doing their work in the classic case of
shooting the messenger. There is really little scope for introducing new taxes,
future progress will be determined by how effective URA is in roping more and
more people into the tax net.
Despite some unwelcome sounds from our political elite it is
safe to say that URA’s foundations are solid enough that it is possible they
will be here to celebrate their golden Jubilee in 2041.
