With the next financial year just three weeks away, a Makerere University don has advised that the best the government can do to boost the flagging economy is to stop dishing out investment incentives and tax exemptions and encourage production.
Dr Lawrence Bategeka, a senior research fellow at the Economic Policy Research Centre at the University, gave the advice while commenting on the next national budget projected to be 10.5 trillion shillings, up from 9.8 trillion.
The next budget comes against a backdrop of dip in economic growth from 6.7 percent in 2010/11 to 3.2 percent this financial year. The last time Uganda’s economy went negative was in 1991/92 financial when it dropped from 3.9 percent to 1.8 percent.
With inflation still at a high of 18.6 and the next national budget projected to increase by less than five percentage points, there is growing concern that government will stick to strict austerity measures with the potential of hurting economic growth further.
An austerity budget also has direct impact on the citizens who would have little money in their pockets.
But Dr Bategeka says the worry should not be on whether people will be hard pressed but rather on how to widen the revenue base in order to boost the economy, at least to the level of other East African countries.
He says despite Uganda’s impressive economic growth of about seven percent in the last decade, tax revenue as a percentage of Gross Domestic Product (GDP) has stagnated at about 12 percent compared to Kenya whose revenues stand at 22 percent and Rwanda at 16 percent.
Dr Bategeka says government should not just widen the tax base but also eliminate the generous tax exemptions and incentives given to so-called investors, most of whom are actually bogus. He says these fake exempted businesses end up stifling genuine businesses because they operate in the same zone with different opportunities.
He says many dubious investors, both local and foreign, non-governmental organizations and religious organizations are hiding behind these exemptions denying the government of much needed revenues.
Dr Bategeka says government should re-instill the spirit of hard work in Ugandans by reinstating the graduated tax so that people especially in the countryside can get back to production. He says Ugandans have embraced globalization at the expense of production that is why there is this craze about European football, gambling and huge alcohol consumption.
The economics don also points out that most government revenues come from the 12 percent of the population in urban areas with the majority rural population wallowing in poverty. He says there is a need to pump in more resources in the countryside to boost agriculture, trade, cottage industries, health education and infrastructure like railway, roads and waterworks.
Dr Bategeka says unless the development challenges in rural Uganda are addressed and the rural folks included in production, there won’t be realistic economic growth and development in the country.