Govt should regularize tax waivers

May 07, 2009

A total of sh67b in taxes owed to Uganda Revenue Authority was cancelled in 2008. The bulk of these waivers were enjoyed by a group of 25 individuals and companies.

A total of sh67b in taxes owed to Uganda Revenue Authority was cancelled in 2008. The bulk of these waivers were enjoyed by a group of 25 individuals and companies.

Among them were companies controlled by Sudhir Ruparelia, Hassan Basajjabalaba and Gordon Wavamunno.

Previously, in 2006, the Government waived sh81b, all for public institutions. It is right for Parliament to look into this issue and establish the criteria used for cancelling tax arrears.

This is important on two fronts. One, if there was any tax evasion in the beneficiary companies, these waivers should not send a wrong signal to taxpayers. And secondly, the adhoc application of tax waivers can lead to unfair competition and can be an avenue for corruption.

Tax cancellations are a genuine tool of fiscal policy, but should be based on objective and verifiable criteria, criteria that are widely publicised and available to anybody who feels they qualify.

Tax cancellations can be a useful tool in keeping ailing, strategic firms afloat, but this should not be done at the expense of increased revenue collections. Uganda is in urgent need of every coin we can collect to finance our development agenda.

In sub-Saharan Africa, Uganda has one of the lowest rates of taxes to GDP and it is critical that we raise this to higher levels as fast as we can.

There is, therefore, a national concern in the issues of tax cancellations, especially when the impression is that they are being done arbitrarily and to favour a select group of wealthy and well-connected businessmen.

An objective criteria for determining will erase any discretion that could lead to corruption and dispel the perception that tax-evaders are being let off the hook.

The Government needs to walk the thin line between boosting tax revenues and supporting businesses with a little more sensitivity than it has shown with the current tax cancellations.

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