"Uganda loses Shs 2 bn per year in capital flight"

Business

Government loses an estimated Shs 2 billion per annum in capital flight annually by foreign based companies who dominate the investment climate in the country, according to economic analysts.

This was revealed during the launch of the Fair Tax Monitor Report by Oxfam and SEATINI Uganda, in collaboration with Tax Justice Alliance Uganda, SOMO, FEMNET and Tax Justice Network Africa, at Golf Course Hotel in Kampala on Wednesday.

The report was launched under the Fiscal Justice for Women and Girls in Africa project co-funded by the European Union

Daniel Lukwago, the lead consultant attributed the loss to tax holidays and other incentives accorded to foreign investors, who in turn make huge profits that are ferried out of the country, leaving Uganda with a low tax collection base from struggling indigenous companies.

"Ugandan companies are foreign based and take away over 2 billion shillings annually in capital flight, which negatively affects economic development," said Lukwago.

Oxfam Uganda country director, Francis Odokrach, said the Fair Tax Monitor is a research tool that identifies the main bottlenecks within the fiscal policies and systems and assesses their redistributive qualities and makes recommendations for change.

"Tax systems are globally, seen as putting women at the margins, and not just in terms of how taxes affect income, wealth, and behaviours directly. They are not designed in a way that gives enough attention to the net effect that tax and spending systems combined, both on paper and in practice, have on the immediate needs or strategic priorities that underpin gender inequalities," he said.

Jane Nalunga, the executive director, SEATINI Uganda, said on top of the prevailing tax system, the impact of the Covid-19 pandemic led to a reduction in government revenues and grants of about $626 m against a $ 6.4bn during 2020/21.

“It is possible to change this status quo. Despite government efforts to increase women representation in fiscal policy formulation, public participation is still weak and low at 22 percent, according to the International Budget Project (IBP) 2019 Open Budget Survey. Therefore, an increase in public tax education remains vital as this empowers citizens to shape transparency and accountability in Uganda," she said.

Minister of State for Finance, Henry Musasizi reiterated government’s commitment to working with civil society organisations to improve on the tax base. He said taxes are critical for revenue mobilisation.

 

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