Basajja got sh13b in tax waivers this year
Publication date: Tuesday, 23rd May, 2006By Mary Karugaba
THE finance ministry has paid over sh16b in tax waivers for entities and individuals including city tycoon Hassan Basajjabalaba this financial year, former finance minister Dr. Ezra Suruma has said.
Suruma said out of the sh16b, sh13.2b was paid on behalf of Basajjabalaba for Kampala International Universityâs Bushenyi campus.
The former minister was responding to the finance committee about the status of the ministryâs tax waives and the monthly reports from Uganda Revenue Authority (URA).
He said the remaining sh2.9b was paid for hotels and non-governmental organisations.
Last month, the finance committee demanded that Suruma presents all tax waives in accordance with the Financial and Accountability Act 2005.
According to the act, the finance minister is required to table to Parliament tax waives for approval before the end of June, September and March 1 of every year. But the minister had not tabled the figures by April.
He said net URA collections for the nine months were sh1,592.6b against a target of sh1,599.5b. Suruma attributed the fall to the underperformance of company tax, withholding tax on bank interest, fees and licences, excise duty on beer, cigarettes and sugar.%%%%%%%%%%%%%%%%Related reading:1. Odd-Helge Fjeldstad, 2005. "Corruption in Tax Administration: Lessons from Institutional Reforms in Uganda," CMI Working Papers WP 2005: 10, CMI (Chr. Michelsen Institute), Bergen, Norway.Abstract:Over the past two decades many developing countries have implemented comprehensive reforms of their tax administrations in order to increase revenue and curb corruption. This paper examines recent experiences in the fight against corruption in the Uganda Revenue Authority (URA).It argues that the technocratic remedies supported by donors have underplayed the degree to which progress in tax administration depends upon a thorough 'cultural change' in the public service. The motives of individual actors are often inextricably tied to the interests of the social groups to which they belong.In the URA patronage runs through networks grounded on ties of kinship and community origin. As such, people recognize the benefits of large extended families and strong kinship ties, even as their social and economic aspirations may be indisputably modern.This implies that such social relations may undermine formal bureaucratic structures and positions. If these problems, which are rooted in social norms and patterns of behavior rather than administrative features, are overlooked, the result may be to distort incentives. As a consequence, the government's commitment to reforming the tax administration may also be undermined.2. Ritva Reinikka & Bernard Gauthier (2001) Shifting tax burdens through exemptions and evasion - an empirical investigation of Uganda. World Bank, Policy Research Working Paper Series #2735AbstractThe authors look at how prevalent tax exemptions, and evasion are among businesses in Uganda, how they translate into actual tax burdens for firms of different sizes, and how the tax administration attempts to ensure compliance. Despite tax reforms undertaken in 1995-97 to increase the efficiency, and equity of the tax system, and its administration, exemptions, and evasion during this three-year period remained widespread, and the dispersion of the tax burden did not decrease. The analysis shows that tax evasion is more prevalent among smaller firms, that tax exemptions are more common among larger firms, and that medium-size firms tend to shoulder a disproportionate share of the total tax burden."Reduction of voluntary compliance with tax laws and regulations through bribe-paying for tax evasionBribe payments to tax officials are a means of gaining favours in the form of reduced tax obligations or payments. Bribe payments to public officials lead to inequities and inefficiencies in tax administration, since they result in a transfer of a public resource to private agents - reducing government revenues. Bribes also constitute a major impediment to equitable and efficient tax administration, placing firms that do not engage in such practices at a competitive disadvantage.In a business survey conducted in Uganda in 1998, which covered 243 firms, as many as 43% said they were paying bribes to tax officers occasionally or always, while 38% reported paying bribes to customs officials. The frequency of bribe-paying increased with firm size. However, the actual burden of bribe extraction by public officials was the heaviest for medium sized firms (26-75 employees). These firms paid 3.5% of their sales in bribes, equivalent to 60% of what the average-sized firm actually paid in taxes. This was 29 times more per unit of sales than larger firms, and 9 times more than smaller firms... "
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