Thursday July 5 2018

These damn new taxes are the best thing govt has done, but not for the reasons you think!



Daniel K Kalinaki

Daniel K Kalinaki  

By Daniel K Kalinaki

A tax meant to silence critical views and “gossip” on social media has instead opened the door to the most widespread, sustained and cross-generational conversation about our tax regime.
There are basically two problems with the social media tax. First, it shoots the wrong person twice: A Facebook user has already paid tax on the mobile phone, data and electricity; they are, except in a few cases, the product, not the revenue. The tax is like taking money at the gate then also charging for the seats in an empty stadium.
Secondly, people generally don’t gossip or insult others for a living; they do so because they are idle, sad and often unemployed. Imposing a tax to keep them quiet is the cyber equivalent of asking starving people who don’t have millet to eat red velvet chocolate cake instead.
This and the mobile money tax have taken many young and poor people, including many in the countryside who have never paid a direct tax, through the organ grinder of our tax system. You can hear the screams from Kidera to Kyotera.
Now that we are united in pain, let us look at the justifications being bandied around. In brief: The tax rates are low; we need to widen the tax base; and government needs more money to provide public services (no, seriously!).
IPhone-wielding ‘experts’ tell us that the social media tax is ‘only’ Shs73,000 per year and can be afforded by anyone with a smart phone. What they do not say is that the majority use tailor-made social media data bundles and cheap torches and radios that just happen to have phones included. What they also don’t say is that the average telecom customer in Uganda spends less than Shs15,000 per month. An access fee of ‘only’ Shs6,000 per month is a 40 per cent tax on them!
Then there is the widen-the-tax base argument made by many, including Members of Parliament, who have insulated most of their own income from tax and even had the temerity recently to repay themselves Shs10 billion that had been ‘mistakenly’ taxed against them. How can people with no skin in the tax game be the ones to choose who should be flayed alive? History is full of revolutions in which purveyors of such antigodlin views were drawn, hanged and quartered!
If we want to widen the tax base, let us end the much-abused tax exemption regime, have every one pay their fair share, introduce tax on idle land to bring it into play and, literally and metaphorically, target the cash cows. Consider this: A young employed graduate earning a million shillings a month pays an effective tax rate of 30 per cent; a dairy farmer with 100 cows giving him 200 litres of milk a day sold at Shs500 makes three million shillings a month. He pays zero in income tax.
But the one that takes the biscuit is the argument that we need more money to get more services. With a few exceptions, of which we hear no end, most of the shiny new power dams, roads, bridges, markets and hospitals are the result of foreign loans that we shall have to pay back. A disturbingly large proportion of the tax revenue is spent on paying the salaries of the people who write project proposals and fly business class to borrow money to implement some of them.
A few days before the new taxes kicked in, the Ministry of Public Service, announced an increase in allowances and per diems paid to government workers. Foreign per diems now range from a ‘low’ of $530 rising to $920 per day for the prime minister and the vice president. (We can only assume that the rate for higher offices was excluded for want of a scientific calculator). By comparison, US State Department employees get $540 in pricey Zurich, Switzerland and just $256 in Malawi; a Ugandan deputy RDC would get $680.
Most employed Ugandans I know, despite paying almost half their income in tax (30 per cent PAYE; 18 per cent VAT), take their kids to private schools and hospitals, hire private guards for their homes, install back-up power and water systems, as well as on-site sewerage storage facilities aka ‘septic tanks’. They gave up on the State.
Now that we have taxes that directly affect the majority, especially the young and the poor, who have votes but little else, maybe the point can finally be made – that what we need is not more taxes and a bigger government, but one that is leaner, more accountable and more efficient.

Mr Kalinaki is a journalist and a poor man’s
freedom fighter. write2kalinaki@gmail.com
Twitter: @Kalinaki.