Individual Coursework (Not more than 5 pages, font 12, 1.
5 line
spacing, type and send to you coordinator, he will put everything in one
folder, zip the folder and send to my email:
[email protected]). Plagiarism is punishable, if you copy your
friend’s work, you lose all the marks.
1. Write short notice (not more than one page) on the evolution of taxation
in Uganda
2. While highlighting relevant examples, explain the challenges encountered
by tax payers and tax collectors in Uganda
3. Explain or suggest practical and appropriate ways of overcoming the
challenges encountered by tax payers and tax collectors in Uganda
The concept of Taxation
Taxation means the imposition of compulsory levies on individuals or
entities by governments.
Taxation is a term for when a taxing authority, usually a government body,
levies or imposes a financial obligation on its citizens or residents.
The term "taxation" applies to all types of involuntary levies, from income
to capital gains to estate taxes.
Though taxation can be a noun or verb, it is usually referred to as an act;
the resulting revenue is usually called "taxes." Paying taxes to governments
or officials has been a mainstay of civilization since ancient times.
Taxation is differentiated from other forms of payment, such as market
exchanges, in that taxation does not require consent and is not directly tied
to any services rendered.
Taxes differ from other sources of revenue in that they are compulsory
levies and are unrequited—i.e., they are generally not paid in exchange for
some specific thing, such as a particular public service, the sale of
public property, or the issuance of public debt.
The government compels taxation through an implicit or explicit threat of
force. Taxation is legally different from extortion or a
protection racket because the imposing institution is a government, not
private actors or illegal actors. Taxation is legal and generally acceptable
Tax systems have varied considerably across jurisdictions and time. In most
modern systems, taxation occurs on both physical assets, such as property
and specific events, such as a sales transaction.
The formulation of tax policies is one of the most critical and contentious
issues in modern politics
KEY TAKEAWAYS:
Taxation occurs when a government or other authority requires that a fee be
paid by citizens and corporations, to that authority.
The fee is involuntary, and as opposed to other payments, not linked to any
specific services that have been or will be provided.
Tax occurs services and on physical assets, including property and
transactions, such as a sale of stock, or a home.
Types of taxes include income, corporate, capital gains, property,
inheritance, and sales etc
Rationale or the purpose of taxation (why do we pay taxes?)
To allocate resources; this is furthered if tax policy does not interfere with
market-determined allocations.
To redistribute income; this is meant to lessen inequalities in the
distribution of income and wealth.
To stabilize the economy; the objective of stabilization—implemented
through tax policy, government expenditure policy, monetary policy,
and debt management—is that of maintaining high employment
and price stability.
In modern economies taxes are the most important source of governmental
revenue.
While taxes are presumably collected to better the welfare of taxpayers as
a whole, the individual taxpayer’s liability is independent of any specific
benefit received. There are, however, important exceptions: payroll taxes,
for example, are commonly levied on labor income in order
to finance retirement benefits, medical payments, and other social
security programs—all of which are likely to benefit the taxpayer. Because
of the likely link between taxes paid and benefits received, payroll taxes are
sometimes called “contributions”. Nevertheless, the payments are commonly
compulsory, and the link to benefits is sometimes quite weak. Another
example of a tax that is linked to benefits received, if only loosely, is the use
of taxes on motor fuels to finance the construction and maintenance of roads
and highways, whose services can be enjoyed only by consuming taxed
motor fuels
E.t.c
Health
Education
Security and defense
Infrastructure
Encourages people to work hard
Evolution or History, origins and development of taxation in Uganda ( why did
the British introduce taxation in Uganda?)
For many decades, taxation has been a key feature of Uganda’s economy
though it has been in various forms
Taxes such as gun and hut taxes were instituted during colonial days.
Taxation served administrative and revenue generation purposes.
In Uganda the British administration introduced taxation by forcefully
encouraging the planting of cotton, ensured that there was no excuse for
failing to pay it. At the turn of the 20 th century, a hut tax was introduced and
this was followed by a poll tax.
The system was designed to drive Africans into the wage labor in which the
European planters and government depended.
To force Africans into the market economy through the growing of cash
crops required by the centre (Britain)
To raise revenue for the government, the Africans were subjected to other
taxes. For example, in Buganda and other cotton growing areas they had to
pay Busulu (an annual rent paid to the landlord), and in other districts they
were obliged to provide free labor or its cash equivalent.
The Africans were subjected to other taxes in addition to the hut and poll
tax. In Buganda and other cotton growing areas they had to pay busulu (an
annual rent paid to the landlord), and in other districts they were obliged to
provide free labour or its cash equivalent. In 1939, it was estimated that
these additional taxes amounted to £ 311,000 and the poll tax to £ 580,000.
A land tax was introduced in some districts, and the landowners of Buganda
were also required to pay a proportion of the rent that they received as tax.
Africans were also subjected to an education tax and from 1919 their cash
crops were charged an export tax.
