KAMPALA – Uganda is set to lose huge revenue collections accruing from international trade in the next five years, Uganda Revenue Authority (URA) has said.
The anticipated revenue drop, according to URA, is due to the African Continental Free Trade Area (AfCFTA) treaty that all African countries ratified, except Eritrea, a year ago.
“We have opened up these borders [under AfCFTA), there is no doubt that the goods that will be coming in our country will not be taxed. Currently, the domestic revenue collections contribute around 58 percent, compared to international trade that brings in 42 percent. Now the 42 percent is going to reduce further to 20 percent,” Mr Ian Rumanyika, the URA assistant commissioner Public and Corporate Affairs, said on Tuesday.
URA collected more than Shs6.8 trillion in net international trade tax during the FY 2018/19.
“So, the rest of revenue collection must come from the domestic market. That is why we are asking all Ugandans to be tax compliant,” he added yesterday at the Second Strategic Leaders’ Summit, an annual event organised by Human Capital International (HCI), a leadership, entrepreneurship and mentorship organisation.
AfCFTA seeks to, among other things, eliminate tariffs and non-tariff barriers that have hindered intracontinental trade and movement of people and goods for centuries, liberalise trade in services and progressively cooperate on investments, intellectual property rights and competition policy and cooperate on all trade-related areas. In the process, many goods from African countries will enter Uganda without paying taxes which URA has been collecting.
Mr Emmanuel Dei-Tumi, the Human Capital International president, said this year’s summit, that run under the theme, “Digital Innovation and Corporate Governance for SMEs in the New Market Frontier,” decided to prioritise and assemble experts in business and continental trade to discuss AfCFTA because the agreement has far-reaching implications on SMEs.
“This year’s summit has brought together the key players in the digital innovation economy and SMEs sector to provide an open platform to discuss the opportunities and challenges of the agreement and exchange ideas on leveraging technology and good governance for SMEs growth,” Mr Dei-Tumi said.
HCI runs monthly practical business classes that tackles topics such as ; how to start a business, how to attract customers, grow and sustain a business and how to avoid losses among others.
Mr Vincent Bagiire, the Ministry of Information and Communications Technology Permanent Secretary, said the government is doing everything possible, including putting in place policies and infrastructure to digitalise the economy.
“The reason most companies that use technology are increasingly becoming successful is because they are harnessing data. What we have done as a government is set up data centres to enable companies like Safeboda to use analytics and hopefully become next the Facebook on the continent,” Mr Bagiire said.
African economies have a combined Gross Domestic Product of $3.4 trillion, but sadly trades internally at 14 percent and the rest of the trade is with Europe, Asia and America.
Mr Abdoulie Janneh, the former UN undersecretary-general and chairman of the Mo Ibrahim Foundation said the government should facilitate the growth SMEs because of their role in the economy.
“The role of SMEs as drivers of growth in economies across African cannot be overemphasised as over 90 percent of all the businesses in the continental market are SMEs and employ over 80 percent of workers. This is key given Africa’s young population,” he said.
The Summit was held at the Sheraton Kampala hotel.