Govt should regulate URA’s exchange rate
Sep 02, 2011
I have been following the present economic situation in Uganda, where prices of almost everything have tripled. Traders have demonstrated but to no avail from government.
By Sam Mubiru
I have been following the present economic situation in Uganda, where prices of almost everything have tripled. Traders have demonstrated but to no avail from government.
In 1987, there was currency devaluation. One who had say sh1m, two zeros were knocked off leaving a net balance of sh10,000. Additionally, further 30% deduction was done living a final net balance of sh7,000.
All that was done in the name of saving the economy. People took it with pain but since it applied to everybody, it passed. The situation prevailing today is worse than it was then when devaluation was done.
Traders are lobbying for price or tax reduction on items they trade in forgetting that an economy is a chain being pulled by so many stakeholders and once broken no growth will take place. Removal of taxes on imported sugar was a great thing.
It would have been better if we found a solution that would cut across all the sectors of the economy.
We all know that fuel is key in production and service delivery and as of now, we still import fuel. We refer to our country as an agricultural country, but we export very little yet we import more.
We know that the dollar is a medium of external trade and as such, we have no choice but to accept because our exports are too low.
My proposal to this prevailing situation is that since Uganda Revenue Authority Customs Department does not remit taxes collected on all imports to the national treasury in form of dollars, it should stop using the prevailing exchange rate of the dollar when taxing imports. A rate should be determined by the Government which will apply to all imported goods. What hikes prices is the exchange rate used by Uganda Revenue Authority.
If the Government steps in and regulate the exchange rate used by Uganda Revenue Authority against the dollar, say, for the period of four months and set it unchanged for example if taxes are worked out at the rate of sh2,000 per dollar, I believe even the pump prices of fuel will reduce drastically even without government enforcing it on the people.
This will push all prices of commodities and services in this country down and even Uganda Revenue Authority will collect three times of taxes they had expected from imported goods because everybody will be able to afford taxes. It will even reduce smuggling and under- declaring of value of imported goods.
The writer is a businessman working with Fire System
I have been following the present economic situation in Uganda, where prices of almost everything have tripled. Traders have demonstrated but to no avail from government.
In 1987, there was currency devaluation. One who had say sh1m, two zeros were knocked off leaving a net balance of sh10,000. Additionally, further 30% deduction was done living a final net balance of sh7,000.
All that was done in the name of saving the economy. People took it with pain but since it applied to everybody, it passed. The situation prevailing today is worse than it was then when devaluation was done.
Traders are lobbying for price or tax reduction on items they trade in forgetting that an economy is a chain being pulled by so many stakeholders and once broken no growth will take place. Removal of taxes on imported sugar was a great thing.
It would have been better if we found a solution that would cut across all the sectors of the economy.
We all know that fuel is key in production and service delivery and as of now, we still import fuel. We refer to our country as an agricultural country, but we export very little yet we import more.
We know that the dollar is a medium of external trade and as such, we have no choice but to accept because our exports are too low.
My proposal to this prevailing situation is that since Uganda Revenue Authority Customs Department does not remit taxes collected on all imports to the national treasury in form of dollars, it should stop using the prevailing exchange rate of the dollar when taxing imports. A rate should be determined by the Government which will apply to all imported goods. What hikes prices is the exchange rate used by Uganda Revenue Authority.
If the Government steps in and regulate the exchange rate used by Uganda Revenue Authority against the dollar, say, for the period of four months and set it unchanged for example if taxes are worked out at the rate of sh2,000 per dollar, I believe even the pump prices of fuel will reduce drastically even without government enforcing it on the people.
This will push all prices of commodities and services in this country down and even Uganda Revenue Authority will collect three times of taxes they had expected from imported goods because everybody will be able to afford taxes. It will even reduce smuggling and under- declaring of value of imported goods.
The writer is a businessman working with Fire System