Furthermore, in 1922 the state persuaded the Lukiko to increase the level of
taxation as follows: An annual tax of 20/= on every Muganda with 5 or more
acres of land; An annual tax of 2/= on all other Muganda, An annual tax of
10% on the nvujjo collected by every landlord.
All these taxes diminished the cash available to the Africans and
consequently affected their ability to enter into ventures which required a
substantial capital investment.
It was indeed partly because of this high rate of surplus appropriation from
the colonial government that a class of rich peasants was not developed.
Since government revenue went into providing social services and financing
general developmental projects both of which were beneficial to the
immigrant community than to the Africans, the taxation system was a means
of transferring income from the African peasants to the colonial bourgeoisie.
Historically, a dual system of taxes related to income has operated in
Uganda. Local government collects the General Personal Tax (GPT), which
is generally paid by the country’s poorer people. Central government
collects income tax, which is paid by the relatively better off. In the mid
1990s, 2.4 million of the country’s 19 million people paid GPT, while only
186,000 paid income tax.
Why was the General Personal Tax (GPT) abolished?
Otherwise known as Graduated Tax (GT), it’s an old form of taxation which was
imposed on adults. It is one of the examples of direct tax. It was introduced in
Uganda during the colonial days as a replacement to Hut tax. In Uganda, it was
abolished over 15 years ago after pressure from politicians, who described it as ‘a
primitive’ tax and badly collected despite its significance to the local government.
Its abolition is credited to Dr Kizza Besigye, who in 2001, while running for
president said he will scrap it once elected in the top office
GPT has been unpopular since it was introduced around 1900, and has been
responsible for a number of riots. Despite its unpopularity, it has only been since
regular national elections began in the 1990s that GPT taxpayers have had an
institutionalised channel to make their views heard at a central level.
Since the 1990s, GPT has been first reduced (after 2001 elections) and then
abolished in the run up to presidential elections in 2006. A variety of factors can
explain its unpopularity and abolishment:
Poor people’s incomes are difficult to estimate. Income assessment was
based on an ambiguous mix of wealth and income parameters and registers
of taxpayers were generally incomplete or inaccurate.
GPT assessment was particularly unfair as it gave scant consideration to
poverty, its results depended more on appearance than ability to pay, the
rigour of assessment varied across districts, and bribery was widespread.
Much more coercion was used to collect GPT than income tax. For example,
failure to pay GPT could result in imprisonment, whereas failure to pay
income tax could only result in a fine or an interest payment.
Ugandan prisons were particularly severe punishments and evidence
suggests they were regularly used for those defaulting on GPT.
Embezzlement of revenues collected by the tax-field officials
The collection caused insecurity and violence as tax-collectors mistreated
the families of the tax-payers.
It was a tool used by political opposition to weaken the government
The key issue is not that people are unwilling to pay tax, but that taxes that
hit the poor randomly, violently and destructively are unacceptable to
significant portions of the electorate.
It was costly to collect…
Government thought they could get taxes from other sources e.g airtime etc
It was abolished to ensure that all people pay taxes including men, women
and children
Privatization meant increased tax base which meant other alternative sources
of tax
Severe penalties
Insecurity and violence
It was seen as burdensome for many citizens and was often difficult to
administer
Tax assessment was hard.
It was costly. Because people's wealth were hard to measure
etc
TAXATION CHALLENGES IN UGANDA
Developing countries like Uganda face formidable challenges when they attempt to
establish efficient tax systems:
First, most workers in Uganda are typically employed in agriculture or in
small, informal enterprises. As they are seldom paid a regular, fixed wage,
their earnings fluctuate, and many are paid in cash, "off the books." The
base for an income tax is therefore hard to calculate.
Workers in these countries do not typically spend their earnings in large
stores that keep accurate records of sales and inventories.
Modern means of raising revenue, such as income taxes and consumer
taxes, play a diminished role in these economies, and the possibility that the
government will achieve high tax levels is virtually excluded.
It is difficult to create an efficient tax administration without a well-
educated and well-trained staff, when money is lacking to pay good wages
to tax officials and to computerize the operation (or even to provide
efficient telephone and mail services), and when taxpayers have limited
ability to keep accounts. As a result, governments often take the path of
least resistance, developing tax systems that allow them to exploit whatever
options are available rather than establishing rational, modern, and efficient
tax systems.
Because of the informal structure of the economy in Uganda and because of
financial limitations, statistical and tax offices have difficulty in generating
reliable statistics. This lack of data prevents policymakers from assessing
the potential impact of major changes to the tax system. As a result,
marginal changes are often preferred over major structural changes, even
when the latter are clearly preferable. This perpetuates inefficient tax
structures.
The income tends to be unevenly distributed within Uganda. Although
raising high tax revenues in this situation ideally calls for the rich to be
taxed more heavily than the poor, the economic and political power of rich
taxpayers often allows them to prevent fiscal reforms that would increase
their tax burdens. This explains in part why many developing countries have
not fully exploited personal income and property taxes and why their tax
systems rarely achieve satisfactory progressivity (in other words, where the
rich pay proportionately more taxes).
Etc
