UGANDA, Kampala | Real Muloodi News | The National Physical Planning Board-NPPB has complained about insufficient funding that has caused the stagnation of several initiatives.
According to Dr Amanda Ngabirano, Chairperson of the Board, the board got just USh100 million from the Finance Ministry this quarter, out of the required USh1.5 billion.
She claims that the operations include suggesting structures in cities for removal, as well as enforcing human settlements and industrial zones. Others include food markets and adequate physical layouts of retail centres.
According to Dr Ngabirano, the board has petitioned parliament to accelerate funds.
Rt Hon Deputy Speaker of Parliament, Thomas Tayebwa, asked the Committee on Physical Infrastructure to handle the matter promptly and report to the House.
The Committee on Physical Infrastructure, directed by Robert Kasolo, the Iki-Iki County Member of Parliament, has yet to meet with Board members to discuss the next steps.
Since its inception in July 2020, the board of the Ministry of Lands, Housing, and Urban Development has only authorised 25 Physical Plans, with over 15 land issues now being handled.
What Can Be Done to Raise Funds for National Planning?
Uganda’s persistent loans from various superpower countries have created a debt crisis. Uganda’s debt-to-gross domestic product (GDP) ratio, usually measured as the level of indebtedness based on national wealth, rose to 54 per cent in June from 49.1 per cent by end of May, based on cumulative debt statistics captured between July 2021 and June 2022.
Uganda needs to raise its own revenue to adequately fund its budget, without continued borrowing. However, the revenue Uganda generates goes to paying an endless cycle of debts that are incurred to develop the nation and also pay back more debts.
According to John Rujoki Musinguzi, Commissioner General of the the Uganda Revenue Authority, Uganda finances only about 50% of its national budget. One of the reasons for this, is low tax collections.
Uganda’s tax revenue-to-GDP ratio is less than 13%; lower than Sub-Saharan Africa’s average at 16%, South Africa at 26%, Tunisia at 34%, Kenya and Rwanda at about 16%.
Musinguzi says that in order for Uganda to advance, the country must improve tax collection and ultimately increase the tax revenue-to-GDP ratio from under 13% to between 16-18% by 2025.
“Our target is 100%, to achieve total economic independence,” says Musinguzi.
Reduce Tax Incentives and Exemptions
Uganda’s borrowing appetite can be quenched by expanding the tax base and reducing the extensive and continual tax exemptions and incentives.
Dickens Kateshumbwa, a Sheema Municipality MP and a former employee of the tax agency Uganda Revenue Authority (URA) says it is shocking that so many persons who identify as foreign investors receive exemptions and other benefits, yet local producers do not.
“For Ugandans it is difficult accessing these incentives. Most of these incentives are politically motivated because of the pressure to create employment, especially for youths. Some of these incentives are undermining local industries and producers. If you say that you are going to give a foreign investor tax exemptions but he is going to compete with a local industry situated at Namanve, it wouldn’t be fair to the local investor. You are actually killing the local industry,” Kateshumbwa says.
“You just wake up and someone is given an exemption or they are before the president and the next thing you hear is that they have received incentives. There should be certain procedures on how one gets exemptions.”
Thadeus Musoke Nagenda, the Chairperson of the Kampala City Traders Association (KACITA), firmly agrees, claiming that, in the majority of situations, it is the foreigners who have benefited from the incentives and exemptions.
“Many of our local producers don’t have information about accessing these incentives whereas those who know about them find it difficult because of the requirements to get them,” Musoke says.
The debate on incentives and tax expenditures for Uganda, according to SEATINI Uganda Executive Director Jane Nalunga, has emerged at the opportune time.
“This discussion comes at a time when our country’s coffers are shaking yet each penny spent should offer maximum value. The country is low on the resources . It’s time to see the how, why and where the taxes go,” Nalunga says.
She added that there is still a dearth of knowledge among stakeholders regarding Uganda’s tax expenditures and their overall effect on raising domestic income. The government should continue to work to enhance its plans for tax expenditures.
According to Dr Richard Newfarmer, the Country Director of the International Growth Centre, tax incentives cut Uganda’s tax ratio to GDP by 1.6 per cent, which is a comparatively high proportion.
“This is really high. Government needs to reduce tax incentives. Uganda collects only about 11 percent of gross domestic product in tax revenue, well below the average for other countries at its level per capita income. As a result, its level of public investment is relatively low compared to fast-growing low-income counterparts,” he says.
The Ministry of Finance’s Director of Economic Monitoring, Mr Moses Kaggwa, observed that the government’s estimate of the lost revenue was much lower than that given in the report; Dr Silver Namunane, a specialist in the Ministry of Finance’s Tax Policy Revenue Domestic Mobilisation, put the amount at USh2 trillion.
Dr Newfarmer concludes that for the government to enhance revenue mobilisation, it must lower tax incentives, focus on promoting exports and internal value, elevate efforts to fund the economy, and guarantee that the economy becomes more robust to external shocks like Covid 19 and climate change.
Dr Newfarmer adds that expanding trade is necessary to increase productivity and structural change by diversifying the nation’s export base away from its current reliance on coffee.
According to Mr Ramthan Ggoobi, the Permanent Secretary of the Ministry of Finance, the government has developed key action points to strengthen economic resilience, including increasing domestic revenue mobilisation, guaranteeing fiscal sustainability, preserving macroeconomic stability, openness and access.
“The others are leveraging private financing, attracting and development of new technologies, [building] a labour force equipped with skills, adapting mitigating to climate change and strengthening data and information systems for better targeting of government programmes,” he says.
According to Dr Richard Newfarmer, boosting government income is crucial, since it helps increase domestic savings, which in turn helps fund investment.
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