NGOs Advise Government on Taxation Ahead of Polling Day

A group of 45 civil society organizations under the Tax Justice Alliance Uganda is seeking amendments in tax laws to reduce unfair taxes that affect the poor, increase tax revenues and reduce reliance on foreign assistance.
Every year begins with new plans by governments and individuals. It is also the beginning of the second half of the financial year and this time around, the climax of an election cycle in which Ugandans will be voting for a President and Members of Parliament.

As the country edges close to polling day, candidates are unveiling plans centred on economic growth, macro-economic stability, security, good governance and democracy, public and private sector institutional development, employment and, agriculture, among others.   

And because governments mainly finance their expenditure through taxation, borrowing and grants, among others, a group of 45 civil society organizations under the Tax Justice Alliance Uganda is seeking amendments in tax laws to reduce unfair taxes that affect the poor, increase tax revenues and reduce reliance on foreign assistance.

In what they have called the Tax Manifesto, the group calls for increased tax education so that more people can demand accountability. The other issue noted in the Tax Manifesto is the limited citizen participation in the tax policy formulation process, despite the provisions in the laws that allow for public input.

They say that even at district and parliamentary level, the majority of policymakers are not interested in debates on taxation and this leaves the population unrepresented in the process. The Alliance now wants the government to provide a clear and structured mechanism for citizens’ engagement in revenue mobilisation and accountability at all levels.

The Alliance also wants the government to decide on tax avoidance and evasion especially by rich individuals and multinational corporations, who invest in Uganda but incorporate their companies in tax havens. The group also wants the government to review the Double Taxation Agreements it has with various countries, saying that all these arrangements do not favour Uganda and should be re-negotiated.  

These, they say affect financial inclusion as mobile money was an easier way to access to financial services that the banking sector, while the OTT further widens the technology gap between the rich and the poor.  They also cite other taxes on necessaries like VAT and Excise duty on items like sugar and salt, and instead call for more direct taxes that will raise more revenues from the rich from the poor.  

The NGOs have also reignited the calls for the abolition of what they call regressive taxes that impact the poorer people more than the rich, including the tax on mobile money transaction and the Over the Top Tax or OTT, also known as social media tax.  

Another major challenge noted is accountability for the revenue collected, which they call very poor and affecting the morale of Ugandans to pay taxes. The want the government to put in place a structured accountability mechanism on the revenue collected and how it is utilized, which will make the tax to be seen to be working. 

TJAU is calling for a review of tax policies that affect access to credit, like the Stamp Duty Act that where one is required to pay 0.5 per cent or 1 per cent of the value of the the amount borrowed towards mortgages and chattels securities, saying it is an unnecessary additional barrier. They want a waiver of these duties in order to ease access to credit.  

They say that encouraging access to credit will have more benefits than the taxes because it will help widen the tax-base. On the oil and gas industry, the tax manifesto wants the government to put in place policies that will return the public confidence lost due to what they call a lack of transparency exhibited both in handling the oil investors and the revenues already got from the licenses.  

This also relates to the wider mining sector where secrecy has shrouded Production Sharing Agreements, making it hard for the public to demand accountability. On new sources, the CSOs suggest that government embarks on international, regional and national strategies to strengthen domestic industrial capacity, bridge the digital divide and reduce dependence on the dominant corporation.  

They call for a focus on the digital economy which has thrived since the pandemic hit, with companies like Zoom, Google, Amazon, Facebook and Microsoft thriving, on businesses in Uganda, yet paying no taxes.  There are already provisions for taxing the digital economy but the URA says the government capacity is still too low.  

They say there are ongoing global efforts through organisations like the Organisation for Economic Co-operation and Development (OECD), to find ways to help developing countries with a solution to taxing non-resident companies. However, the CSOs caution that any measures to be put in place should be designed not to hinder the development of the digital economy.    

The NGO have also noted the low contribution of the Agriculture sector to government revenues, despite employing more than a third of Ugandans. According to them, agriculture remains one of the most underfunded and slowest growing sectors of the economy.  

They say increased funding to the sector which targets increased incomes for the people involved will ensure the increased ability for them to pay more taxes.  In 2019/2020, the entire sector contributed just 14.9 billion Shillings in revenue or 0.09 per cent of the total revenue collections of the year.  

In recent years, the government says, it has increased direct funding to agriculture-related programs line NAADS, Operation Wealth Creation, the Agriculture Credit Facility, the Coffee Replanting Program among others, but the sector growth is still very low.   Agriculture contributed 24 per cent to the GDP.   

On the regional integration process, the NGOs have called on the partner states of the East African Community to implement tax harmonisation policies.This aimed at promoting investment, free movement of goods and services in the community and in turn, boost economic growth.  

However, the countries have failed to implement these plans, on top of retaining non-tariff barriers. This has instead led to tax competition with each country using tax incentives to attract foreign investments, hence denying the governments due to tax revenues.  

All the countries in the EAC have as a result seen their revenue to GDP ratios remain low at 12.8 per cent, 18.8 per cent, 13.3 per cent, 16.1 per cent and 13.0 per cent in Uganda, Kenya, Tanzania, Rwanda and Burundi respectively. 

This is way below the potential 25 per cent tax to GDP ratio for the East African region.   On local revenue mobilization, the Alliance recognizes the need to empower both the local governments and the central government to raise revenues domestically, to reduce the cost of foreign loans that are serviced by local tax revenues.    

The support the proposed creation of a replica of the Uganda Revenue Authority, based at district level, instead of only appointing the district finance officer to solely manage local revenue issues. They also a policy for uniform rates of licenses for Local Government to avoid multiple taxation.  

The Alliance is also opposed to the creation of new administrative units like districts and constituencies which is increasing the cost of administration to the Central government.