Reduce tax burden & boost purchasing power to stop business collapses
The recent pronouncements by some of the big international business brands such as Shoprite, Game and Africell that they were exiting Uganda’s market has jolted the political establishment in Uganda.
There is a sense of alarm that something terrible indeed is happening and needs to be stopped, judging by the statements of some top politicians and technocrats in government.
It is however surprising that the exit has surprised them at all. We say so because it goes to show that our leaders are not paying close attention to developments.
What is clear is the latest wave of exits is just a continuation of a downward spiral of Uganda’s economic collapse.
Several foreign companies have in recent years closed shop after many years in business – as was the case with Barclays, British Airways, and in other instances a few years of operation such as Uchumi and Tuskies or forced into mergers as was the case with NiC bank and CBA last year.
While we don’t celebrate any business loss, we believe that the latest announcements are good for raising the antennae of the government about the harsh economic environment in the country.
For many years, the cries of local business community have gone unnoticed. In fact hundreds if not thousands of local business collapses have gone undocumented.
The failure of foreign companies is therefore nothing new but instead a tip of a bigger crisis in the business environment.
What needs to happen therefore, is the government to rise from slumber, admit that there’s a problem and take corrective measures.
Cut tax rates
One of the biggest sources of discontent for the business community in Uganda is the high and sometimes unfair and illogical tax burden.
The recent dispute between textile importers and the government over the per-kilo levy, is just but one of the many complaints of the high tax burden.
Some tax experts have argued that Uganda’s 18% VAT, in addition to several other taxes such Pay as You Earn, Property tax and Local government taxes are impacting negatively on businesses but the government was not heeding this call.
Indeed many businesses have collapsed under the weight of these taxes. The latest exodus is just a rude reminder that nothing has been done to correct the error.
Inject money into the real economy
The government has been promoting the idea of Savings and Cooperative groups as a vehicle for revenue mobilization.
We believe these entities are not viable if their members are not engaged in gainful employment as the case is with most ordinary Ugandans.
One of the most assured avenues of making for Uganda is agriculture. Uganda has enormous advantage in exporting a number of products. If the government invests in the development of just a few high-value agricultural products such as coffee, spices, fruits. Ugandans can truly escape the poverty trap that is driving away international companies and driving under local entities.