Double revenue efforts, IMF urges govt
Jul 01, 2010
UGANDA needs to redouble its effort to scale up domestic resource mobilisation given the risks from the Euro Zone crisis and possibility of a shortfall in foreign aid, the International Monetary Fund (IMF) has advised.
By Sylvia Juuko
UGANDA needs to redouble its effort to scale up domestic resource mobilisation given the risks from the Euro Zone crisis and possibility of a shortfall in foreign aid, the International Monetary Fund (IMF) has advised.
“There is a possibility of a negative impact coming from the difficult situation in Europe. There is need for countries like Uganda with the more ambitious programmes on infrastructure to redouble their efforts in revenue mobilisation in order to afford those increased investments while at the same time programmes on the social sector side are not affected,†said Antoinette Monsio Sayeh, the IMF director of the African department.
Sayeh said Uganda and other sub-Saharan African countries have to be prepared to take action to adjust policies in the event of deterioration of the Euro Zone.
“They need policy buffers that allow them to respond through rebuilding reserves, financial sector performance and improving environment for the private sector. This can enable them to respond rapidly in the event of a downturn,†Sayeh told journalists recently.
She noted that while Uganda had a record performance on the macro-economic front, its revenue mobilisation falls short of regional and international standards. Uganda’s revenue to GDP ratio is 12.5% against Kenya’s 22%. Sayeh said if the Euro Zone crisis is not adequately addressed, Uganda could face a risk from the resultant downturn.
“There is a risk from a severe downturn that may result from the crisis in Europe on Uganda because it’s a key export market and a source of financial assistance and financial inflows,†she added.
According to Sayeh, if the crisis is not dealt with appropriately, the spread to other advanced countries also has a larger impact on global recovery and a negative impact on sub-Saharan Africa.
“There are many channels through which impact would materialise including eventual demand on exports, export volumes declining, price of exports going down and limited flow of remittances,†she said.
However, she was optimistic that growth in sub-Saharan Africa would reach 5% this year.
“We foresee in 2010 growth averaging 5% for sub-Saharan Africa on the basis of performance we have seen in the first half of the year.â€
Even with the global uncertainties, Sayeh was bullish that Uganda can still mobilise higher revenues without the introduction of new taxes.
“We think there is room for Uganda to get more domestic revenue than it’s currently doing.
“The Government needs to do more to collect on existing taxes, re-enforce tax administration and collect taxes due and limit the amount of tax exemption. They need to review a number of tax policies necessary to increase revenue mobilisation. It’s possible to do more even if growth continues at an average of 5-6%,†she said.
Thomas Richardson, the IMF senior resident representative, underlined the importance of a regulatory framework to deal with the new oil regime.
He said the IMF had organised a three-day conference on petroleum and taxation in sub-Saharan Africa to provide a platform to exchange information on good practices.
“The issue of collecting from the oil sector is a challenge many countries face in the sense that oil companies have sophisticated accounting and tax administration.
“Uganda’s need to be ready to deal with a higher level of taxation,†he said.
Richardson noted that with the East African Community’s common market, there could be a risk of lowering taxation.
“There is a little bit of risk that each country has its own set of tax preferences and the risk that they could all agree to adapt each other’s exemptions and preferences and that would impact on the overall tax take. Together they have to work and ensure holes are plugged across the board,†he said.
UGANDA needs to redouble its effort to scale up domestic resource mobilisation given the risks from the Euro Zone crisis and possibility of a shortfall in foreign aid, the International Monetary Fund (IMF) has advised.
“There is a possibility of a negative impact coming from the difficult situation in Europe. There is need for countries like Uganda with the more ambitious programmes on infrastructure to redouble their efforts in revenue mobilisation in order to afford those increased investments while at the same time programmes on the social sector side are not affected,†said Antoinette Monsio Sayeh, the IMF director of the African department.
Sayeh said Uganda and other sub-Saharan African countries have to be prepared to take action to adjust policies in the event of deterioration of the Euro Zone.
“They need policy buffers that allow them to respond through rebuilding reserves, financial sector performance and improving environment for the private sector. This can enable them to respond rapidly in the event of a downturn,†Sayeh told journalists recently.
She noted that while Uganda had a record performance on the macro-economic front, its revenue mobilisation falls short of regional and international standards. Uganda’s revenue to GDP ratio is 12.5% against Kenya’s 22%. Sayeh said if the Euro Zone crisis is not adequately addressed, Uganda could face a risk from the resultant downturn.
“There is a risk from a severe downturn that may result from the crisis in Europe on Uganda because it’s a key export market and a source of financial assistance and financial inflows,†she added.
According to Sayeh, if the crisis is not dealt with appropriately, the spread to other advanced countries also has a larger impact on global recovery and a negative impact on sub-Saharan Africa.
“There are many channels through which impact would materialise including eventual demand on exports, export volumes declining, price of exports going down and limited flow of remittances,†she said.
However, she was optimistic that growth in sub-Saharan Africa would reach 5% this year.
“We foresee in 2010 growth averaging 5% for sub-Saharan Africa on the basis of performance we have seen in the first half of the year.â€
Even with the global uncertainties, Sayeh was bullish that Uganda can still mobilise higher revenues without the introduction of new taxes.
“We think there is room for Uganda to get more domestic revenue than it’s currently doing.
“The Government needs to do more to collect on existing taxes, re-enforce tax administration and collect taxes due and limit the amount of tax exemption. They need to review a number of tax policies necessary to increase revenue mobilisation. It’s possible to do more even if growth continues at an average of 5-6%,†she said.
Thomas Richardson, the IMF senior resident representative, underlined the importance of a regulatory framework to deal with the new oil regime.
He said the IMF had organised a three-day conference on petroleum and taxation in sub-Saharan Africa to provide a platform to exchange information on good practices.
“The issue of collecting from the oil sector is a challenge many countries face in the sense that oil companies have sophisticated accounting and tax administration.
“Uganda’s need to be ready to deal with a higher level of taxation,†he said.
Richardson noted that with the East African Community’s common market, there could be a risk of lowering taxation.
“There is a little bit of risk that each country has its own set of tax preferences and the risk that they could all agree to adapt each other’s exemptions and preferences and that would impact on the overall tax take. Together they have to work and ensure holes are plugged across the board,†he said.