UDN staff intensify the campaign against MPs Income Tax exemptions during a press conference held at the secretariat, 17th April 2016.
Members of Civil Society, including Uganda Debt Network (UDN), SEATINI and Civil Society Budget Advocacy Group (CSBAG) hereby express our disappointment with Members of the 9th Parliament over their move to amend the Income tax (Amendments) Bill, 2016, to exempt their benefits and allowances from being taxed.
This move comes at a time when on 4th February 2016, the Commercial Court had ordered the Parliamentary Commission to deduct tax from M.P’s emoluments. Rather than complying with the court order, the MPs, in indecent haste, have gone ahead to misuse their legislative powers to nullify the court ruling through this amendment.
It should be noted that the country is struggling to look for additional revenue (from domestic sources) to finance a number of key priorities in the national budget. It is a total shame that the members of Parliament are making such a move, at a time when the cancer Institute at Mulago hospital is urgently looking for funds to replace the only cancer machine in the country to save the lives of poor Ugandans who cannot afford to be treated from abroad.
Given the tremendous challenges the country is facing, we abhor these underhand methods and the insensitivity of our legislators to the plight of their fellow citizens. MPs are supposed to lead by example and to be trustees of the people’s interests. This move is a betrayal of this trust especially given the fact that other tax payers who earn less are taxed by URA.
Implications of this move
If this bill is assented to by the President, Uganda will lose about UGX 41.58bn additional revenue annually (i.e. about 9 million per MP per month). If this money was generated, it can help Government address some of the most pressing needs. Below are some of these areas:
This money can finance Napak Local Governments for the next 4 financial years. Since the total district budget for Napak for FY 2015/16 currently stands at 11.3billion.
This money can close the funding gap in Ministry of Health’s FY 2016/17 of UGX 36bn to recruit 3542 health workers for General Hospitals.
Nyamwegatira Health Centre III in Kanungu district currently receives a UGX 6,893,220 per year out of the proposed 13,450,000/=. If these funds are realized, it would fund – 6,032 Health centres IIIs in a year.
In the Education Sector, this money can comfortably pay a monthly salary of 101,878 primary school teachers. Fill the funding gap of Shs. 1.75bn required for the industrial court for its efficient operations during Financial Year (FY) 2016/17.
The newly created Directorate of Agricultural Extension Services needs an additional UGX 0.928 billion for Wage and Operational Expenses for the newly created districts, fill funding gap amounting to Ugsh. 2bn to revitalize the Cooperatives and Kick start the Cooperative Bank at the cost of UGX 35Bn which has not materialized to date for over 3 years
We call upon the MPs to rethink this move for the sake of our people. They should also be aware that this move will compromise their over sight role.
We also call upon all citizens of Uganda to join us in this campaign to ensure that Ugandans are not denied of their rightful taxes that are crucial for government to provide social services and infrastructure.
We shall also seek Court redress through Public Interest Litigation.
We call upon the President of the Republic of Uganda to disassociate himself from this move by rejecting to assent to this Bill to save Ugandans billions of tax payer’s money and to contribute to domestic revenue generation envelope.
As Government embarks on a plan to raise more taxes to finance the budget, a review of FY2016/17 proposed budget presents a cocktail of views. The proposed budget at UGX. 26.3 trillion from 24 trillion in 2015/16 is a step in the right direction since Government is expected to check her spending given the huge debt that needs servicing. Government must also be applauded for its efforts that have seen the country take third place in budget transparency on the African continent, thanks to the civic education coupled with opening up spaces for constant citizen engagement and participation in the national budget processes at both local and national level.
FY 2016/17 budget priorities are aligned to Vision 2040 and the National Development Plan FY 2015/16 to FY 2019/20 which include: Enhancement of national security, Promotion of production and productivity through support to NAADS and value addition in the key growth sectors of the economy, Scientific research and innovation, Infrastructure development, Supporting wealth creation with special focus on the Youth and Women Entrepreneurship Programme and Microfinance and Raising the quality of social services to improve the general welfare of Ugandans.
Hon. Fred Omach Minister of State for General Duties MoFPED giving a key note address during the Pre-Budget Dialogue for FY 2016/17, March 2016.
