Dear Ugandan Taxpayers, WHY? And FOR HOW LONG?

COMMENT | Olivia Nalubwama | The National Resistance Movement (NRM) government of Uganda is out here doing good like a shifty-eyed Father Christmas in August —  sprinkling favors like tax waivers worth UGX13.391 billion to eight taxpayers. The eight taxpayers: J2E Investment Corporation Limited (J2E), Nicontra Limited, Busoga University, Nkumba University, Makerere Business Institute, Kisiizi Hospital Power Limited, businessman Donati Kananura and Mr. Peter Lokwang, a dealer in limestone mining in Moroto District.  Yet, why this murmuring and grumbling about the eight entities presented by the State Minister for Finance (General Duties), Henry Musasizi before the Parliamentary Finance Committee? On August 20, when Minister Musasizi appeared before the Members of Parliament (MPs), they questioned the transparency of the process regarding tax waivers. Were the eight businesses singled out because they employ millions of Ugandans, or is it the hefty taxes they pay, or are they producing life-changing products that raise Uganda’s international profile? Perhaps out of respect for the Ugandan taxpayer, the MPs were not buying whatever Musasizi was hawking.

Uganda needs every tax shilling it can squeeze out of its citizens, therefore, the Ugandan taxpayer is an essential tool that must be handled with utmost care. Therafa, tax waivers in a poor country where taxes are squeezed out of a narrow base are a grave matter. Some would even be so dramatic as to say it is a life-or-death situation. So precious is tax revenue that when it falls short then the government justifiably has no money for lesser things like preventing the Kiteezi garbage disaster or funding medical interns or keeping the electricity on in public hospitals when your person needs critical care or ensuring public schools are safe and well-resourced…the list is endless. Thankfully, budgets for far more important things like grandiose parliamentary sittings, the plethora of presidential appointees under the Office of the President and State House, etc do not suffer such lack. Calm yourself. Surely, the Minister and his team understand the gravity of the tax waivers, especially in the context of the foreign funding we love to pretend to hate but cannot do without. Surely the Minister and his team aware of the burden upon the Ugandan taxpayer would not treat tax waivers lackadaisically.

Findings from the Ministry of Finance’s August 2024 Tax Expenditure Report for FY2022/23 reveal that in the past five years, Uganda has lost shs.12 trillion in potential tax revenue due to tax waivers. In a January 2023 appraisal report on Uganda, the International Monetary Fund (IMF), those dastardly foreign imperialists, recommended a reduction in tax waivers to increase Uganda’s revenue base.  In 2019, the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) report on the harmful impact of tax incentives in Uganda stressed that tax waivers are bad for governments as they erode the tax base and are susceptible to corruption. SEATINI stressed, “All the evidence suggests that the disadvantages of tax incentives vastly outweigh the advantages….”

Yet, the development of this list of eight beneficiaries is a curious thing. Parliament Watch on March 27 noted that when the Minister initially presented this matter before the MPs in March, the list had expanded from three to seven beneficiaries to the tune of shs.13.313 billion. The list is now at eight. In May 2023, Speaker of Parliament, MP Anita Among directed Minister Musasizi to provide the complete list of tax exemption beneficiaries for parliamentary scrutiny.

Even more curious: that complete list of tax waiver beneficiaries includes our MPs who are some of the best paid in Africa, even better paid than their EU counterparts. The Independent Magazine observes that tax exemptions on MPs allowances have cumulatively cost the government and therefore the Ugandan taxpayer, shs.638.6 billion since 2018. Dear reader, you might have felt the sting of paying taxes from your sweat wondering what your taxes do for you and your family. Our MPs found this burden too much yet they do such great patriotic work!  In the Income Tax Amendment Act 2016, despite public anger, the MPs agreed to delete their emoluments. As the Independent Magazine put it, the MPs sought to relieve themselves from the burden of paying taxes and recognize expenses arising from the performance of their duties. Dear Ugandan taxpayers, you are not angry enough, why are you so kind?

When the Minister appeared before the MPs on August 20, the MPs expressed concern that the tax waivers are being abused leading to huge losses for Uganda. The irony is blinding. Nonetheless, the MPs took a keen interest in J2E Investment Corporation Limited (J2E) which seeks a waiver of shs.2.7 billion. However, the Minister could neither name its owners nor provide important documentation like audited accounts and articles of association that would enable the MPs to assess the credibility of the businesses. Hinting at J2E’s troubling history, MP Semujju Nganda found it incredulous that the UPDF/army with its formidable construction unit t undertaking national projects like potholes and stadia would cede the construction of its barracks to J2E.

Linked to businessman Eria Mubiru alias Kabenge Eriya Mubiru, J2E hit the headlines in 2017 embroiled in fraudulent procurement claims worth shs.76 billion in the Ministry of Defence (MOD). In June 2015, MOD through closed bidding, contracted J2E to undertake the Infrastructure Development project at Kaweweta Recruit Training School, reported the Daily Monitor in March 2017. An army investigation into Mubiru’s dealings found Mubiru had fronted several companies in collusion with UPDF officers to fleece the UPDF. The investigation into Mubiru’s companies (which had been awarded five construction tenders) found “fake profiles of employees to win contracts, concocted books of accounts, tax evasion and failure to execute works paid for”. The UPDF investigators established that Mubiru had been a tad greedy noting, “J2E was by now overstretched with work but its appetite for more deals and the urge by the army to award it more contracts was only surging and unquenchable.” The investigation red-flagged this influence peddling by the contractor. In the report, former Deputy Chief of Defence Forces Lt Gen Charles Angina described Mubiru as a dishonest businessman, riddled with unethical conduct and therefore unfit to bid for government contracts as per section 93 of the PPDA Act 2003.

Furthermore, Ndejje University disowned Mubiru’s engineering degree asserting he had never studied there. The Uganda Institution of Professional Engineers (UIPE) also affirmed that Mubiru was not and had never been a registered engineer.  The Daily Monitor detailed that Mubiru procured the services of a business advisory consultant whose assessed Mubiru’s business accordingly, “The client (Mubiru) is a young entrepreneur who has vital connections in the Ministry of Defense. The business has no formal structures, plan or projections.”

If we had the space to dig into more beneficiaries and interrogate why/how they are on the list, we might end up self-combusting.

Dear Ugandan taxpayers, why don’t they fear you? Aren’t your miserly taxes worth a modicum of respect?

*******

Olivia Nalubwama is a “tayaad Muzukulu, tired of mediocrity and impunity” smugmountain@gmail.com

THIS ARTICLE WAS FIRST PUBLISHED IN THE OBSERVER