Litany of licence fees: Local govts must be reined in
A hairdresser plaits a weave in one of the saloons in Galiraaya Mall, downtown Kampala. Despite the rise in female-owned businesses, most do not live beyond the first year. PHOTO/FILE
What you need to know:
- The issue: Licence fees.
- Our view: We recognise the need for local governments to raise local revenue, but it should be done in a manner allows for businesses to thrive, lest we continue grappling with high youth unemployment and high business mortality rates.
The Uganda Revenue Authority (URA) has revealed that several companies have registered sharp declines in annual incomes over a period of four years ending June 2023.
According to a URA report, the most affected were businesses with an annual turnover of around Shs50m. Those fall in the category of the small taxpayers.
This revelation came hot on the heels of a disclosure by the Uganda Retirements Benefits Regulatory Authority (URBRA) that only about three million Ugandans save for retirement.
Four years ago, the Global Entrepreneurship Monitor (GEM), a joint project between Babson College of the United States and the London Business School of the United Kingdom (UK), which researches on entrepreneurship around the globe ranked Uganda as one of the most entrepreneurial countries in the world with about 30 percent of Ugandans starting a business every year.
The same report, however, pointed out that Uganda is also among the top five countries in Africa with a high business failure rate with many of the businesses biting the dust within a year of being started.
The causes of this high business mortality rate were associated with poor planning, lock of financial discipline on the part of the proprietors, inadequate capital, a litany of taxes and numerous licence fees.
The biggest bottleneck has been the taxes and litany of licence fees which have increased the cost of doing business, reduced profitability, and stifled growth and made it practically impossible for those involved in business to make any savings.
Matters have not been helped by the fact that local governments have been coming up with all sorts of licence fees in the name of generating local revenue. Some local governments have come up with what is now described as an advertisement fee, which is levied on shop owners who put up signposts outside their premises.
Last week, agents of the Jinja City Authority went around confiscating signage from all shops of those who had not paid for the signage, but it has since emerged that advertisement fee is often much higher than the cost of a trading licence or operational licence. This calls for an investigation.
We recognise the need for local governments to raise local revenue, but it should be done in a manner that allows for businesses to thrive, lest we continue grappling with high youth unemployment and high business mortality rates. The Ministry of Local Government and that of Finance must intervene.
