IMF worried about Uganda's tax inequality

Jun 05, 2012

The International Monetary Fund (IMF) is concerned about tax inequality in Uganda, describing it as “unfortunate”.“The taxation mechanism in Uganda is not fair. The poor are paying just as much as the rich,” said Thomas Richardson, the senior IMF resident representative.

By Patrick Jaramogi

The International Monetary Fund (IMF) is concerned about tax inequality in Uganda, describing it as “unfortunate”.

“The taxation mechanism in Uganda is not fair. The poor are paying just as much as the rich,” said Thomas Richardson, the senior IMF resident representative.

Richardson noted that taxation is a political issue that needs to be handled well.

“Inequality is bad for the growth of the economy. Anything that you do to dampen incentives undermines growth.”

Richardson was speaking during the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) –Uganda and Oxfam Novib Tax Justice Budget stakeholders’ breakfast dialogue at the Imperial Royale Hotel in Kampala last week.

He urged the Government to eliminate tax exemption and incentive given to investors, describing them as ‘enemies’ of economic growth.

“More funds should be channelled towards provision of social services such as good roads, reliable energy and clean water,” he said.

Balaam Muhebwa, a tax and business consultant, said well-to-do firms benefit from the various tax incentives such as the 10-year tax exemptions granted to agro-processing firms, which further erode the progressiveness of the income tax structure. “The poor cannot benefit from such incentives,” he said.

Muhebwa said with more state revenue coming from regressive tax revenue sources such as VAT, the tax burden continues to fall on the poor.

“This goes against the tax justice principle; that the state creates a system of taxation that requires each person to pay tax according to their means,” he explained.

Jane Nalunga, the SEATINI country director, said those who earn more should pay more.

“Tax justice principles talk about equalities in paying taxes. It talks about reducing poverty and inequality but the Ugandan case is very worrying because the rich are very rich, while the poor are very poor,” she said, adding that taxation is supposed to bridge that gap.

Makerere University don, Prof. Ndebesa Mwambutsya, said the Government must be accountable for what they do with tax revenues or the democratic principle fails.

 

 

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