Saturday May 24 2014

Abide by constitutional duty and pay your taxes

By David F. K. Mpanga

Last week, I wrote about our constitutional and social duty to pay taxes. I lamented the long term negative effect of rampant corruption that has made it socially acceptable for people to evade the payment of taxes.

People absolutely hate having their money looted or wasted and, therefore, feel justified in paying no taxes at all, wondering why they should pay tax if their hard-earned money is going to be looted by fat cat public officials and their corrupt counterparts in the private sector.

I thought that this issue merits a closer look because corruption induced tax aversion is only part of the problematic equation of public finances. We also have another negative factor in the form of the prevalent populist politics. A lot of what passes for political campaigns today is nothing but cheap appeals to people’s base emotions, fears and prejudices or exploitation of the people’s poverty and ignorance.

Politics has become a dirty game of brown envelopes stuffed with cash and high sounding promises made without any explanation as to who will bear the cost. In this atmosphere, people who stand for and occupy elective office have discovered that opposition to the payment of any tax is a cheap way to popularity.

It is, therefore, not uncommon for Ugandan politicians to oppose taxes in one breath and make promises of delivery of improved public services or infrastructure in another.

Populism has made the majority of Ugandans, the rural and urban poor, wrongly believe that they are entitled to live their entire lives without paying any direct taxes. They are fooled into believing that there is such a thing as a free lunch and that the government is able to materialise the money needed to deliver services out of thin air.

This has stunted many people’s natural aspiration for self-improvement through hard work and given rise to the dependency syndrome that is aptly summarised in the well-worn phrase “tusaba Gavumenti etuyambe”.

But sadly, that is not all. A lot is also being lost to multinational corporations at the top. A recent study carried out by Global Financial Integrity found that between 2002 and 2011 Uganda lost about $243 million per year in tax revenues to corporations that engage in, the legal but ethically dubious practice, of trade misinvoicing.

The authors of the study observed that this capital flight, which represents a staggering 12.7 per cent of government revenues, is facilitated by a global network of secrecy jurisdictions (international offshore tax havens) as well as opaque corporations and account structures.

With the bottom end paying little or nothing by way of direct taxes and the top end getting away with not paying staggering sums by means of clever devices the country is in a bind. We cannot and should not pretend that we do not pay because, ultimately we do.

We may avoid paying the taxes but we end up paying the huge cost of having to put up with poor services and infrastructure. Whatever is left in the coffers after the looters have creamed or wasted the amounts that they can get their hands on is not enough to fund the services and infrastructure.

The gaps that are left in the public purse are also filled by begging from international donors and borrowing from creditors.

There is a price to pay for this too, in terms of loss of sovereignty and national dignity as well as the huge debt burden that we are leaving our children to bear. Again, I say taxation must be resasonable, fair and progressive but if we are to develop on a sustainable basis then there are no two ways about it. All natural and corporate citizens must abide their constitutional duty to pay tax.
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