Kampala blog: tax Incentives: a race to the bottom?

Having been to many African countries, it was strange that I hadn’t made it to Uganda until yesterday. I went to attend the launch of two new reports; “Tax Incentives: A race to the bottom” one on Uganda and another on the East Africa region by ActionAid Uganda, Tax Justice Network-Africa, Uganda Debt Network and SEATINI. The launch was a huge success.

Among the participants were parliamentarians, officials from the Uganda Revenue Authority (URA), media (both print and online) and civil society organizations from across the sub-region and beyond. Key speakers at the launch included the TJN-A Coordinator Alvin Mosioma, the Country Director of ActionAid Uganda, Arthur Larok, and welcoming remarks from ActionAid International board chair Irene Ovonji Odida.

In her welcome, Irene wowed participants and urged them to use the information provided by the report to create a better system where people will live a life of dignity. Irene emphasized that taxes are the only sustainable source of financing for governments, and that tax incentives are draining nations of much needed revenues that should be used to finance public services. Arthur, ActionAid Uganda’s new head, urged the Ugandan civil society present to organize and mobilize to get their government to move faster on reviewing and reforming tax incentive policies.  He said greater transparency was needed especially in the oil sector, quoting a Minister who lamented the run-away profits earned by multinationals saying, “these guys just invested 150 million dollars and now they are scoring billions of dollars”.

Speakers included a staff member of the East African Community (EAC), who spoke about the common market that was formed in July 2010 and the project to harmonize tax policies which he said will build capacity for tax administration. Other discussants included a member of the parliamentary budget office of Uganda, who was interested in assessing the impact of the tax incentive policy.

He also won the hearts of ActionAiders by regretting the failure of his government to take into account women’s unpaid care work, saying a way must be found to factor it into our economic thinking.

An official from the Uganda Revenue Authority reminded participants that tax incentives were not all bad per se; rather it is the way they are administered or implemented, giving an example of a 2% exemption on income tax for companies that employ disabled people in Uganda. Noting that exemptions should analysed one-by-one rather than a blanket rejection of them all.

Another participant observed that corruption and political influence can be behind the granting of incentives as politicians with power to offer discretional incentives are often either in business themselves or benefit through corruption.

CSOs at the meeting also used the time to strategize on how to influence government to adopt the report recommendations especially as the Ugandan government had promised to review tax incentives to make them more transparent. CSO advocacy will call on government to provide a framework that details the types of incentives offered, who benefits from them and their associated cost. However, the ultimate goal will be to cut incentives and increase tax revenues for investment in social services. At the sub-regional or regional level, CSO advocacy will call for harmonization of tax policy to avoid unnecessary competition among member states.  

The report was launched by Nandala Mafabi, the Leader of the Opposition in Parliament, with a statement that promised parliamentary action on the topic. I certainly want to visit Uganda again to see what changes are taking place; I’m optimistic that the Ugandan government and the others in the EAC will now move on this.