Budget demands: CSOs tell government to return graduated tax
What you need to know:
Basis. Tax is levied according to the earnings generated.
Kampala. Civil society organisations (CSOs) have intensified the call for reintroduction of graduated tax, urging government to reinstate the infamous tariff even if it means doing so under a different name.
Despite the unpopularity of the tax leading to its suspension about one and half decades ago, the CSOs, eight in number, believe that if reintroduced, it will instill a sense of responsibility and also invoke demand for accountability from the government, something that is still missing.
Speaking on behalf of the CSOs, the South and Eastern African Trade Information and Negotiations Institute-Uganda, country director, Ms Jane Nalunga, and the Civil Society Budget Advocacy Group coordinator, Mr Julius Mukunda, both argued that the relevance of the defunct tax far outweighs the reasons against it.
“We can discuss the collection methods which we all agree were not the best. However, its relevance to local government operation is crucial,” Ms Nalunga told journalists early in the week while stating the CSOs position on tax revenue measures for the financial year 2016/17.
She added: “Local governments need that money to operate. And that is why we are proposing that graduated tax be reinstituted. We do not mind under what name it is called or referred to, but we think it is an alternative avenue for financing local governments’ meagre budgets.”
Weighing in on the matter, Mr Mukunda said graduated tax is one of the most progressive, considering that it is levied according to the earning generated unlike the consumptive one where both the poor and the rich pays equally, something he referred to as unfair.
He said: “We are not seeing enough government commitment in as far as expanding taxes are concerned. All we see is taxing the same things like cigarettes, fuel and now second hand clothes and that’s not good enough.
“Graduated tax is another way to increase revenue. Before it was scraped, Kabale District alone would collect about Shs200m annually, but now the districts are struggling to deliver services because they are cash strapped, yet their role is the most important.”
The two - Ms Nalunga and Mr Mukunda, further said that graduated tax, no matter the name will instill hard work and responsibility among youths, some of whom spend a lot of time gambling rather than engaging in productive work.
According to the CSOs direct tax such as graduated tax will have the citizens get involved in demanding for services that is due to them.
This will be a shift from the popular view that the services the government is offering is a state favour.
Graduated tax is an old form of taxation which was imposed on adults. It is one of the examples of direct tax. It was introduced in Uganda during the colonial days as a replacement to the Hut tax. It was abolished in 2005 after pressure from politicians, who described it as ‘a primitive’ tax and crudely collected despite its significance to the local government.
In an earlier interview, the Information and National Guidance minister, Maj Gen Jim Muhwezi, said that the country has since moved on from that coercive method of collecting taxes.
He earlier said: “We believe in empowering people economically then through that empowerment they will be able to contribute into the government coffers. We don’t have to go around coercing people. That was why it was scrapped in the first place.”
He continued: “Their (CSOs) advice has been noted but we must think of the reasons why it was scrapped in the first place. As government, our responsibility is to provide enabling environment for everybody to thrive and contribute towards their wellbeing, families and the country.”
A statement by the Minister of Finance, Planning and Economic Development, issued in response to the matter, said the Budget is already before Parliament and that CSOs, like any other persons, are entitled to their opinion and have leeway to present their views on the same to Parliament.
It further said CSOs have every right to convince Parliament that what they are suggesting is both practical, viable and has minimal policy consequences.
Other proposals the civil societies are fronting include, revisiting the double taxation stance by government to tax multilateral companies whose subsidiary companies operate locally.
They also suggested that imposing an environmental tax on firms and companies that have a carbon foot print on the environment will raise more revenue, re-introducing road tolls on new infrastructure transport projects and taxing cash withdrawals above five million and intensifying property tax.