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Uganda banks on larger tax base to meet goals

Saturday April 12 2014

Uganda's budget is projected to grow by 9.6 per cent in the financial year that begins July despite the threat of aid cuts and shortfalls in revenue collections.

Officials are counting on improved public sector efficiency, which they hope will stimulate growth and therefore expand the country’s tax base to fund increased spending.

The government has instituted an output budgeting tool to remove ghost workers from its payroll so that money spent on financing mostly social service sectors can yield the intended results of reducing poverty.

The government is also paying salaries early to get rid of arrears and stimulate growth of Ugandan companies.

Government officials believe that these reforms will stimulate growth and automatically increase taxes so as to finance the country’s ambitious budgetary targets.

According to proposals in the 2014/15 budget framework paper, the government plans to increase overall budget allocations by 9.6 per cent to Ush14.3 trillion ($5.5 million), compared with allocations that totalled Ush13.1 trillion ($5.1 billion) for the financial year that ends this June. 

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The emphasis on infrastructure will continue into the new financial year, with the works and transport sector taking 18.1 per cent of the budget, while the Ministry of Energy and Mineral Development will receive the second highest allocation — 12 per cent. 

The increased expenditure comes despite a Ush277.1 billion ($110 million) reduction in donor aid. The Uganda Revenue Authority (URA) has also registered Ush270 billion ($105 million) in collections for the year to January 2014.

READ: Uganda tax body to miss targets as collection drops

But Keith Muhakanizi, Uganda’s Secretary to the Treasury, is optimistic that revenues will change next year because of the expected 6.8 per cent economic growth rate and reforms in the way government delivers services to the people.

Mr Muhakanizi said that budget release performance stands at 103 per cent to date despite shortages in domestic revenue. The government sold treasury bills to bridge the shortfalls.

Donors also released all the money they promised and the only weaknesses have been found in the poor execution by government departments.

The worst culprits were the health, agriculture and education ministries, which could in turn explain the low government allocations to these areas.

The Ministry of Health will this year get Ush1.2 trillion ($464.3 million), 40 per cent of which is expected from donors — who usually choose specific areas like HIV/Aids, tuberculosis, family planning and malaria.

Arthur Bainomugisha the executive director at Advocates Coalition for Development and Environment blames the low absorption capacities of some of these ministries on corruption and lethargy among public servants. 

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