Government through the Ministry of Finance has admitted to not having an actualized impact of the benefits that Shs11.7Trn tax exemption have had on Uganda’s economy in the past three years.
The admission was made by Ramathan Ggoobi (pictured), Secretary to Treasury while appearing before Parliament’s Finance Committee where the Finance Ministry had been summoned to explain how far it had gone to rationalize the criteria upon which tax exemptions are awarded in Uganda.
Responding to questions raised on the criteria issued to award tax exemptions and the impact the previous tax waivers have had on the growth of investment in Uganda, Ggoobi pointed to the growth facilitated by foreign investors in various sectors, but failed to put a concrete figure on this growth.
“I think we need to look at where Uganda has come from and how our economy has performed over the years. It hasn’t performed because of good luck and miracles. Uganda has been one of the top investment destinations in this region. Our private sector growth is in the range of 15.2% it is quite good performance although we haven’t looked at the causality,”Ggoobi said,.
However, Keefa Kiwanuka, the Committee Chairperson criticised the Ministry of Finance for dishing out these tax waivers without bothering to carry out a review on their impact on the economy.
“I am glad that you have pointed it out yourself that you don’t have evidence that there is a direct link between the investments in the country and the tax exemptions. I think it is unfortunate that we have spent over Shs10Trn and we can only and we can only assume that it is making an impact,” remarked Keefa.
The Minister of State for Planning, Amos Lugoloobi informed the Committee that Government has decided to focus on the implementation of the Fiscal Governance Framework for Tax Expenditures that will stipulate the criteria for approval of new tax waivers, institute minimum requirement for initiating new ones and clarifying roles and responsibilities of the entities involved in the governance of tax waivers.
“Government has come under increased scrutiny by various stakeholders including Parliament for incurring these tax exemptions without a clear criterion for selecting beneficiaries and without a clear reporting and monitoring framework to assess effectiveness of these tax exemptions, yet they are costly in terms of revenue foregone which is Shs2.478Trn as of FY2021/22 equivalent to 11.4% of total revenue collections of the same Financial Year,” Lugoloobi said.
The Ministry of Finance officials informed Parliament that for the past three years, Uganda has foregone Shs11.7Trn through tax waivers, but there has been no mechanisms put for the beneficiaries to report back to Government.
The revelation angered Jane Pacuto (Pakwach DWR) thus remarking, “ This isn’t Buganda Road Court that when someone pleads guilty that you should acquit. This is something to do with collecting revenue that should cause positive impact for the people of Uganda. And when somebody tells us that there has been no mechanism to monitor and evaluate, and these are people who are on pay roll. Why? Did you lack capacity because in the end we are losing because of that laxity.”
The Secretary to Treasury however asked lawmakers not to be unfair to the technical people at the Ministry for not monitoring tax waivers arguing, “There has been a problem of tax exemptions in this country and we have all agreed that we have to move. So instead of derailing on the past, because the MDAs who have a role to play, each of us is going to be accountable to ensure we get this territory very well cleaned up and ensure we get value for money.”
