Have tax advisors run out of revenue-generating ideas?

The government is mandated by Section 152 of the Constitution to mobilise revenues from citizens through which it fulfills its tax objectives.

The tax policy design is derived from the wider development and fiscal policy objectives as stipulated in the National Development Plans.

Currently, Ugandans are paying for a number of taxes almost at every stage of their interaction with any economic transaction.

Taxes on income include individual income taxes like Pay As You Earn (PAYE), Withholding tax, business income tax,  Property taxes, Value Added Tax (VAT) , and Excise Duty tax, among others.

The government in 2018/2019 financial year passed some tax amendments notable of which were increase in Excise Duty on mobile money and bank charges from 10 per cent to 15 per cent.

Imposition of Excise Duty of Shs200,000 on motorcycles at first registration, levy of one per cent on mobile money and introduction of daily levy of Shs200 on the over the top services (OTT).

On the Non-Tax Revenues (NTR), the government increased motor vehicle first registration fees from Shs1.2m to Shs1.3m.
 
All these amendments take place without observing the corresponding increase in economic activity as Gross Domestic Product (GDP) growth in the same period remained stagnant in 2017 and it affected the livelihood of the majority.

Focusing on the above amendments, it is evident that mobile money and bank charges increased which gradually affected financial inclusion, which once became one of the governments’ priority areas.

Secondly, mobile money increased charges came hand in hand with an additional one per cent levy, as well as OTT, all of which are deducted on residual income.

 Not surprising though, early this year, information passed when the Minister of Finance made some proposals concerning the taxing of bank withdrawals on already taxed income coupled with the already increased bank charges. Much as this sounds a bit strange, it also economically sounds weird.

Fiscal policy is ideally anchored on the grounds that government gets a share of an economic activity that directly or indirectly contributes to the country’s total output to facilitate it conduct its business.

Just recently, the minister expressed intentions of reviving annual licenses on all motor vehicles on top of the increased revenues collected on the first time motor vehicle registration without considering the 3rd party insurance levy, which almost no Ugandan actually knows what this money does as there are always no compensation when needed.
This seems frustrating as many Ugandans are struggling with the basics of their lives .

 The tax burden on citizens seems higher in Uganda compared to the East African Community (EAC) member countries but surprisingly, our tax to GDP ratio remains increasingly low compared to the EAC region and the Sub-Saharan Africa average.

It is true that the government is committed to improve and work on its domestic revenue mobilisation strategy, but this should not come at the expense of citizens’ livelihoods.
Uganda is the only country in EAC and one of the few in Africa, whose tax system is not aligned with the banking system.

The Tax Identification number is not connected to the individual’s or business’s bank system information. This implies that the tax administration is still lacking and possibly cases of tax evasion are so rampant, which leads to the tax authority failing to realise its targets.

Before thinking of burdening the citizens further, tax policy advisors need to rethink their strategy and fill all the gaps which lead to tax evasion and eventual revenue losses.

Mr Fred Kasalirwe is a research fellow at Advocates Coalition for Development and Environment (ACODE)