Taxes: A Necessary Evil Or Joyful Reward?
a large informal sector makes it almost impossible to expand the tax base without exerting a heavier tax burden to those already in the tax bracket
From the beginning of time, taxes have been paid to a central authority. The use of varying nomenclature by different societies only serves to domesticate the concept of taxation, but with the same purpose of raising revenue to run public affairs.
At the time the church and government were one and the same, tithe was paid to God through his vicegerents which in effect was a form of tax. The scriptures capture the act of paying tax with such disdain that the tax collector was the most hated figure in society. It is therefore not surprising that Uganda Revenue Authority (URA) quite often gets a backlash from those who would have wished to forfeit to pay tax if the option was to either avoid or evade it.
The tax construct is etched in the principle of non-quid pro quo, where individual payments may not necessary confer a benefit in return equivalent to the amount paid, but collectively reward tax payers and those that are out of the tax bracket. This brings us to our question, ARE TAXES A NECESSARY EVIL OR A JOYFUL REWARD? The question takes us to the famous riddle of what came first; the EGG or the CHICKEN? Taxes, by nature reduce our disposable income (cash available to spend) of the tax payer and it is resented based on that fact.
However, even if that tax was left uncollected from the individual tax payers and instead asked to fund community works, it would be impossible to realise any development because as individuals it is hard to develop without pooling resources as a community.
This is because national development is a summation of different deliberate economic actions which actions must be collectively funded through taxes. And without taxes to finance infrastructure, health, education etc there cannot be any development to talk about. Even if these are financed through loans, the reality is that the loans at some point will have to be paid back. It should be noted that in order to access international financing, there must be demonstrable potential to pay back the loan in future.
Records from URA show that Uganda currently stands at a tax to GDP ratio of 14.3. This means that also our international credit rating is not strong enough to attract mega financing. URA records further show that there are only 1,360,000 registered taxpayers and yet there are over 10 million registered entities in the country.The implication is that out of about 8 million tax payers, a small fraction falls in the tax net.
Additionally, a large informal sector makes it almost impossible to expand the tax base without exerting a heavier tax burden to those already in the tax bracket. The informal sector through locally organized groups can be documented, a threshold set and a monitoring system formulated to determine those who hit the threshhold can be included into the tax bracket. What is intriguing is that any attempt to include the informal sector in the tax loop will be opposed by politicians, yet they demand roads, schools and other services.
There have been deliberate attempts by URA to carry out tax education through local groupings like Kampala City Trader’s Association (KACITA), the annual tax payer’s appreciation week, use of local languages, automation of services etc. However, with all this effort, taxes are still seen as a necessary evil rather than a joyful reward. When we talk of increased power megawatts, beautiful highways and flyovers, street lights, a refurbished Mulago hospital and other infrastructure projects, it means that we are joyfully being rewarded for the pain we endured to pay a tax.
Again, local leaderships of markets collect a lot of daily dues that are not directly linked to URA, there should be a mechanism that brings these dues in the national coffers. Artisans, welders, maize millers in places like Kisenyi in down town Kampala make quite a significant amount of money, but remain outside the tax bracket. The popular GAVUMENTI ETUYAMBE (government help us) call must be pegged on the realization that government can only do so much with the mearge tax revenue. It can only KUYAMBA (help) if we did our part of the bargain.
As we demand for the social services, we have to keep it in mind that taxes are more of a joyful reward than a necessary evil that we must embrace and demand for accountability later.
