Budget: Kiwanuka walks the tight rope

Sunday June 15 2014

By Yasiin Mugerwa

Parliament returns on Tuesday to deal with a congested agenda. The focus will be on Ms Maria Kiwanuka’s budget for the 2014/15 Financial Year. As the case for last year, on Thursday, the minister for Finance unveiled yet another tax-heavy budget to close the gaps in government revenues created by donors because of corruption and the anti-homosexuality legislation.

By increasing taxes for essential supplies like salt, sugar, paraffin, fuel and others; politicians who are supposed to have a final say on the government proposals have since criticised Kiwanuka’s fourth budget as “a recipe for disaster” and labelled her “indifferent” for balancing the Shs15.034 trillion budget on the backs of the poor who are currently stuck in the low income bracket. She also slapped a tax on mobile money and bank transactions among other taxes.

Opposition say
In order to put growth on to a new trajectory, Shadow finance minister Geoffrey Ekanya (Tororo, FDC) who is expected to lead “the block paraffin-salt-sugar- and hoes tax campaign” in Parliament, said agriculture needs more than Shs400 billion (about three per cent of the total budget) to grow faster and that the poor people must not be punished.

Other legislators said the “roundabout ways” of worsening living standards – which include reinstating exercise duty on paraffin, taxing salt, agro-inputs, private schools and other meddling in the 2014/15 Budget will certainly curtail growth in the medium term.

While a non-election year Budget was never going to be easy, Lwemiyaga MP Theodore Ssekikubo said if the question in voters’ minds is no longer an issue, then the minister has misfired. Mr Ssekikubo said with the cocktail of taxes, without serious government investments to balance development in the country, the right balance is going to be tricky.

However, realising that Parliament might block the minister’s disparaging tax measures, the President on Thursday begged MPs to have the new taxes approved to support government programmes.
Responding to the critics, the Minister for Presidency, Mr Frank Tumwebaze, said there is nothing against the poor. He said even the taxes are collected and invested in key productive areas like infrastructure development; it’s the poor to benefit. On the proposed tax on paraffin, the minister said this is necessary to deliberately discourage paraffin usage to save the lives of the local people from the associated health risks of paraffin. He said even with the so-called new taxes, Uganda still remains the lowest of all the other four partner states with the ration of tax revenue to GDP only standing at 13 per cent. He reiterated that our taxation policy is still very conscious of the low and middle income earners.


On the question of balancing the books on the backs of the poor, the minister repeated what the President said during the State-of-the Nation Address that the proportion of Ugandans living below the poverty line has declined from 56.4 per cent in 1992/3 to 24 per cent in 2009, and further to 19.7 per cent in 2012/13. To the minister, this indicates that the country has already surpassed the Millennium Development Goal (MDG) target of halving the proportion of its population living in extreme poverty by 2015.

Justifying the new taxes to lay the foundation for development, the minister used the 2014/15 budget speech to highlight yet another important milestone in the infrastructure sector. The minister’s accomplishment in the 2013/14 Budget recast by the President highlighted improvements in the quality and stock of physical infrastructure with 806km of new roads constructed; 1,657km of high voltage distribution lines and 42,236 new rural users were connected to the national power grid. The President said the focus of the budget is shifting from consumption to investment.

Some analysts said by announcing these tax measures without increased funding to the agriculture sector, the spine of the country’s economy, the minister is basically trying to “deepen” the tax base.

Long journey
In the face of widespread criticism on account of harsh taxes, the minister said this year’s Budget is a continuation of a long journey towards creating “a better Uganda” for the current and the future generation. She focused the budget on implementing key development priorities over the next year within existing resource constraints; continue to narrow the infrastructure gap, while promoting economic productivity and diversification for better job creation.

To the minister, it’s not that the Budget lacks good ideas. It proposes to pay for new spending with specific government spending cuts (reforms in the gross tax system) and tax increases. It proposes spending the Budget lion’s share (Shs2.5 trillion) on infrastructure improvement that would propel the economic growth to 7 per cent in the next financial year.