IMF says Uganda tax system unfair

By PATRICK JARAMOGI

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

 “IMF is concerned about the issues of inequity regarding taxation in Uganda. The taxation mechanism is not fair. The poor are paying just like the rich,” said Thomas Richardson the senior IMF Resident Representative to Uganda said Friday.
Richardson noted that the taxation is a political issue that needs to be handled well.

“What is the effect of taxation on poverty eradication? Inequality is bad for growth of the economy. Anything that you do to dampen incentives undermines growth,” he said.

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

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

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

Balaam Muhebwa, a tax and business consultant said the well to do firms have benefited from the various tax incentives such as the 10 year tax exemptions granted to agro-processing firms, thus further eroding the progressiveness of the income tax structure.

“The poor cannot even put up a case to benefit from such. Uganda currently realizes more tax revenue from indirect taxes and yet they are more regressive,” he said.

Muhebwa said with more state revenue coming from regressive tax revenue sources such as the 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 his/her means,” he explained.

Jane Nalunga the SEATINI Uganda Country director said those who earn more should pay more.

 “Tax justice principles talk about equalities in paying of 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.

 She said taxation is supposed to bridge that gap.

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