Higher tax burden may suffocate business

June 20, 2018 in Business, Finance, Policy by Editor

June 20, 2018—Business people under the Private Sector Foundation Uganda (PSFU) umbrella are worried about the impact the new taxes introduced in the 2018/2019 National Budget will have on innovation and the possibilities of suffocating private sector growth.

It has been widely suggested that the 1 pc levy on all mobile money transactions will halt new innovations that would have eased and even lowered transactions costs.

Moses Ogwal he Director Private Sector Development at PSFU said currently in Uganda, there are over 200 new ICT innovations, but these may not be operationalized due to the taxes.

“The new mobile tax taxes airtime, data, tax income for operators, the sender, the receiver, paying bills and all that. This is like double taxation and will in the end discourage ICT innovations. We encourage the government to leave operational taxes out not to choke innovations,” Ogwal said.

This was during a private sector post-budget luncheon at the Uganda Manufacturers Association conference hall recently. Ogwal said although taxes are important, the government needs to realise a point at which taxes are harmful to growth.

“The budget is generally strong on taxes and expenditure, but then the creation of wealth element is not appreciative,” Ogwal said.

PSFU executive director, Gideon Bandagawa said although the budget had tried to address some of the challenges that are facing the private sector like access to adequate power, private sector credit, commercialisation of agriculture and supporting industry, much still needs to be done for the private sector to be able to make profits so that the government can collect more taxes.

“We appreciate that government is recapitalising the Uganda Development Bank (UDB) however this is not enough, the private sector needs over UGX 6trillion in the six major sectors” Badagawa said.

Among other things, the private sector wants government to review the structure of the UDB to be able to attract more private capital. One suggestion was enabling the National Social Security Fund to participate in the capitalisation through the amendments on the NSSF Act and also strengthening micro-finance centers to be able to give credit to the private sector.

The private sector also wants government to implement the National Agriculture Finance Policy, fully implement the subsidized agriculture insurance program as a way of commercializing the agricultural sector and reduce the 68.9% farmers that are still in the subsistence farming

However Albert Beine, managing director, Global Taxation Service Limited, said the private sector needs to do more in contributing to taxes if Uganda Revenue Authority (URA) is to achieve the UGX16.4 trillion that it is targeted to achieve in the coming financial year from the UGX 15 trillion set for last year.

“Uganda still has one of the smallest budgets. Kenya’s budget is four times bigger than Uganda’s. Even then, URA is going to find it hard to achieve the set target yet it failed to achieve the UGX15 trillion set for this ending financial year. It is up to all Ugandans to pay their taxes and help government to fulfill its budget plans,” Beine said