Sunday July 31 2011

We should all applaud URA tax clearance innovation

By Nina Mbabazi Rukikaire

It is quite interesting that traders and politicians this week have raised their voices to criticise the policy decision by Uganda Revenue Authority to require all Ugandans buying land or real estate of Shs50 million and above to first get tax clearance.

Kacita spokesman Mr Isa Ssekitto states that this will in fact have a negative impact on our shilling and worsen the economy. The MPs interviewed by Daily Monitor stated that the performance of the stamp duty would be affected as business people try to conceal their transactions. Interestingly, corruption is one of the factors fueling excess liquidity and weakening the shilling.

The question is, if your transaction is above board, why would you be concerned about this policy? I am assuming that those who can afford to buy homes and land for over Shs50 million are already paying PAYE at their employment or VAT, Excise, etc as private sector entrepreneurs. So, why the fear of this policy?
This policy is going to strengthen URAs ability to collect income and corporation tax which many evade.

The truth is, for a long time, Uganda has suffered high prices in the real estate sector spurred on by corruption. From civil servants who always pay PAYE on their salary but can’t afford Shs500 million homes yet they own them, to some members in the private sector that under-declare the value of their imported goods to reduce the tax component. The easiest place to hide this dirty money has been and still is real estate. We also have the element of large industry that year on year declare a loss so that they can dodge corporation taxes, yet they will build some of the most expensive real estate in this city.

Firstly, URA should be commended for this move to increase taxes for many reasons. Our national debt is over Shs11 trillion and we must find a way to reduce it; with increased cost of living, we have seen very important sectors of our community demand for a pay raise; where shall it come from?

In Thursday’s news, the Defence Ministry increased their budget by Shs44 billion because of increased food/transport prices. Our economic situation is getting harsher by the week; if URA can strengthen collections so that we do not have to receive as much aid from the outside world, then we should encourage them. Uganda taxes to GDP ratio is only 12% compared to Kenya that is at 22%. How do we expect to develop the necessary infrastructure, including getting off diesel generators, if we do not increase our revenue sources?

Secondly, as citizens, we demand so much from our government and rightfully so, yet we shirk our duty to Country. We are dishonest in our dealings with URA and other state organs but we want to hold government accountable for their dishonesty when it does catch our attention? “As iron sharpens iron, so one man sharpens another” – Proverbs 27:17. When we demand more from government, we should get ready to face the reality that our demands must come from somewhere.
Personally I welcome URA’s decision, but the problem URA will have is government must ensure greater transparency in how they spend our tax shillings.

If they don’t, Ugandans that have been engaging in tax evasion/corruption will simply invest elsewhere in East Africa (foreign accounts have become unreliable investments for the corrupt). When we pay taxes, we do so to actually enjoy the benefits of a combined pool of resources to deliver services to our door-steps. If only government can be as quick to identify its corruption loopholes as it is in identifying tax cheats!

Ms Mbabazi is a social critic