By Norbert Mao
At midnight last Sunday, Uganda changed irreversibly. The country’s Gross Domestic Happiness plummeted. Citizens woke up to the reality that the government in place is a bunch of highway robbers who tax them and steal their taxes. In the morning the citizens were united in their determination to fight back against the new taxes.
A tax system reflects the values of those in power and also the values of the people. But that is only if the country is democratic and the leaders are democratically elected and enjoy legitimacy. In countries where the rituals of democracy abound but there is no democracy, the tax system only reflects the values of the rulers.
The latter seems to be the case in Uganda. Our economic system reflect values that are not the values of the people but rather the values of the rulers. The rulers are incompetent, greedy and corrupt and so the tax system (or fiscal capacity) is a direct reflection of those same values. It is for that reason that incompetent MPs woke up when the taxes were imposed to lament that they didn’t know what they were approving when the Bill was presented. “I didn’t know it was a direct tax. I thought it was an indirect tax”, one MP sadly cried. A tax by any other name is still a tax. A tax is a tax period. The effect of all taxes are the same. They affect incomes and thus the purchasing power of citizens and force citizens to make hard choices to substitute certain goods for others. This is elementary economics which speaks of the income effect and substitution effect of taxes.
The fact that the President, by word of mouth, is retracting a tax hardly a week after it came into effect is a sign of the policy chaos at the heart of Musevenomics. The law passed is 1% tax and some have already paid it. Then the President, who assented to the law by appending his signature, presumably after reading it carefully, turns up and says the tax is 0.5%! Sometime back the Minister of Finance had also disputed the figure. Key stakeholders are publicly voicing opinions on the tax meaning the process lacked the consultation vital in making sensitive important. Otherwise, why would a body like the ICT Association of Uganda speak out after the fact.
There are those who will try to politicize everything. They will talk of other motives for the things Ugandans are trying to do to reduce the impact of these unfair taxes on their wallets. Ugandans just want to save money. Period! So they have decided to resort to the so called Virtual Personal Networks (VPNs) and to find other means of transferring money. I’m told Safaricom’s MPESA is cashing in on our chaos especially in the parts of Uganda bordering Kenya.
Then there’s the consumer protection angle. Our government has left citizens at the mercy of the telecom companies who have been ripping off Mobile Money users by charging excessive transfer and withdrawal fees. Now to add insult to injury, the government wants to get a commission from a transaction they play no role in. At least the telecom companies pay license fees and corporation tax. The reason why the tax in the lump sum sent and received is unacceptable is because citizens are already paying too much for the service. However they could bear with it because it is convenient and has opened financial services to those previously excluded by banks.
Those who say Ugandans don’t pay tax are simply stupid or malicious. Everyone who makes a purchase pays tax. Ugandans are insulted that they don’t even get the minimum services possible with what is collected and borrowed in their name. The developed countries often cited as countries what charge high taxes has citizens with a zeal to pay taxes because they get a minimum non negotiable rack of services.
Any tax that increases the cost of services compels the people to vote with their feet. They will simply move. It is claimed that the taxes are for infrastructure improvement, well and good, but the gross corruption makes the cost of construction to go over the top.
Apart from the Mobile Money agents who are going to close shop and thus join the army of the jobless, the government policy undermines investment. Over a few years many telecom companies have collapsed. They simply could not cope. The body count includes K2, UTL, Vodafone, Broadband Company, Wilken, Starcom, Sanyutel, SMART Telcom. Others like Smile and I-Tel are struggling. The likes of Zain, Celtel, Warid and Orange cut their losses by selling.
No matter how much makeup or deodorant one applies to these new taxes, they are ugly and stink.