Strategies for Uganda's Tax Revenue: Efficiency and Accountability

Briefs:

• Budget and Tax Increase: The FY 2024/2025 budget in Uganda sees a substantial rise, accompanied by increased tax targets, sparking public concern over past tax utilization.

• Strategic Fiscal Management: Key strategies include transparent reporting, audits, and reforms to curb wasteful spending and enhance fiscal efficiency.

• Promoting Confidence and Growth: Focus on widening the tax base through education, prudent debt management, and reserves to stabilize the economy and attract investment.

On June 13, Finance Minister, Hon. Matia Kasaija read to the public a Shs72.1 trillion for the financial year 2024/2025. This budget manifested a whooping increment of Shs14.050 trillion, as compared with the 2023/2024 Shs52 trillion budget. Besides this budget being the highest of the kind in comparison with the past, the significant increase in taxes to be collected from Shs29.67 trillion in the FY2024/2025 to Shs32.84 trillion in the fiscal year 2024/2025 has hooked public attention and discussion. The financial situation in Uganda is a mixed bag when looked at in perspective of the different economic performance indicators. With an increased GDP of 6.7% from 6.5% in 2023, we appreciate it as an indicator of success. The public debt burden that escalates every year turns the narration to the contrary of the meaning of good.

This increment of 3 trillion in tax collections raises legitimate concerns among citizens, basing on the past instances where citizens have felt dissatisfaction with how the collected taxes are utilized. As Uganda begins its new economic journey in this financial year, it is imperative for the government to adopt strategies to ensure that the collected levies are rightfully spent, and address the sectoral needs to mitigate public skepticism.

Any functioning government’s activities thrive on the collected taxes, and it would be erroneous to dodge collecting taxes. Lack of compliance arises due to how displeased people are with the government’s spending and delivery. The government should therefore build public trust as it prioritizes accountability and practical delivery.

As a strategy for efficient usage of tax revenue, the government should embrace transparent reporting of the collection and how it is used. Akin to this, regular audits and public disclosures will help the process of transparency and accountability. The government ought to focus on the essential services, that is, the relevant pressing needs. Non-essential expenditures should be checked as they fuel irrelevant borrowing, and in the end, broadening national debt.

For this financial year, the government should endeavor to reduce wasteful expenditure. Cases of embezzling public funds should be ousted with immediate effect. This is the deepest bottomless pit that creates a void in budgeting and accountability. Similarly, public procurement processes necessitate a reformation. We need to ensure competitive bidding as another way of making our public procurement efficient.

As we ensure adequate revenue collection, we need to get ways of widening the tax base without overburdening the taxpayers. Encouraging more businesses to get registered for taxation as we teach its benefits can be of great help. We do not need to drag business owners; gradual tax education encourages compliance and consequently widens the tax base. In the other way, increasing taxes every now and then is not the only way of widening the tax base. Gradual tax rate reduction can encourage compliance and consequently increase the base.

Prudent fiscal administration involves keeping track of our debt margin. We need to learn to work within our means and minimize unnecessary borrowing. Borrowing should be limited to productive investments other than recurrent expenditure. In another way, we can start the good disposition of setting aside portions of the tax revenue for reserves. Buffers like emergency funds and reserves offer the country as a smooth landing in terms of economic shocks. On top of this, they boost confidence in the economy, which is a way of attracting investors into the country hence stimulating development.

It is a good thing to benchmark against countries that have successfully managed their tax revenues. This will help us incorporate new techniques of handling our tax challenges as a country and enhance fiscal responsibility.

Looking ahead, the journey in this new fiscal year 2024/2025 should be a package of prudent comprehensive fiscal responsibility. It is wise to bridge trust between the tax authorities and the taxpayers. When we put in mind that every shilling contributes to national prosperity, the government will enhance sustainable economic growth as it instills confidence in the populace.