In Uganda, it is estimated that at least 690 billion shillings (US$265 million) are lost annually due to tax incentives (African Development Bank, 2009/2010), or 2% of the GDP in 2009/2010.
In other words:
tax holidays and exemptions were almost twice the health budget
For further comparison, the 2009/10 loss is equivalent to what government has allocated for the entire Universal Primary Education on the 2013/14 budget.
ActionAid’s new research, ‘Give us a break – How big companies are getting tax-free deals’, reveals that the tax breaks given by developing countries to big companies globally could put the 57 million children who currently don’t go to primary school, into the classroom with enough cash left to meet international targets on basic health care provision and agricultural investment needed to end hunger.
Apart from harmful and unnecessary tax incentives, Uganda has very poor revenue generation with a tax to GDP ratio at about 13%, one of the lowest in sub-Saharan Africa, often reflecting injustice when for instance small traders are actually taxed higher than big business; or the poor woman pay a higher percentage of her income on kerosene than the Big Man on petrol for his guzzling 4x4.
However, even if generation of taxes was fair and sufficient, the allocation to the sectors of agriculture, health and education, which directly affect the lives of the poor, is still low. And then there is the utilization with extremely inadequate public service delivery – again affecting especially the sectors of health, agriculture and education, and again affecting the dignity of poor Ugandans the most.
Add the rampant and endemic corruption where thieves eat incomprehensible amounts of public money.
What can we do?
- Increase the amount of resources available to finance the country’s development plans and thereby decrease Uganda’s dependence on aid.
- Parliament participates in scrutinizing contracts made with domestic and multinational companies. This will ensure transparency in negotiation and implementation of contracts and compliance with set minimum standards and taxation commitments.
- Government puts in place a harmonised policy on tax exemptions and incentives and legislation to close revenue losing loop holes in the investment code and bilateral tax treaties.
- An active national citizen agency linked to and campaigning with other regional and international movements to lobby for development of fair and transparent rules by Global and East African Governments on corporate taxation leading to the reduction of revenue leakages through tax incentives, holidays and transfer pricing or capital flight.
ActionAid is also launching an SMS campaign where Ugandans are asked to tell the government how our citizens could benefit from more tax money for our schools, hospitals and other public services. You can send a text, starting with ACT and then your message to 0 750 700 889. The SMS messages will be collected and handed over to government.