Expanding the tax base under the existing conditions is like bleeding an anaemic person.
A recent directive by President Yoweri Museveni to the Minister of Finance to tax users of social media platforms such as Facebook and WhatsApp in a bid to widen the country’s tax base has stirred a serious debate.
Whereas the Finance Minister, Matia Kasaija welcomed the proposal and even promised to implement it, experts have argued that if implemented, the tax will come as double taxation since Ugandans are already paying for internet data. New Vision’s John Semakula interviewed economic experts and other influential Ugandans on the issue and bellow is their advice to government on how to widen the tax base without targeting social media users:
Prof. Augustus Nuwagaba-tax land and informal sector
Uganda has got a narrow tax base that makes the government look here and there for taxes. What constitute our tax base are few things such as banks, petroleum products, and telecom companies. Yet the informal sector that contributes almost 60% of the economy is not taxed.
The challenge with the informal sector is that it’s not fixed. It’s here today and there tomorrow. Government needs to formalise the informal sector so that in the end it would be able to charge at least sh60,000 in taxes from everyone in the sector.
In other countries, land is also taxed in form of rent but in Uganda it’s not registered so government may not even be able to tax it. Let government register land to tax it. The challenge is that our government enjoys introducing new taxes without any input into the targeted sectors.
And instead of allowing financially struggling business to close, government should inject more money into them. In the United States, there is something called, quantitative easing where government puts money into the private sector for businesses to thrive before taxing them.
Government can also invest in the agricultural sector where 82% of Ugandans are involved. Imagine that you have 20 million Ugandans in the agricultural sector and each one of them pays sh100,000 every year.
Government can invest in agricultural infrastructure such as irrigation schemes. Ethiopia is already doing this and Vietnam did it several years ago and there is growth in these countries.
If Uganda invested in agricultural infrastructure where we have a comparative advantage as a country, we would target the 1 billion people on the continent through African Continental Free Trade Area. We would then not complain about taxes since Uganda can’t exhaust that market.
Cut down administrative costs –Economic expert Dr. Fred Muhumuza
It’s going to be difficult for government to expand the tax base in this stressed economy. Government should cut down its costs on administration to come to a balanced budget.
Expanding the tax base under the existing conditions is like bleeding an anaemic person. Of course, it’s also not true that social media users are not paying tax because to get on the internet, people pay taxes.
So proposing another tax on social media is like charging a car owner a tax each time he uses his vehicle yet he paid import tax and continues paying taxes on fuel.
And charging taxes on social media is a global issue. It has been agreed on worldwide not to charge people for using the internet.
The UN has even declared use of internet and social media as a social human right. In Europe, Hungary tried to introduce a tax on social media and other European countries prevailed over it and stopped it.
Reduce tax waivers to big companies-Isa Sekitto (Spokesperson KACITA)
In my lay understanding as a social media user, I thought we were already paying taxes for accessing social media because the data we use is not a donation from government. Even when I am buying a smart phone to access internet and social media, I am paying a tax.
And social media is not only used for leisure as some of us use it for business. So if government wants to increase the bills for calls in business, then let it introduce taxes on social media.
Of course, taxes are a complicated subject to talk about. But if government is only vigilant to look at properties, we would widen our tax base.
Uganda can also widen the tax base by reducing the tax waivers for big companies. We need an equitable tax allocation where the big companies pay big and medium pay medium and small is allocated a small tax. Taxes should be treated like a bottle because if you put it on a wrong bottom, it will fall.
Denis Kakembo-Organise informal sector (Lawyer and tax expert)
The income tax Act says that all of us who have a source of income including individuals who sell mangoes in the market and saloon owners have an obligation of paying taxes. But the informal nature of most of the businesses in Uganda makes it hard for government to know the incomes of the business owners.
Government has also not helped much in organising the informal sector. That is why all the taxes that are introduced target the same type of people and products such as beer, internet data and cigarettes.
So government needs to change from this lazy approach to solving the tax challenge to being keen on implementing long term measures to widening the tax base.
The long term measures could be encouraging the business community in the informal sector to keep books of account such that it easy to calculate their tax worth.
Kibirige Mayanja-Economic expert
Government can widen its tax base by eliminating corruption and improving administration in revenue collections departments.
There are traders who import goods and are never taxed to the disadvantage of those who pay taxes. So widening the tax base can be an issue of controlling corruption than introducing new taxes.
Maj. Gen. Benon Biraro –No alternative, Social media users should be taxed
I support the president’s proposal to tax social media users. Uganda is a heavily in-debited poor country so any effort to widen the tax base by introducing new taxes is welcome.
Introducing new taxes results into increased salaries and make it easy to run government.