KAMPALA — Mr. Ramathan Ggoobi, the permanent secretary Ministry of Finance says government has halted discretionary tax relief measures to businesses amid high tax burden concerns from textile traders.
Mr. Ggoobi was speaking at second annual virtual Economic Forum organized by the Institute of Certified Public Accountants of Uganda (ICPAU) in which he responded to textile traders’ frustrations who also demanded a halt on implementation of a new tax policy on textile and garment imports.
Mr. Ggoobi says that such measures distort the planning and implementation of programs for the country.
He adds that although the government has previously given tax relief measures, now, everything to do with relief must follow the law and not the discretion of the minister.
“Government provided a number of tax relief measures which have helped businesses to servive. You have been hearing the traders in the textiles. They have been threatening to strike because of taxes but we had a good conversation with their representatives and we hope we are going to solve this by giving them some relief to ensure that they can clear those containers, then later, we can tax them at the rates that we should, “Mr. Ggoobi said, adding government can nolonger provide descritionary tax relief.
” Not even my minister can provide this relief anymore”, he added.
John Walugembe Kakungulu, the Executive Director of the Federation of Small and Medium Enterprises Uganda (FSMEU) said decried Uganda’s tax rate on small businesses—saying “this is the reason why many would-be taxpayers decide to evade or avoid taxes.”
“Generally speaking, Uganda needs a lower tax rate and a lower tax burden. Not just to SMEs but to everyone if you’re to attract Foreign Direct investors. Having a high tax rate doesn’t guarantee you more revenue collection necessarily and in fact it might give an incentive for people to dodge tax, ” he said.
Responding to SMEs tax complaints, Mr. Ggoobi said government intends to continue giving relief to the economy, but not tax relief and direct cash but through investing in companies.
He said the Uganda Development Corporation (UDC) will do diligence on companies invest in those that will meet set criterias
“We give money to UDC, after due diligence it acquires a stake on behalf of government. They pump in the resources. When the company recovers and now they can be able to make money, they buy us and we get about, we use that money to help others. That’s how sustainably we can help businesses recover and we shall continue to use that window, Mr. Ggoobi said.
Ggoobi also revealed that Uganda’s public debt is rising fast, and pointed out that the debt-to-GDP ratio is past the acceptable level of 50% but said low levels of revenue collections in the past two years meant that government had to borrow more to meet budgetary requirements.
“The slowdown in economic growth has affected government’s fiscal position because revenues were lost and this resulted in the increase on the public debt. That’s why government has borrowed more and now the debt has gone above 50%,” he said.
Gilbert Musinguzi, the Quality Assurance Manager at Uganda Debt Network said that government should focus on minimizing expenditure, including implementing the planned merger of government institutions to remove duplication, control corruption and encourage Public-Private Partnerships.
Responding to this, Goobi said the government has sanctioned a plan to increase citizens the spending capacity contrary to giving out direct cash.
One of the ways is investing in labour intestive public works where youths will be employed by the government and paid.
“Some money has been invested in what we call labour intestive public works. We give you some money to employ some young people to use manual labour to work especially in public works. So Uganda Road Fund and UNRA have been given some good amounts in partnership with the world bank to employe some young people on temporary public works. She said its a deliberate government policy to give them some money. Others are going to be in afforestation with the National Forestry Authority” he added.