OP-ED- Tax to GDP ratio in Uganda is 14 percent. This is low by all standards. The sub-Saharan ratio is around 18 percent. The East African community recommendation target is for partner states to collect 25 percent of ratio to GDP. The National Development Authority (NDA) recommendations target is to collect above 16 percent. The eligible direct tax payers in Uganda are about 8 million but only about 3.5 million are registered tax payers and of those registered only about 1.7 million actually pay direct taxes.
If tax to GDP ratio is so low at 14 percent, why then are traders complaining of high taxes in Uganda? Why this irony or mismatch between low tax collection ratio and complaints of (omusolo gututta). What are the confounding/ aggravating/ extraneous factors or issues that distort the association between low tax to GDP ratio and low taxes paid by the citizens? Because ordinarily low tax ratio to GDP would mean that tax payers are paying less and therefore would not feel burned but instead there is complaint of paying high taxes!! The relationship of low tax collection for the country but high tax burden to the tax payers is confusing.
EFRIS; New Wine in Old Bottles? Mark 2: 22
EFRIS which is Electronic Fiscal Receipt and Invoicing Solutions is a new tax programme tool for efficient tax collection and management. It is meant to cure informalities and loopholes in tax collection as some traders have been evading tax. This tool has been introduced in the sister East African countries of Kenya, Tanzania and Rwanda and is working there in those countries though with some tensions. Without this tool some traders have been charging VAT from consumers and not remitting it to URA. By using this tool and ensuring efficiency, tax evasion is reduced thus expanding the tax base. EFRIS in a way will contribute to improving tax administration which is an outcry out there in the population about increasing the tax base and EFRIS is meant to address this issue.
However being new wine in old bottles i.e. New tax collection technology tool in the old system and mind set, it was bound to cause some frustration and conflicts.
Legitimate or Illegitimate Demands by Traders?
Do traders have a legitimate complaint to make against EFRIS? Yes and No. To a certain extent the traders have no legitimate complaint when they associate AFRIS with high taxes. The tool has nothing to do with tax increase policy. It has something to do with tax efficiency. Yes they have a legitimate demand because the tax tool is new, cumbersome and is likely to be expensive in the long run because traders may have to incur extra costs to hire human resources and buy the App machinery in order to comply with URA requirements.
Yes they also have a legitimate demand because the traders allege that URA officials are not simple while carrying out sensitization, URA are not easily accessible among other factors is that they are few, and URA are not respectful and considerate of the tax payers. Furthermore, the traders’ complaints arise out of a situation where EFRIS as a new tool which seeks to formalize tax collection is imposed on a trade regime that is still largely informal.
Traders for example borrow goods from each. If say a buyer wants goods you don’t have you go and borrow some cartoons from your colleague from another shop and sell them to your customer. How now do you resolve the issue of receipts here!! And many other informalities in this largely inform economy which will contradict formalizing tools like EFRIS.
Confounding/Extraneous /Aggravating Factors
The tax outcry among the traders does not necessarily arise out of EFRIS technology. The application of the technology may be the occasion for rising against the tax regime in Uganda. EFRIS is not the cause but the occasion. First of all the tax regime in Uganda is largely regressive and not progressive. It is consumer tax and not income tax. It is largely indirect not direct.
It is not fair and equal. The tax base is very narrow. Taxes fall on the shoulders of extremely very few people. Those captured well in the tax system pay very highly and many go either untaxed or taxed less than they are supposed to pay. This tax inefficiency frustrates those who genuinely pay and hence the protest.
Tax apathy. Tax payers cannot see the linkage between what they pay and what services they receive. Roads are poor, schools are dilapidated, health centers are empty of drugs etc. Amidst this lack of service delivery, state officials are involved in extravagance and luxury, some go out on vacations on state resources, government funds are embezzled or abused etc. This political corruption frustrates tax payers who refuse to comply with tax demands because they do not see the linkage between tax paying and service delivery. There a lot of tax exemptions that is not arbitrary without considering whether the exempted company is transferring technology or providing employment or promoting value chains.
Some recommendations
Uganda must gradually shift from largely the regressive tax regime to the progressive tax regime. There are many people with large incomes who are not taxed and instead the burden falls on consumers. There must be a conscious effort to promote tax justice. There is pervasive Tax injustice.
There is pervasive tax evasion by foreign companies and by the so called well connected people. Let government quietly ask UATEA. They know tax evaders. But government can also use life style audit to discover tax evaders.
Ministry of trade, Finance and Revenue Authority need to harmonize their systems. So far these ministries are not harmonized and it is even said some officials inthese ministries are frustrated and not putting a lot of human investment in their work.
There is need to expand the tax base through efficiency in tax administration and through expanding the tax base. Why for example, should someone owning one thousand exotic cows or five thousand local cows not pay tax? Why should someone who sales a lorry of matooke every two weeks not pay tax? Why should someone who sales 5000 bags of rice not pay tax? Why shouldn’t those trading in agricultural produce not pay tax etc
URA officials should be simple, accessible and respectful of the tax payers
Rtd LT MAGUFURI MOSES
