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Government Faulted On Tax Policy

A new report titled Fair Tax Monitor Uganda has faulted government on tax Policy. The report states that government is not performing well in regards to reducing the widening poverty levels amongst Ugandan’s through tax policies.

Government is also faulted for not having a clear and transparent policy on tax incentives and exemptions awarded to some companies. As a result, Uganda loses revenue amounting to Shs 8.4 trillion between 2010/11 – 2016/17.

The Southern and Eastern Africa Trade, Information and Negotiations Institute (SEATINI-UG) and Oxfam launched a study on 23rd January 2019.

In 2018, SEATINI-Uganda with support from OXFAM commissioned this study with the overall goal of strengthening advocacy activities at the local and global level. The study provides an overview of the country’s national tax system and identifies the main challenges faced.

It analyzes the fair tax index indicators including the tax system, tax burden and progressiveness, effectiveness of tax administration, government spending and finally transparency and accountability.

The research reveals among others; the fiscal regime which explicitly shows that the legal and institutional structure of who, where and when revenues should be collected are clear but there seems to be inadequacies in the coordination from top to bottom and vice versa.

The report calls for number of measures including the need to overhaul VAT exemptions and zero rated supplies providing a level ground for all taxable entities.

The study however recommends for amendment of section 77 (1)-(2) of the Public Finance Management Act (PFMA), 2015 which accords the Minister to award tax exemptions, report and justify the award to parliament.

“Government should analyze the impact of any proposed tax reforms and base the decisions on the potential impact on reducing inequality before introducing any new measures,” the report reads in part.

Regina Navuga, the Programme Officer at SEATINI-Uganda said taxes must be mobilized in a fair and just manner to create an environment that allows businesses to evolve and prosper.

She said in the current tax regime, the majority of whom are poor are contributing more to the treasury than the rich.
Jane Nalunga SEATINI-Uganda Country Director said, the current tax system has left the majority who are poor with a huge burden.

“Corporations are not paying their fair share of tax which has prompted various stakeholders among which Civil Society Organizations to address the unfairness and thus put an end to inequality,”Nalunga said.

Daniel Lukwago lead consultant on the study said the government benefits from indirect taxes more than from direct taxes because citizens are less likely to feel the tax burden.

Moses Dombo, Country Director Oxfam said, since there isn’t a clear policy on tax exemptions and incentives, Uganda loses a lot of revenue but was fast to add that more revenue would be generated from clear tax policies if government enforced on policy implementation.

Reacting on the report, Saul Ongaria, senior economist at the Ministry of Finance, said at the moment the Minister of Finance does not have the powers to exempt or award any incentives.

Hon Jovah Kamateka formerly a member of the parliament on committee of finance expressed concern as to why the business sector comprises of 60% of women traders who lack information in regards to what sort of taxes they pay. She urged URA to sensitize women traders to better understand & interpret the taxation system.

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