Uganda: Experts Ask Govt to Broaden Sources of Income

Source from:  The Monitor (Kampala) 21 October 2008 10/22/2008

Experts have advised the government to haul more revenue from within Uganda to minimise effects of the global economic slow-down that are likely to detonate out of diminished capital flows to poor countries from rich nations. Ms Yvonne Mhango, the head of Africa Research at the Standard Bank Group- the parent company of Stanbic Bank, said the Ugandan government "should intensify" the mobilisation of revenue by broadening the tax base, to wade through a thorny period ahead of Africa on the premise of reduced remittances and aid in the coming few months. "The government should make sure that all people who are operating in the country contribute to the state. A lot of people that are making money but are not contributing to the state should be taxed," the South African-based economist said. By doing so, the government would boost its efforts in financing its expenditures on infrastructure, energy, health and education. Broadening the tax base also means that the government will have to introduce new taxes to try and reduce the gap that will be left by inadequate aid flows and earnings from exports and imports. At the same time, the few Ugandans who contribute to the government coffers would have to endure the pressure that will further be exerted on their wallets to foot several tax bills in addition to domestic expenses. At the beginning of the turmoil in the financial markets in the United States of America, several economists and Ugandan business leaders were speculating that poor nations like Uganda would not be critically damaged because most of their financial markets are under developed, banks well capitalised and insulated against the heat that has melted global banking systems. Now, poor nations have been predicted to succumb to "collateral damage" expected to emanate from the money losses that the world's rich nations are battling and enduring. Foreign aid, earnings from exports like coffee, tobacco, copper, steel, and remittances from abroad by relatives of those living in poor countries like Uganda, are expected to dwindle in the near future -and for many Africans' it will be harder to wear a smile and eat a decent meal. Mr Goolam Ballim Standard Bank Group's Chief Economist said the reduction will come as a result of job cuts and freeze on luxuries like safaris in Africa on the back drop of reduced revenues earned and loans borrowed by global firms, to finance their businesses. Many African governments largely finance their budgets on donor aid although its been reducing in recent years. Uganda like a few others has however been a stellar performer in reducing this dependency. According to last financial year's budget, only 35 per cent (Shs1.7 trillion) of the budget (Shs5 trillion) was supported by donor aid, down from above 65 a few years ago. Mr Ballim added that this will slow down economic activities in well capitalised countries and result into lower commodity prices and reduced trade for African nations. "Global resources will reflect weaker aggregate demand. From the volume and price point of view, we are going to be receiving less," he told the participants. Sub-Saharan Africa alone is expected to grow at 6 per cent in 2008 and 2009, down from 6.5 per cent, according to Ms Antoinette Sayeh, the director of the International Monetary Fund's African Department who based her research on the fund's October 2008 Regional Economic Outlook report. Mr Ballim and Ms Mhango were speaking at a one-day seminar discussing the impact of the financial crisis and global slow-down, on African economies to a selected group of investors and economists in Kampala on Wednesday. Ms Mhango equally stressed that there's need for the government to improve the tax administration process to make it easier, for the tax payers to meet their obligations in quenching the thirst of the treasury. "It is bureaucratic processes which discourages the collection of taxes among people. I am sure people want to pay taxes but the process is tedious. Improving the process of administration, increases the efficiency of tax collection and brings more revenue," she explained. Commenting on pubic expenditure, she called on the government to be more prudent in making budget allocations and boost the capacity of ministries to efficiently utilise the resources given to them rather than have idle money in ministry coffers. "Those are areas that government can improve, and make more revenue." African governments were also challenged to increase their national saving levels to try and move out of deficits situations when aid inflows reduce. Enditem