Benjamin Rukwengye
Nearly every Ugandan entrepreneur has a story about their first interaction with the taxman – the Uganda Revenue Authority. It is very rarely a happy one. No “Congratulations on opening a business, we wish you well.” Usually, something along the lines of this is how much you owe, pay up or you will be screwed.
This partly explains why Uganda has one of the most thriving informal sectors you will find anywhere. There are no incentives for formalisation. A friend shared an interesting story of his first encounter. He was, at the time, working in International Development but the yoke of the black tax was choking him to death – as many readers might be able to relate.
So, he used whatever he could put away to invest in a passion project – an Afro-fashion brand that was helping refugees make money while also putting fine quality bitenge on the backs of supportive clients. It wasn’t making much money to take home but it was solving two key problems. Refugee resettlement and cultural identity. Whatever he made was reinvested.
The initiative was limping but moving nonetheless. One day, however, another friend in a government agency approached him with a lifeline. They were celebrating something and needed a supplier for commemorative t-shirts. If a bid was submitted, there was a chance that a good amount of money might come in.
To submit the bid and stand a chance to get a slice of the cake, however, the bitenge needed a Tax Identification Number (TIN Number, in Ugandan speak). He mulled over the situation for a while wondering whether it was the right time to formalize. The allure of the deal didn’t help. When he slept, his mind wandered off to new premises, better machines, increased capacity, better pay for his team, etc. But still, he wasn’t sure he should do it.
Eventually, with promises from the agency contact, he bit the bullet, regularized the status of the business, and submitted the bid. He didn’t get the deal, because it went to someone who greased the procurement guy’s wheel. However, he landed squarely into URA’s hands and a few months later, received an email assessing him for unpaid taxes and threatening penalties. Not because of that email but because of how hostile the environment is for those who try to do big business by the book, the enterprise collapsed not long after that. It is hard to do legitimate business in Uganda. As this week’s debate on URA’s Electronic Fiscal Receipting and Invoicing System (EFRIS) has shown, even the guys downtown in Kikuubo survive and thrive because they cut corners.
This might be used as an explanation for why we aren’t able to provide basic services to the citizens and validate the fact that everyone must pay their fair share of taxes. But that is just half the debate. The fact that our city roads are in a deplorable state, or why our children endure the joke that is our quality of education, or why our Medicare services are on constant life support has as much to do with who is not paying taxes as it does with who is debauching the revenues.
Every other Ugandan has a theory about someone whose goods get in without paying taxes. If you listen closely, you will hear whispers about people who fix their competition and opposition with the taxman’s or his agents’ help. Whether this is true or not is for others to decide but it no doubt negates the legitimacy of the taxman and undermines his ability to mobilize from everyone else.
It also doesn’t help the taxman’s cause that he is the face and messenger of a greedy boss. The politicians and technocrats who bleed the national coffers live in the same economy as everyone else who is required to pay their fair share of taxes. Yet while the common man cries about the status of things, they see the ones living off their sweat doing so with such reckless extravagance.
Expenditure is not URA’s problem and is way out of its mandate but we cannot debate incomes without expenditures. If it’s true that only 1 percent of formally employed Ugandans earn over Shs1 million, it might be a stretch to expect tax compliance from them – or those with even much less – when what they see of their government’s habits is that of a fool and his money.
Mr Rukwengye is the founder, of Boundless Minds. @Rukwengye
