Traders question fairness of tax system amid rising burden

While Ugandan traders recently called off their planned demonstration following promises from the head of state to address their tax grievances, the broader question of tax burden and fairness within the Ugandan tax system remains a critical issue.

Despite the government's assurances, traders and tax experts argue that the distribution of the tax burden in Uganda is far from equitable.

During the height of the shop closures to protest high taxes, Permanent Secretary and Secretary to the Treasury (PSST), Ramathan Ggoobi, claimed that Uganda's tax burden is among the lowest in the world.

He referenced the Heritage Foundation's research, which ranks taxation burdens globally.

"Uganda stands at 11.7 percent, Tanzania is slightly higher at 11.8%, Rwanda at 17.1 percent, and Kenya at 17.4 percent, making Uganda the country with the lowest tax burdens for its citizens," Ggoobi stated.

However, Isa Sekitto, a businessman and spokesperson for the Kampala City Traders Association (KACITA), disagrees with Ggoobi's assessment, asserting that the reality on the ground is different.

"The taxation burden feels much heavier than those figures suggest," Sekitto said. "It’s not just the percentage but also the types and frequency of taxes that traders have to deal with."

Emmanuel Ssemugenyi, a tax lecturer at Kyambogo University, also points out that the regional comparison of common taxes reveals a different picture of Uganda's taxation burden.

He notes that while Uganda has a lower tax-to-GDP ratio, the structure of its tax system places a heavy burden on a relatively small segment of the population.

"In the fiscal year 2022/2023, the Ugandan tax register increased from 2.6 million to 3.5 million taxpayers, an increase of about 34 percent. However, those registered for Value Added Tax (VAT) are required to make an annual sales turnover of 150 million shillings," Ssemugenyi explains.

"This indicates that the plethora of taxes falls on 3.5 million out of a 20 million working population." he added

Sekitto further argues that the high taxes imposed on imports limit investment and stifle economic growth.

This, in turn, impacts the entire business community and creates barriers for new entrepreneurs.

To broaden the tax base, the Ugandan government has proposed taxing the agricultural sector, specifically cattle.

This approach is intended to reduce the tax burden on a few taxpayers and distribute it more evenly. However, the idea has generated mixed reactions among stakeholders.

Tax experts, like Ssemugenyi, believe that Uganda can tax its citizens into development if the system is fair and inclusive.

But to achieve that, the government must address the concerns raised by traders and ensure that the tax system does not disproportionately impact specific groups.