IMF to government: Stop tax exemptions
IMF Senior Resident Representative, Ms Ana Lucia Coronel, says the government must work out a plan that should bring to an end further tax exemptions. Photo by Stephen Otage.
What you need to know:
The financiers tell the Ugandan government that if it cannot stop tax waivers immediately, it can have an alternative of doing it gradually.
Nairobi
The International Monetary Fund (IMF), one of the country’s major financiers, has asked the government to stop granting tax exemptions on the grounds that it discourages those who comply and also complicates its management.
According to the IMF Senior Resident Representative, Ms Ana Lucia Coronel, the government must work out a plan that should bring to an end further tax exemptions that critics believe has been badly abused.
The previous year alone, the government offered tax exemption worth about Shs3 billion.
Speaking at a post-budget analysis on Friday in Kampala, Ms Coronel said it was important for the tax exemption to be phased out. And where the government cannot have it halted at once, it should be done gradually. She said: “With tax exemption phased out, tax collection will be boosted and revenue administration will be easy.”
In a separate interaction with journalists in her office, Ms Coronel said exemptions should be limited to specific investors and that should be arrived at after carrying out studies.
In his presentation, Mr Francis Kamulegeya, a tax expert seems to suggest that tax exemptions should be applied sparingly.
The PricewaterhouseCoopers (pwc) Country Senior Partner, Mr Kamulegeya, said the country needed to be competitive but at the same time help the actors in the economy succeed. The Uganda Revenue Authority (URA) Commissioner General, Ms Allen Catherine Kagina, said in an earlier interview that she was taking the matter seriously because it discourages compliance. However, it is worth noting that the government, through the Minister of Finance has the powers to grant exemptions—and in some cases advise the tax body.
Most Members of Parliament, especially the opposition, are against exemptions, with the Leader of Opposition, Mr Nandala Mafabi, suggesting that instead of granting exemptions to tax defaulters, their properties should be attached or sold to recover the due taxes.
In her post-budget presentation, the Finance Minister, Ms Maria Kiwanuka, said out of the 10 needs of investors (business), incentives like tax exemptions ranks way down the pecking order—actually it came ninth out of the 10 pressing issues, with power being on top of the list.
URA’s tough job
Meanwhile, there are calls from tax experts like Mr Kamulegaya that the URA takes on additional role of demanding accountability from the money it collects and hand over to the government to run its budget.
Although Ms Kagina said they were willing to take on the task and in any case they were already doing it, Minister Kiwanuka said it should be the peoples’ responsibility to demand accountability of the taxes collected from them.
Ms Kiwanuka, who was speaking as the Chief Guest said: “You must demand for value for your money. Don’t just leave it to URA. But you must follow your money and demand accountability.”
