Scrutinise tax collection

KAMPALA CITY Council has privatised collection of trading licence fees. Each of the five divisions in Kampala has chosen a company to collect trading licence fees. Victoria Insglass Investments will collect for Kampala Central; Kisenyi Community Development for Rubaga and Investment Masters for Nakawa. Bids for Kawempe and Makindye are still being evaluated. KCC intends to privatise collection of other taxes as well. Certainly, something needs to be done as KCC is failing to collect much of the tax due to it. However, there are some serious risk factors in the way it is outsourcing tax collection. In the first place it is not clear why each division has to select its own company to collect taxes. These taxes are owed to KCC not to the divisions. KCC may now lose accountability over these tax collections and end up losing revenue. In the second place some of the companies awarded the collection contracts seem to have no special financial expertise. Previously, KCC has been using law firms for collection and certainly lawyers can be unnecessarily bureaucratic and costly for collecting routine taxes. Change was needed but surely KCC could have used reputable firms of accountants for tax collection. Such firms would have the skills to bring the records up to date, pursue the outstanding monies, and make certain that all future payments come in on time. There is a risk that inexperienced companies will not be sufficiently systematic in collection and will be subject to manipulation by taxpayers. However the die is cast and KCC cannot reverse its decision on trading licences. However it should carefully monitor this experiment and should extend this method of outsourcing only if it generates the expected revenue.