Strengthen existing tax system

The passing of the 1 per cent tax on every transaction made by phone users on mobile money is a slap in the face of poor Ugandans. It is only going to sail Uganda into a queue of helpless citizens. While banks are expensive compared to the mobile money system, it is now clear that mobile money service is going to lose the essence of its initial usefulness. The system was basically developed to help the poor, who are non-bankable, to access cheap banking services in form of micro finance. Slapping such a tax on it will instead worsen their situation.
Similarly, social media, which is a leisure parent for poor Ugandans, especially the youth, is likely to lose its significance effective July 1. Today, the youth use social media to advertise what they do to earn a living. They also use it to network with colleagues on how to get jobs. All these opportunities are likely to be reduced by this killer tax. Imposing Shs200 daily on each Sim card used to access social media, would mean cutting off communication for many.
Airtime and mobile phones sale as well as mobile money transactions are likely to go down. While the imposition of these taxes might widen Uganda’s tax base, the challenge is, you cannot expand a tax base with loopholes.
Other than introduce new taxes, emphasis should be put on the existing tax system to yield the set domestic tax revenue. The revenue performance report for 2016/2017 financial year showed that the cumulative domestic collections were Shs3,506.73b in the first six months of the financial year with a surplus of Shs40.13b. In fact, the performance was 103.7 per cent.
Is it a taboo to use the surplus revenue and also collect taxes from what would have been evaded so as to save poor Ugandans from new taxes? The recent report on the Monthly Performance of the Economy - March 2018 by the Ministry of Finance showed that tax revenue collections were Shs1,163.6b against the target of Shs1,209.9b. The Ministry argued that, this was as a result of the shortfalls in both direct and indirect tax revenues, which totalled to Shs22.9b and Shs53.7b respectively.
Why the existing tax should be strengthened: Recently, URA estimated that between 2015 and 2017, the actions of VAT evaders resulted in a revenue loss of Shs200b. It was noted that government has managed to recover Shs60b of the lost tax revenue. The list of the evading companies had 148 companies with 93 being operated by foreign interests and at least 90 of those being from China. Therefore, it implies that only 55 (37.2 per cent) of the companies that evaded the taxes are operated by local investors and 62.8 per cent by foreign individuals.
So slapping citizens with new taxes implies that they are paying and compensating for the taxes evaded by foreign investors. This is very unfair.
Jonah Kiberu,

This page might use cookies if your analytics vendor requires them.