Monday June 5 2017

Govt will not re-introduce direct taxes, says Finance minister

Mr Matia Kasaija

Mr Matia Kasaija 



Government has resolved to move away from imposing direct taxes on individuals on grounds that they are too complicated to collect.
According to the finance minister, Mr Matia Kasaija, government is now considering imposing only indirect taxes because they are cheap and easy to collect.
Talking to Daily Monitor last week, Mr Kasaija also said indirect taxes rarely result in physical confrontation with the payers as was the case with the collection of graduated tax which made the government appear brutal and hence unpopular.

Graduated tax pressure
Already, there is pressure by a group of civil society organisations such as Civil Society Budget Advocacy Group (CSBAG) and Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI-Uganda), as well as a cross-section of policy analysts to have government reintroduce graduated tax although in a different form.
In an interview with this newspaper last week, the Budget Policy Specialist at CSBAG, Mr David Walakira, said a tax that is paid directly by an individual is important in instilling a sense of responsibility as well as instigating the demand for accountability.
He said: “If graduated tax is re-introduced it will work towards improving the tax-paying culture and appreciation of tax as a means of facilitating service delivery.”
He added: “The scenario where citizens wake up to busk in the sun as the first thing in the morning needs to be stumped out by policy. Graduated tax needs to be reintroduced with review of the Local Government Act to address the issues of assessment and administration.”
Mr Walakira further argued that calling the tax such as graduated tax primitive tantamount to hoodwinking the citizens, wondering how the population can be entitled to what it hasn’t contributed to.

Opposing view
Mr Kasaija disagrees with that position.
He said: “Those who are calling for re-introduction of graduated tax are essentially asking us to introduce what we call head tax and this is a big ask. First, its method of collection is brutal and it easy to corrupt those involved in its enforcement.”
“We discussed this and we resolved not to go back to that method of tax collection again. We are now moving towards indirect taxation and we have agreed that that will be our preferred methods because nobody can escape it.”
Direct tax is a uniform tax or surcharge imposed upon every person or every adult.
On the other hand, an indirect tax is a tax collected by an intermediary from the person who bears the ultimate burden of the tax (such as the consumer).
In an earlier interview, Mr Fred Muhumuza of the Makerere University School of Economics, sounded skeptical about the need to reintroduce the graduated tax, no matter what name it is christened.
“Technically, it is not easy to collect the tax and it tends to cause harsh means of enforcement due to inability to be collected at convenient times,” Mr Muhumuza said.
He added: “Convenience is a key canon of any good tax. Most rural dwellers have incomes pegged to seasons and graduated tax is only for a given period.”
He also agrees with the government imposition of indirect taxes, saying there are already better taxes in place by way of consumptions.
He said: “Just recall how government abolished car licence tax and instead put it on consumption of fuel. That is a more efficient way of collecting tax than ‘hunting’ for irregular incomes.”
He further argued that, economically, people are poor and the link that paying such a tax will improve their plight would be what he described as farfetched.
And besides, he says: “it is not true that once the people pay the tax, they will push for more accountability. It just does not work that way. People are already paying taxes and accountability is not duly forthcoming.”

The categories
Direct taxes. Are government levies on the income, property, or wealth of people or companies.
A direct tax is borne entirely by the entity/person that pays it, and cannot be passed on to another entity/person.
Some of the examples include corporation tax, income tax, and social security contributions. Roads/Toll tax and graduated tax are the other examples
Indirect taxes. Customs duties levied on imports, excise duties on production, sales tax or value added tax (VAT) at some stage in production-distribution process, are examples of indirect taxes because they are not levied directly on the income of the consumer or earner.