Unbalanced tax regime fuelling income inequality

By Franco Olongo and Raymond Baguma

Uganda’s unbalanced tax regime that taxes only the formal sector is leading to increasing levels of income inequality, a Makerere University don has said.

Dr. Ndebesa Mwambutsya, a lecturer in history and development studies, observed that only a few people are benefiting from Uganda’s economic growth, which favours informal sector workers with high incomes, while the formal sector carrying the tax burden.

He cited the agricultural sector, which he said contributes about 23% to the country’s Gross Domestic Product (GDP), but contributes almost zero to the tax revenues.

“The burden falls on salary earners and not those who are in the informal sector,” Mwambutsya noted.

He was speaking during a public dialogue on the role of citizens in public service delivery and social accountability at Hotel Africana recently.

The dialogue was organised by the Uganda Women’ Network and DIAKONIA, a Swedish nongovernmental organisation.
Present were academics, and members of the civil society.

The dialogue discussed the failing state of public service delivery in the country, the weak social accountability mechanisms and assessed the impact of the budget on public service delivery.

Mwambutsya said there is need for the civil society to organise and involve citizens in demanding for social accountability from their leaders.

Perry Aritua, the executive director of Women’s Democracy Network-Uganda Chapter, said: “Service delivery can improve if leaders and citizens embrace their rights and duties in social accountability as a norm for good governance and service delivery.”

She said if citizens continuously exert pressure on leaders who fail to account for taxpayers’ money use the law to recover money from the corrupt, citizens would be more willing to pay taxes.