OP-ED

Our tax policy should create more jobs

By Ben Ssebuguzi

An economy where it seeks to raise its stakes in creating more jobs has to be careful when drafting its tax policy because poor tax reforms can be disastrous to the economy. Government may attempt to mobilise resources by affecting the supply side (savings) or demand side (domestic investment of the economy), that’s why we need due prudence by tax experts when drafting budget proposals.

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According to development economists, if you want to propel your economy to create more jobs, you create subsidies by taxing the public and then put the money in the industry, or increase custom taxes to make your locally made products more appealing in order to promote import substitution to mitigate hemorrhagic tendencies that drain our forex reserves. 

According to a capacity utilisation report analysis of manufacturing firms in Uganda prepared by Private Sector Foundation and Mastercard Foundation intended to influence policy development in the manufacturing firms in the country reveals that the majority of the manufacturing firms produce below 60% of their full capacity which affects the number of jobs created in the country. 

This means that instead of employing 10 employees, the manufacturing firms are able to only hire 6 people. The report cites lack of effective demand for manufactured products as the main reason for the underutilisation in the sector (56%), followed by high levels of competition from imported products (42%)

This report which was released on April 24, 2024 during a dissemination workshop at Kampala Serena Hotel could be one of the pointers that shaped the new tax policy for the financial year 2024/25. President Yoweri Kaguta Museveni recently had to stomach and endure the heckling from traders during his meeting with them at Kololo.

During his meetings with the traders, he bluntly informed them that the tax regime in Uganda was deliberate because he wanted to take painful steps to safeguard our country’s future. So the raft of taxes on key products such as fuel (Ushs 300) and building materials like cement, adhesive, and grout (Ushs500) among other things is sufficient to raise revenue amounting to Ushs 1.9 Trillion which will be able to reduce funding gaps brought by the government decision to reduce public debt uptake.

Besides raising enough revenue to pay for government expenditure, when designing a new tax policy, you ought to consider increasing the disposable income of poor households and promoting Equity which underscores the relevance of the new tax policy reforms in the 2024/25 budget proposals. 

For example, after protecting your industries from imports, the revenue from customs, can be used to stimulate demand by empowering the homesteads to increase their income to buy local products through the Parish development model, Office of the National Chairman  Wealth creation program, Emyooga, Operation wealth creation, Women Entrepreneurial Fund, Statehouse industrial Skilling, among others hence reducing inequality by funding the poor which is also one the characteristics of the good tax regime. 

However, for us to attain our intended objective of increasing our GDP to USD 500b in a decade time from USD55b in 2024, we need to improve on financial literacy and access to bank accounts in order to increase the only  11% of people who save with formal banks. We can’t increase our private sector credit uptake if our citizens don’t save with banks. Lack of enough capital is one of the hindrances of private sector growth which is the main source of jobs. 

Notwithstanding the aforementioned, the tax management agency, Uganda Revenue Authority has to be supportive to the taxpayers by listening to each other. They should have some empathy when penalising ignorant taxpayers through education so that taxation management does not become a fatal mortality centre. 

According to the Ministry of Finance, the focus for the 2024/25 budget is full monetization of the economy through agriculture, industrialisation, expanding and broadening services and digital transformation and market access. 

In conclusion, government policymakers and technocrats should appreciate President Yoweri Kaguta Museveni pro-poor economics of empowering the underprivileged to join the money economy. They should appropriate enough funds for him to transform the people at the bottom of the pyramid who in the end will support the growth of our industry sector hence more jobs. 

Long live General Yoweri Museveni, Long live Hajjat Hadijja Namyalo SPA/PA and Manager ONC. 
The writer is the Head of Research at Office of the National Chairman (ONC) in Kyambogo

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