President right on taxis, market vendors taxes

Last month President Museveni directed Prime Minister Dr Ruhakana Rugunda that all government agencies should stop overtaxing informal businesses, especially market vendors and taxi operators, who should be exempted from daily fees. He proposed, for example, that the taxi operators be charged for one annual licence at a uniform fee and be free to operate on the designated route for the licence period without further charges.
He said the same should apply to market vendors.
The President’s move is good for small businesses. It will encourage business growth and stimulate re-investment among the local small-capital entrepreneurs. It will be of huge tax relief to the small traders who form the bulk of our business community.
Taxation should encourage production and not to kill it. Prohibitive daily taxes strain businesses and diminish their profitability, thus killing the morale to do or grow the business. For example, the move to charge taxi operators in every district/local government they pass through cripples their earnings and business expansion.
For example, a taxi operator on the Kampala-Mbarara route has to pay tax at the point of departure in Kampala, then at every transit point in Mpigi District, Lwengo District, Masaka District, Lyantonde and finally Mbarara District. He pays tax about six times on the same day for every trip made through these local governments lying on the route.
He cannot pay these chain taxes and remain with income to take care of his family. The alternative would be to increase the transport fare to accommodate the taxes.
But this move too breeds multiple challenges because high transport fares would discourage movement of goods and services across the country and hurt aggregate trade in the country. Same fate for market vendors. There are days of low business sales. But the vendors still have to pay the daily levies and on some days return home without income to feed their families as the little earned that day has been taken away by the taxman.
Government needs to ensure taxation is fair not only for vendors and taxi operators, but also for all taxpayers, including professionals and other big business operators.
However, this should not be used to shrink the taxable base. Government should explore how to optimise revenue collections from the informal sector. Hitherto untaxed high earning informal businesses should be identified and they start contributing to the national coffers.
There are many untaxed businesses in the informal sector which should be brought on board without overburdening the few known ones.

The issue:
Taxing small businesses
Our view:
Government should explore how to optimise revenue collections from the informal sector. There are many untaxed businesses in the informal sector which should be brought on board without overburdening the few known ones.