Isn’t Uganda’s tax system immoral?

Doris Akol, commissioner general, URA

What you need to know:

William Lubuulwa shows that Uganda’s tax system is unfair considering that Members of Parliament and Cabinet ministers enjoy tax proceeds in form of public service entitlements at the expense of the poor who earn little.

Although the massive taxpayer appreciation code-named omugano gwa URA recently concluded at Namboole stadium was a sweet thing for both the Uganda Revenue Authority (URA) and the tax paying community, the introduction of the so many direct and indirect taxes may be in bad taste for Uganda’s economic terrain.
Biblically, taxes are a noble thing, if we remember that Jesus Christ acknowledged the responsibility of paying taxes to Caesar by citizens. “Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honour, then honour,” goes a verse from the New International Version of the Bible.

It is not that the payment of taxes is wrong. Where URA usually errs is the timing, cost or nature of taxes, and how they are being enforced. Good taxes are expected to be based on ethical standards. For example, how could government justify the exorbitant Pay As You Earn (PAYE) chopped off the monthly paltry salaries of poor workers?

Pro-people taxation
Pro-people taxation should be grounded on strong moral values. Its aim should be to protect the poor and provide incentives to those who join hands with authorities. Therefore, a moral tax system must be thoughtful of the bottom poor, both rural and urban.
A tax system that exempts the financially mighty such as Cabinet ministers or Members of Parliament (MPs) and rewards incompetence or corruption cannot be sensitive, and is therefore immoral. It is very unfair for anyone to enjoy cash collected from the struggling poor under the guise of, say, public service entitlement.
Although the middle class in our country does not constitute a large proportion of our society, it should be encouraged by the tax authority to pay their dues in time, and always.

If the middle class is over taxed, the tax system will stifle capacity for national economic growth. It is wrong and selfish for MPs, who think and decide for the rest of the citizenry, to cushion themselves so heavily against taxes.
But the unhappy citizenry also begin to question the motive the URA technocrats have in nurturing a very unkind system that taxes citizens right from the source of income, through all the stages to expenditure, including a child’s bun and diapers. Isn’t this anything but secondary slavery?

While the URA is a government agency mandated to assess and collect taxes to ensure compliance, there should be a provision for an independent tax advisory commission to monitor the performance and fairness of this Authority.
But who appoints the URA leadership? How are the senior managers and the rest of the workers hired? How transparent is this process?
In a constitutional democracy (some people say ours is one), there is no one above the law, save for our MPs, who decide their salaries and have them. How I wish teachers, too, had this prerogative! URA as well should be subjected to checks and balances.

But who supervises the tax Authority? Where can one report in case the Authority misbehaved or abused office? Aren’t the courts too few, slow and at times prone to the scourge of corruption? Uganda’s tax system, with all its taxes - profit tax, sales tax, tax on interest, property tax, fuel tax (included in fuel price), trading licence, Value Added Tax, excise duty, customs duties, stamp duties, turnover taxes, environmental levies, PAYE, social security contributions, and probably many more - is a great bondage to Ugandans.

Few people paying taxes
In a year-ender engagement with the media at the African Centre for Media Excellence, URA’s commissioner general Doris Akol said very few people are paying tax; that is why the tax rates are so high. The informality of Uganda’s economy dictates that nearly 52 per cent is neither regulated nor taxed according to Uganda Bureau of Statistics figures.

But the tax chief was quick to add that URA is trying, through numerous ways, to educate the general public on the value of paying taxes.
“Money from taxes is good for the economy. We at URA collect the tax, but, how money that is released is used, is the biggest problem in our country,” the chief tax collector said.
The tax Authority wants to have as many payers as possible but, “Sometimes widening the tax base is uncomfortable and many people would not want to hear this kind of message,” Akol explained.

Much as no country can develop on donor hand-outs to cover shocks in the revenue system, our taxes should be managed such that all citizens benefit.
Transparency should be seen in all stages of taxation from legislation through collection but most importantly, during the usage of the proceeds. This is where Akol needs support before one celebrates in the 2016 omugano gwa URA.

Poor overtaxed
The plan to have a substantial chunk of our national budget met by Ugandans is a great idea yet it overtaxes the poor. The poor in this country have been taken for a ride for a long time. They will soon accept President Museveni’s 18 million hoes as a gift and thank the NRM government for making such a rudimentary tool available to them in this digital era. What they do not know is that the money government uses to buy these basic implements comes from the many indirect and direct taxes they pay.

At times government loses donor support due to failure to respect human rights. It, therefore, becomes an insult to expect citizens to pay unreasonable taxes in the name of meeting the national budget. Such circumstances mean the citizens are suffering twice: loss of donor revenue as a country and payment of a hefty tax.

The greatest plus would have come from government overhauling its public administrative infrastructure by cutting down on expenditure through downsizing it. But look at the districts and constituencies we create every day because some section of the population has decided to eat rats or has undressed! Over 110 districts already! And 400 something parliamentary seats!
Outright plunder in statutory establishments should be stopped to ensure their existence contributes to the national treasury. But do we see a willing leadership to fight the mismanagement of state funds or Ugandans are simply being fed on lip service?

What happens in civilised democracies?
Ordinarily, in more civilised democracies, cost reduction should have started from the top. Soon after a new government was sworn in in 1986, President Museveni promised a fundamental change that aimed at curbing state waste through buying local, not only to promote indigenous businesses but also cut expenditure on imports. However, this has not been the case.
The colonialists must have been smarter. Before they thought of introducing graduated and income taxes in the country, they first promoted the growth of coffee and cotton for every household.

This was an incentive for lazy men to go out and work on farms because they had to pay tax. When the NRM government abolished this tax, little did they know that many people would abandon work and turn to the bottle because they were no longer mandated to pay taxes.
Many people ask how much the government has done in creating employment for the citizens to afford the taxes instituted almost every other day. This is the question we must all answer.

What is a tin and who requires it?
The Taxpayer Identification Number (TIN) is a 10-digit number that works as a taxpayer’s identity for taxes and unlocks your account with URA. Everyone who is employed or involved in any type of income producing or economic activity where customs duties, income tax, VAT, excise duty, stamp duty, withholding tax or any other tax dues requires a TIN.

Any person running a business in Uganda, seeking trading licences, importation of goods, employees with a monthly salary exceeding Shs235,000, acquisition, disposal and transfer of land whose value exceeds Shs50 million, motor vehicle or boda boda-related services like change of ownership, changing from old logbook to a new logbook, alteration of vehicle particulars, acquiring a duplicate logbook and number plates and so on, persons making supplies of goods and services to anyone of above Shs5m and supplying goods and/or services to government requires a TIN.