The Ugandan government has been warned that the continued offering of exemptions and other incentives has seen government continue to lose trillion of money that would have been used to finance other sectors of the economy.
Speaking on Tuesday during a function organized by SEATINI Uganda, Sheema municipality MP Dickens Kateshumbwa who also formerly worked with tax body URA said it is appalling that many people claiming to be foreign investors get exemptions and other incentives yet the same are not offered to local manufacturers.
“For Ugandans it is difficult accessing these incentives. Most of these incentives are politically motivated because of the pressure to create employment, especially for youths. Some of these incentives are undermining local industries and producers.If you say that you are going to give a foreign investor tax exemptions but he is going to compete with a local industry situated at Namanve, it wouldn’t be fair to the local investor. You are actually killing the local industry,”Kateshumbwa said.
The report on Uganda’s tax expenditure released recently indicated that that the country loses shs5 trillion in exemptions and other tax incentives.
The report which is the latest, released last year indicated that the shs5 trillion translated into 30% of the total revenue collection collected in the financial year 2019/20 but also accounting for 3.64% of the GDP, higher than the sectoral allocation percentages to sanitation, (0.79%), agriculture (0.75%), health (1.85%), social development (0.15%) and education (2.4%).
Speaking on Tuesday, MP Kateshumbwa said a number of people who come to the country as investors are quacks who after being given incentives and exemptions they disappear in thin air.
“Someone walks into an office and starts speaking English and before you know it, he has been given a piece of land and they are taken around in a helicopter. They are given exemptions without even undergoing a background check . If you look at the incentive regime, all these things are within the law but there is no refined process of how an investor gets exemptions and other incentives,"
“You just wake up and someone is given an exemption or they are before the president and the next thing you hear is that they have received incentives. There should be certain procedures on how one gets exemptions.”
The chairperson of Kampala City Traders Association(KACITA), Thadeus Musoke Nagenda could not agree more, arguing that in most cases, it is the foreigners who have benefitted from the incentives and exemptions.
“Many of our local producers don’t have information about accessing these incentives whereas those who know about them find it difficult because of the requirements to get them,”Musoke said.
Speaking in response, the Director for Economic Affairs in the Ministry of Finance, Moses Kaggwa partly blamed parliament for giving a green light to the incentives.
“Parliament passes these tax exemption laws so they are partly to blame and also it’s up to them to create a procedure unto which they will follow to grant tax exemptions,”Kaggwa said.
However, MP Kateshumbwa said some times parliament’s hands are tied because government negotiates and signs MoUs with investors even before they start investing in the country and that this makes it difficult for parliament to intervene and stop provisions of the incentives after the deals have been signed.
The SEATINI Uganda Executive Director, Jane Nalunga said the discussion about incentives and tax expenditures for Uganda has come at the right time.
“This discussion comes at a time when our country’s coffers are shaking yet each penny spent should offer maximum value. The country is low on the resources . It’s time to see the how, why and where the taxes go,”Nalunga said.
The SEATINI Executive Director said there is still a lack of understanding among stakeholders about tax expenditures in Uganda and their overall impact on domestic revenue mobilization.
The Director for Economic Affairs in the Ministry of Finance said government will always continue planning better on how to improve tax expenditures.
