Government should not lose fight against poverty

What you need to know:

  • The issue: Poverty eradication
  • Our view: What is required is a raft of measures that can widen the tax base without placing a huge burden on those who are already taxed.

More Ugandans are getting poorer yet according to the Uganda National Panel Survey, the economy is growing. About 338,520 of the 40.3 million Ugandans – an equivalent of 8.4 per cent – slipped into poverty in the Financial Year 2018/2019. This means that whereas the economy is growing, people have not felt it in their pockets. So where is the challenge?

A PriceWaterHouseCoopers (PwC) report notes that this growth has not been inclusive enough as it has not translated into job creation, poverty reduction and significant wealth creation for Ugandans.

At 21.6 per cent, poverty in northern Uganda remains the highest. This is closely followed by eastern and western Uganda at 10.7 per cent and 4.9 per cent respectively. These figures tell another story - that a minority of Ugandans is getting richer while the majority are getting poorer. It also means that as more people slip into poverty, the income inequality gap is also widening.

Despite government’s relentless efforts to end poverty, the situation is getting worse by the day. In some areas such as the resource-rich Karamoja, poverty remains high. The key concern is, what is government doing to bring the most affected regions out of poverty?
Much as the revenue collected in Uganda is still low, there are problems with the tax system itself. According to the Fair Tax Monitor Study, Uganda’s tax system is unstable and contributes to the widening income inequality.

Generous incentives, largely enjoyed by foreign investors, the report found, have also seen Uganda lose huge sums of revenue over the years. But are there any dividends to show for these incentives? The Daily Monitor of May 9, reported that Parliament permitted government to write off Shs500b in form of tax waivers for 34 private companies and government agencies considering that there were no resources for payments.

A 2018 report by Southern and Eastern Africa Trade Information and Negotiations Institute (Seatini) titled: ‘The impact of Harmful Tax Incentives and Exemptions in Uganda,’ shows that Uganda lost Shs1.4 trillion due to tax exemptions in 2017/2018. This was mainly due to international trade tax and Value Added Tax related exemptions.

But the bigger challenge for Uganda now lies in devising means of stimulating consumption. What is required is a raft of measures that can widen the tax base without placing a huge burden on those who are already taxed.

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