Private sector asks govt to raise local resource capacity

Government relies more on cross border taxes instead of widening the local revenue base. FILE PHOTO

What you need to know:

The changes. Much of Uganda’s taxes are collected from cross border trade. The private sector believes there should be concerted efforts geared towards improving collections from the domestic market.

The private sector has challenged the government to highlight the importance of domestic resource mobilisition as well as harnessing productivity in the 2013/14 budget in order to spur economic growth.
Mr Gideon Badagawa, the Private Sector Foundation Uganda executive director, said last week in a interview: “It’s good the government is giving due consideration to the business community in the National Budget formulation processes.”

However, Mr Badagawa added it is of outmost importance that the government implements private sector budget proposals that could help in the reduction on the cost of doing business.

The private sector continues to decry of low energy supply, however, the recent addition of 250 megawatts from the Bujagali Hydropower plant has ignited new hope among private sector stakeholders. The 250 MW remains low when compared to the current growth in demand, which calls for the implementation of new initiatives including Karuma Hydropower Dan and Nyagak among others.

According to available statistics demand for energy has been growing at 12 per cent per annum, an indication that the current available supply might soon be outstripped. Worth noting is that manufacturers are still incurring highly on energy, which explains the high feed in of productions costs ranging between 15 and 65 per cent compared to 2 and 5 per cent as the global acceptable range.

Thus to mitigate the challenge of insufficient energy, according to PSFU the government has to quickly Fast truck the construction of the 600 MW Karuma Dam as well as minimizing energy losses to less than 20 per cent from the current 27 per cent.

The private sector also wants the government to give incentives to electricity producers, including sugar factories, which are currently supply about 50 MW on the national grid.

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Boosting growth

Taxes being an important aspect of government revenue, the private sector suggest that their allocation should look into providing services that stimulate growth and provide social amenities.

In Uganda however, according to the private sector, the tax system is still inelastic, which yields low revenue limited by the absence of natural growth in the country’s economic activity (GDP). Data indicates that Uganda collects more taxes from cross border trade activities compared to domestic economic activity which the government can easily control.

This is a dangerous trend due to the fact that external shocks will tend to affect the country’s collections At the moment Uganda Revenue Authority relies on about 30 per cent of Ugandans from which it collects 90 per cent of its total tax revenues. Thus there is need for the government to start asking the familiar but difficult questions of how best it can increase the tax base as well as implementing strategies that could help to boost GDP growth.

For instance the government needs to consider the promotion of Domestic Taxes and Common External Tariffs which not only increase tax revenue but will at the same time boost competitiveness of the private sector. The government should also restore growth to reshape the macro- economic environment in order to help stimulate economic growth while at the same time making sure that the economic equilibrium is not destabilized.

To achieve this, there is need to target productive sectors and social sectors such as agriculture, tourism, manufacturing, education and health.