A REFLECTION ON TAXATION AND TAX REFORMS IN UGANDA

 

An effective tax policy is a key reflection of an effective governance framework. This is premised upon the notion that tax is an expression of authority and taxation policies that are fair, comprehensive, and feasible reflect the effectiveness of the governance machinery. To this end, states across the world aim at reforming their tax policies to achieve the aspects of fairness, transparency, and comprehensiveness.  In low-income countries, challenges such as a low level of relevant statistics, a high level of inaccuracy in records available, and a high degree of informality in tax administration continue to thwart the adoption of effective tax policies. It is important to point out that an effective tax policy involves not only the collection of revenue from the population but also the ability on the part of the government to account for this tax collected. The aspect of accountability covers elements such as investing in social welfare programs such as the provision of education, sound medical care, and vibrant infrastructural projects among others.

This implies that taxpayers must not only pay taxes but they must proceed to require elected officials to account for and spend on key priority areas that ultimately benefit them during budgeting processes. This is the notion of a social contract as broadly understood and an effective taxation policy is viewed as a cycle with the government collecting taxes on behalf of the taxpayers on one hand and the taxpayers are duty bound to pay taxes on the other side to be able to benefit from social services from the government.  An equitable taxation policy must advance equality. The taxpayers in the same category must be subjected to the same tax burden and those who are well off indeed must bear a greater burden than those who are not well off. The obvious implication of such an approach is that it demotivates creativity and encourages laziness and a general lack of self-initiative. Many would be lured to remain in a lower income bracket to avoid paying heavy taxes while the rich and affluent would equally find it derailing to bear such a huge tax burden. However, it helps greatly in income distribution.

To achieve an equitable tax policy, there is a need to strengthen personal income taxes, emphasize simplicity, and transparency concerning tax exemptions, improve the taxation of Multi-National Corporations, consumption taxes must exempt key essential goods, encourage civic engagement and reciprocity, and restrain from poverty increasing tax practices such as indirect taxes. To achieve these notions, various stakeholders must be involved in tax management; the women must be involved in various stages of tax administration. Taxpayers must be able to voice their concerns. People like taxi operators, market vendors, and salon operators must have direct avenues through which they can voice their concerns and such concerns must be addressed by the various administrators. Such stakeholders must broadly have an understanding of their duties, rights, and organization of the tax system. Questions centered on penalties and fines must be impartially resolved by an independent body clearly put in place for that particular role.

Tax bargains should equally be offered a central role in tax administration. This can be realized by having in place a robust civil society, improving the capacity of various stakeholders, addressing the existing excessive tax incentives, reducing tax avoidance, widening the tax base, and setting domestic tax targets. The role of parliament, international monetary fund, and MNCs in tax bargains must be supplemented by local initiatives such as ‘barazas’ and local community meetings where individuals can further engage in tax bargains. This will make the resultant tax policy acceptable and hence to enforce. Promotion of collaborative tax clinics, and encouraging the citizens to use their votes as an avenue of tax bargains with their elected leaders.

Tax bodies must be restructured to accommodate such reforms. There is an urgent need to have headquarters for tax collections and various regional and sub-regional offices aimed at tax policy enforcement. Taxpayers must be able to assess themselves through various platforms including online options to effectively administer modern tax policies.