One of the key sectors that is of interest to most Ugandans is agriculture, and rightly so for being the main driver of poverty reduction over the years; from 24.5% in 2009/2010 to 19.7% in 2012/2013 according to the 2014 Uganda Poverty Status Report. Government’s move to increase allocations to agriculture from 474 billion in FY 2015/16 to 794.63 billion in FY 2016/17 is, at face value a commendable move. However such increment should be directed towards strengthening the existing infrastructure including human resource and enforcing quality rather than quantity in the sector.
Part of Uganda’s debt portfolio is characterized by non-performance. UDN Report on Public Debt (2015, p.34) and 2015 Auditor General report raise issues relating to low absorption capacity since FY 2009/10 resulting from poor project management, procurement challenges and poor financial management among others. The AG Report further highlights the persistent challenge of low absorption of external debt indicating that, the national debt portfolio was still underperforming with absorption levels below 50%. With the proposed FY2016/17 budget, Ugandans expect public debt to be managed efficiently for purposes of economic growth.
Civil Society Organizations and General Public during the FY2016/17 Pre-Budget Dialogue, March 2016.
It is therefore a continual responsibility of all Ugandans to shrewdly monitor the utilization of budgeted resources and demand for prudent accountability and transparency in resource allocations and utilization for efficient service delivery.
Our Budget, Our Responsibility!
Uganda’s debt situation dates back to 1950s, where it had major debt relationships with the western world institutions, especially the World Bank (WB) over construction of railways and Owen Falls Dam– Jinja. As such, Debt acquisition processes and transparency thereof, coupled with absorption and outcomes remain serious issues. Moreover, the global financial crisis of 2008 that triggered a near economic crisis and the effects thereof, imply more serious issues and repayment challenges amongst both the Creditors and Lenders.
Memories of previous economic crises like the Mexican crisis of 1994 and the Asian crisis of 1997 remain apparent. More lately the Chinese economic is on a draw down, while there are also emerging Lenders beyond the historical WB and IMF. For such creditors are EAC nations, including Uganda, the need to continuously review the global Debt dynamics is inevitable. Such review must anchor their policy options on public transparency, wider stakeholder participation and Government accountability on the desirable Debt Outcomes, for Debt to remain relevant in the lives of the final intended recipients.
Rate of debt acquisition and outcomes;
Beyond the crises in 1980s and 1990s, additional concerns by Uganda debt Network (UDN) relate to the speed at which the debt is rising, absorption capacities, poorly/ non-performing loans, corruption/ transparency and sustainability issues amongst Government systems and institutions not only in Uganda and EAC but also Sub Saharan Africa (SSA). This is, particularly, in respect to Grants, Domestic debt, Loans and Government Guarantees.
While borrowing is not the problem per se, what do we say of the Ugandan case, for instance, where external borrowing increased by 82% between FY 2014/15 and FY 2013/14? Over a longer horizon, total external debt for Uganda was said to be USD 6.27 billion end of February 2015, compared to about USD 0.99 billion in 2006. This represents an increase of 500% over a period of 9 years. In June 2006, the total outstanding debt was USD 2.3 billion given the additional amount of domestic treasury securities of USD 1.0 billion and domestic non-security arrears of USD 0.3 billion. As of December 2015 according to Ministry of Finance Planning and Economic development (MoFPED), domestic debt estimates stand at $2.92bn with external debt at $4.88bn. The estimated total public debt as of December 2016 is estimated to be at $7.8bn. In the FY 2016/17, Government plans to pay UGX 2,014bn to the local market interest from domestic borrowing up from UGX 1,656.2bn that was planned for the FY 2015/16. Even then, in the FY 2013/14 the planned non-bank financing was over shot by UGX 675bn to be at UGX 1,715bn. Public Debt is projected to increase to $8.3bn by end of June 2016. Moreover new debt proposals have come forth in the FY 2016/17.
External and Domestic Debt Estimates as of December 2015 ($). Estimated Total Public Debt as of December 2015 ($ Billion)
There are generally impressive policies through respective Debt Sustainability Frameworks. Even so, it’s up to Ugandans and African citizens at large to keep their Governments on tenterhooks to account for every outcome of Debt acquired. So far EAC and selected African countries have registered fairly stable macroeconomic frameworks for prudent debt management, poverty reduction, economic growth and development.