The answer to youth unemployment lies in tax incentives
Publish Date: Mar 06, 2014
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By Allan Nkonge Gwembuga

Uganda presents an fascinating case of youth unemployment with a whopping 80% in urban areas having more unemployed youths compared to rural areas and females being more affected compared to their male counterparts.

Although many interventions have been put in place by Government to address the problem, corruption, population explosion, lack of priority budgeting, poor work culture, a rigid education system and failure to make agriculture attractive to the youth among others are serious challenges.

To minimise the problem of youth unemployment, there are two things the government ought to do: Improve the legal framework to increase opportunities of youth employment and create tax incentives for youth employers.

To begin with, improving the legal framework to increase opportunities of youth employment is the most obvious method of reducing youth unemployment.

Tightening the legal framework will increase opportunities for youth employment and practical preparation of youth for work by all higher institutions of learning.

However, the government will need to provide attractive remuneration packages to teachers, lecturers and other professionals to ensure a good work done.
Secondly, creating tax incentives for youth employers is equally crucial.

A more creative and constructive approach would be to improve incentives for companies/ institutions which employ these “theoretical and inexperienced youth” to cater for the expenses in training and recruitment.

For instance, it would work, if the tax regime is re-organised so that there are tax rebates on youth employers in organisations which employ a given number of youth for a given time and have spent a given amount of money training them for better efficiency on the job.

A key reason for youth unemployment, which is often times overlooked, is insufficient skills and knowledge applicable to the job they are applying for. It is, therefore, important that youth employers are indirectly refunded these expenses of “refining employees to suit their demands”. 

The agricultural sector being dominant in Uganda employing 82% of the population and contributing about 23.9% of the total GDP in 2013, and, therefore, a high priority area in the government’s National Development Plan; youth employers in agricultural value chain development would be a strategic focus for such proposed tax incentives after all most industries and services in the country are dependent on this sector.

All private employers registered to remit Pay As You Earn (PAYE) to Uganda Revenue Authority (URA) would qualify and would be able to deduct the incentive amount for which they qualify from the income tax they would have to pay to URA.

Furthermore, youth employees who would qualify would have to, for instance, be between 18 and 29 years old; be working in a special sector or industry which indicated by the finance minister in consultation with the ministers of labour and trade and industry like agriculture; have an identity documents detailing when he/she finished school, among others. The tax incentive would not be applicable to youth domestic workers.

By and large, it is imperative to note that the Ugandan government supplemented with civil society organisations has applied several national and local strategies to reduce youth unemployment such as the “Entadikwa” Scheme, the Youth Entrepreneurship Scheme and the government sponsored youth training programmes through Enterprise Uganda.
Most of these government and civil society interventions have been moving hand in hand with other poverty reduction strategies.

Whereas the Government has of late concentrated on establishing youth funds and entrepreneurship skills training, Civil Society Organisations (CSOs) and especially Non-Governmental Organisations (NGOs) have focused on self-reliance.

The magnitude of Uganda’s youth unemployment crisis is a cause for concern and while the long-term solution is to “fix” the education system and place the economy on a growth path that is better aligned with the scale and capacity of its resources, in the short to medium term more forceful and greater interventions are required than have hitherto been provided. 

The writer is a tax and business development analyst


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