Uganda must urgently develop, implement a precise devt strategy

The current impasse between the two tax collecting agents of the government – the traders and the Uganda Revenue Authority (URA), is a result of a structural problem to explain. 

On the surface of it, the current major issue of contention is about the use of technology in assessing and generally accounting for Value Added Tax (VAT) “collected” for and payable to URA by the manufacturers and traders, in particular.

The bigger question though, is that of the traders and URA, who needs efficiency in assessing and accounting for taxes, in general? URA is always quick to emphasize that the traders do! If that is the case, why force it upon them, then?

It is certainly the URA that needs efficiency in tax collection and they are banking on this technology (Efris) to eliminate any leaks of the collectable tax.

URA argues that her taxes, especially VAT, are all passable to the final consumer and therefore traders are only required to transmit what they collect from the consumers. In this argument, however, there is gross intellectual dishonesty on the part of URA.

URA economists know that a number of dynamics are at play to determine how much of a tax may be passed on to the consumers by traders.

Traders, since they are practical in what they are doing, know exactly what they go through – that for example when people are generally broke, high prices for non-essential goods equals to poor demand.

Therefore, traders can only pass on so much of the tax to consumers in form of price increment and they pay the rest of the tax themselves.

With high competition for few customers, traders are bound to pay the highest position of the tax compared to consumers and they know this.

This above friction, however, is but a symptom of a larger underlying problem – the piling of a relatively huge tax burden on a small portion of poor but formal citizens so as to raise the set revenue targets by URA.

To sustainably and smoothly increase our tax revenue, we need to focus on two things: One, bringing more people into the formal economy, not by mere registration on online platforms, rather by facilitating them to be elevated into the formal category economically. The more people that will join the formal sector, the wider our tax base will grow and the wider the tax burden will be distributed.

Two; facilitating growth in income amongst all categories of tax payers. This will in turn lead to growth in aggregate taxable income to the benefit of tax collectors and by extension, national treasury yet against less stress to the taxpayers. 

To achieve these two feats mentioned above, we must do things “unusual”.  We must develop and implement an economic development strategy and focus on it over the next few years to accelerate economic growth. 

Over the past 30 years, we have been gambling as a nation. Those who have been around enough remember the Entandikwa scheme, the Plan for Modernization of Agriculture (PMA); The Poverty Eradication Action Plan (PEAP); Naads I and II; ATAAS, Prosperity for All; and now of late, the much hyped Parish Development Model (PDM).  

None of these was ever an effective economic growth strategy as they never delivered any growth or development to show off. They seem to have been simply populist models, most likely marketed for political gains on the part of the sponsors of these programs.

It is no wonder, agriculture was never modernized; poverty was never eradicated; none of us prospered (certainly save for some of those who were running the program); I wish I could say that the PDM will deliver a miracle but I am constrained by lessons from history! 

In the next article I will opine on the strategy options Uganda might consider to accelerate her economic growth and transformation in a few years’ time, but till we develop and implement one, the cow called Uganda will continue to face the wrath of the herdsman who seems to understand more about milking of the cow and less about feeding it. 
Agaba Muzoora, Development activist        
[email protected]