Uganda needs tax policies that promote the growth of local corporations without regard to whether they invest at home or overseas, experts have said.
Speaking during the second day of the virtual economic forum organised by the Institute of Certified Public Accountants of Uganda(ICPAU), Dr.Fred Muhumuza, an economist and lecturer at Makerere University highlighted policies that need to be amended for business success.
“Domestic firms or industries can compete with their foreign counterparts in a global market place, this attracts policies that seek to increase exports and reduce imports. A core objective of tax policy is to raise sufficient tax revenues to finance public expenditure while maintaining sustainable budget deficits and public debt ratios,” said Muhumuza.
Muhumuza explained that most of the drivers of the competitiveness of firms lie within the domestic economy as they are defined by institutions, policies, laws among others.
He added that individual firms may then be ‘competitive’ internationally in the sense of having a cost or other advantage relative to their foreign rivals, given the exchange rate, interest rates, among others.
Muhumuza recommended that tax incentives can be given to the foreign investors but can be more beneficial if the domestic investors, for instance in real estate are taxed less to encourage the former to lease their assets.
“We must do more than tax policy to get business competitiveness. In most cases a competitive firm would be able to earn returns in excess of its cost of capital. It is more difficult conceptually to judge ‘competitive’ to an economy as a whole rather than a particular business,” he said.
In his presentation, Prof Charles Kwesiga, the executive director Uganda Industrial Research Institute(UIRI) said the government should aim at making technology affordable in the agricultural sector.
He said that this will improve on the production of high quality goods.
“Agriculture remains the major source of livelihood in Uganda. It’s a core sector of Uganda’s economy and largest employer. Commercialisation of the sector is impeded by farmers’ limited use of fertiliser and quality seeds, and a lack of irrigation infrastructure,” he said.