Tax reforms send Ugandans into fury

In a move to find a cure for the ailing economy, the government of Uganda proposed tax reforms aimed at widening the narrow tax base in the country. Parliament has since (May 30) approved the reforms that include a UGX 200 levy on every liter of cooking oil, a UGX 100 levy on every liter of diesel and petrol, UGX 650 on every liter of opaque beer, UGX 1500 on every liter of drinking spirits, UGX 200 on non alcoholic beverages, with fruits and vegetable juice being the exception. With many Ugandans unemployed and living below the poverty line, increased tax on essentials like cooking oil, diesel and petrol shall increase the prices of basic commodities like food due to the increased costs of transport beyond the reach of the poor.

However the most controversial of these reforms is the levying of a 1% tax on mobile money transactions and a UGX 200 daily levy on social media platforms like WhatsApp, Twitter, Facebook, Instagram, Skype etc.

The president directed the Ministry of Finance to slap a levy on social media to combat gossip. According to Mr Museveni, youth spend their time on social media spreading gossip instead of engaging in productive activities. What the president doesn’t know is that there is huge amount of useful information dispersed from social media including communication from State Agencies. The President himself has a Twitter and Facebook accounts managed by statehouse staff. Uganda police has encouraged the creation of Neighborhood Watch WhatsApp groups, to help report and share real time intelligence with the police to promote community policing. Social Media is also used to convey positive messages on sexual education, drug abuse and a number of important issues affecting the nation. It is also a platform for everyone to participate in healthy debate on a number of issues. Taxing social media is therefore a move to suffocate and frustrate the free flow and exchange of information and ideas among the citizens. The government is trying to increase penetration of information technology into the population and truth be told, for many people, signing up to WhatsApp, Facebook or Twitter is a soft and easy entry point into the complex IT world. The benefits of social media outweigh the few bad apples which should encourage and promote it instead of these platforms being restricted with tax. The Internet data used to access this media is also already taxed which would be a case of double taxation.

The 1% tax on Mobile Money is a deterrent to the financial transaction inclusion the service provides to over 20 million Ugandans, majority of which do not have conventional bank accounts. The easy process of signing up to mobile money and the wide spread network of agents all over the country benefits the rural population. Of late, additional services like micro loans services have been added to mobile money services list.

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A local tries to withdraw money at a kiosk

This means that a rural farmer can access credit facilities through the Mobile Money services conveniently which is not the case with conventional banking. Mobile money facilitates easy transfer of factors of production which would boost the Ugandan economy in the end. Extra tax on mobile money is going to put a burden on the most vulnerable population especially those in the rural, poor and middle class users.

Also read Are we choking up on loans?

It is not that we are against paying taxes, no, that’s a national duty we are all obliged to as responsible citizens. What is annoying is the exemption of taxes granted to so called investors in form of tax holidays. In this years’ proposed tax reforms, an investor with an initial capital investment of over USD 200 million is exempted from tax on income. And these investors mostly have access to credit facilities as compared to locals. The same foreigners repatriate their profits to their home countries. Therefore the poor pay for the services the wealthy use to make even more money which is then shelved away in offshore accounts.

The endless reports of billions of Shillings lost in corruption scandals is also a source of anger among the average Ugandan. Coupled with the supplementary budgets taken out by State House to facilitate daily expenses, travel and presidential grants is also a huge pointer that the Ugandan government is living beyond its means. The cost of administration consumes a large portion of the budget.

home04pixIGG Irene Mulyagonja Kakooza was blamed for failing to curb corruption in last week’s State of the Nation Address

In the financial year 2016/17, Uganda Revenue Authority collected UGX 13 Trillion of the 29 Trillion needed for the budget. This has caused heavy dependency on borrowing both internally and externally, in addition to grants from development partners. This debt burden is passed onto the poor tax payers.

Uganda is not a poor country, we have resources, if only we could spend on the priorities and live within our means.

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Don’t miss all updates on the national budget reading and the URA budget breakfast on all our social media platforms on 18th June 2018

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