Senior economists have advised the government to drop plans of imposing seven new taxes.
Last week, the government proposed to introduce seven new taxes including a 12 percent tax levy on internet bundles starting from July 1st, 2021 in the next financial year.
Speaking to NBS Television during Monday’s Morning Breeze show, senior economists Ramadhan Ggoobi, a lecturer of Ugandan Economics at Makerere University Business School (MUBS) and Dr. Fred Muhumuza from Makerere University said that the timing is bad for the government to make such amendments.
“The intention of the introduction of the taxes is good but the timing is bad. This is a historical mistake we are trying to correct wrongly,” Dr. Muhumuza said.
Ggoobi said that the government seems to be under pressure to raise domestic revenue and reduce borrowing but the direction they have taken is all wrong.
” In the 90s when the government faced this pressure they responded through fiscal discipline. Now they are responding differently. I am not surprised that these new taxes were introduced at the wrong time. It seems the government has run out of options,” Ggoobi said.
Dr. Muhumuza said that the government should instead put its focus on how they can make household income growth, which will, in turn, increase domestic revenue other than ‘milking’ already overtaxed Ugandans.
“If someone is working for the stomach, even if you taxed them, you are going to get so little. The easiest market to rely on is the domestic market so the government should build it up,” Dr. Muhumuza said. “The economy is an ecosystem but it begins with that cell, the household.”
In the new amendment, the government is also proposing to drop the overly criticized Over The Top (OTT) tax on social media access which will be replaced by the levy on internet bundles, if approved.
The other proposed tax heads according to the government are on exports of processed gold, unprocessed minerals, wheat, leaf tobacco, fish maw, and milling by-products.
Earlier this year, the cabinet also passed a resolution to rationalize government agencies which economist Ggoobi said is a good thing, but just not enough.
“It’s good that agencies are going to be rationalized but we have to look at the whole government, do we need all these districts? Do we need all these ministries?,” Ggobi asked.