Saturday July 12 2014

Taxing agriculture sector contradicts Vision 2040

By Nathan Nandala Mafabi

I commend civil society under their umbrella ‘Civil Society Budget Advocacy Group (CISOBAG)’ and other actors who have come out to voice their displeasure at the very reckless and inhuman taxation imposed on poor Ugandans in the 2014/15 Budget.

The imposed taxes on farmers and peasants not only contradict national aspirations carried in the Millennium Development Goals (MDGs) and 2040 Vision, but also defeat the basic principles of taxation.
I wonder whether the Ministry of Finance Planning and Economic Development (MFPED) works in tandem on budget issues with the President’s office or each of these entities work independently.

Like I pointed out in my last article carried in this paper, the President in his State-of-the-Nation Address made very exciting pronouncements about the importance of agriculture to our economy.

But the MFPED came with a totally different angle, strangling the farmer and poor peasants through removal of tax waivers on all agricultural inputs on one hand and slapping a tax on salt, paraffin and all sundry on the other.
If you ask me, this is a new invention because countries all over the world including developed ones subsidise their farmers so that people can grow food for the population.

If Uganda has 80 per cent of its population engaged in the agriculture sector, the best should be for the government to invest in this sector rather than taxing it.

Just in the neighbourhood, in anticipation of food shortage, the Kenyan government has gone into a drive to distribute farm inputs like fertilisers, quick yielding seeds and machinery in order to boast production.
In the first place, because of the continued government neglect, the agriculture sector has been growing at 2 per cent below the population growth rate of 3.3 per cent. We may not be as pessimistic as Rev Malthus who predicted a population trap due to food shortage, but it is important to take these early warning signs.

The State of Uganda’s Population Report 2010 estimates that 1.9 million people in Uganda are food insecure while 6 million are at the risk of becoming insecure. 22 per cent of the children under five years are stunted, 7 per cent are wasted, 10 per cent are underweight, and 33 per cent are anaemic.

By taxing farmers, government is making a bad situation worse. For instance, by imposing a tax on a hand held hoe, farmers will not even afford to buy a big hoe and will resort to the small Irokon -small hoes used in the weeding of millet in Teso. And how much acreage can it cultivate?

When you impose a tax on agriculture in a developing country, you are telling the peasant farmers that they should not educate their children, that their families shouldn’t access good health facilities and that their standards of living should remain poor.

In my view, government should reduce the budget of agriculture by the corresponding anticipated tax revenue from agricultural inputs than impose taxes on the sector.

After all, money sent to the ministry is fraudulently used by officials. There is one minister who built a shopping mall in his home town in the short time he was there. The mall is worth more than Shs20 billion. IGG, police and other investigating bodies have never questioned where he got the money!

The 2013 ‘MDG Report for Uganda’ says that the reason for Uganda’s high unemployment is because the economy is being driven by service sectors like telecommunications which just need few highly technical people.

One of the solutions to the escalating levels of unemployment would be to invest not to impose taxes in the agricultural sector.
Taxation is a redistributive tool. It is supposed to get money from the rich and put in sectors that benefit majority poor. Currently, government pundits are excited about halving poverty levels from 56 per cent in 1992/93 to 19 per cent today. The paradox here is that now 20 per cent of the rich Ugandans control 80 per cent of Uganda’s wealth.

The remaining 80 per cent of the population share 20per cent! Finally, how is government going to ensure the high economic activity to drive the country? The resource envelop for agriculture is far too low to generate the desired momentum; the interest rates are very restrictive for any prospective to borrow, yet government is again stretching its hand to take the very little from the poor through taxes.

For now, if we had a responsive Parliament, we would have thrown out this 2014/15 Budget. But there is nothing much to hope for since half the budget allocation has already been passed contrary to the Budget Act. We can only wait to suffer the consequences of our inconsiderate actions.

Mr Mafabi is the chairperson Bugisu Cooperative Union and the Memeber of Parliament for Budadiri West.