Tuesday, September 20, 2016

ELLY RWAKAKOOKO: URA’S BLAST FROM THE PAST

Last week former Uganda Revenue Authority (URA) commissioner Elly Rwakakooko sauntered into our news room to shoot the breeze about the good old days.

I wish.

Rwakakooko had come in to set the record straight about his time at URA and what eventually led to his departure from the tax authority, which last week commemorated its 30 years of existence.

“I declined another term because I didn’t entire agree with the methodology being used to discipline people no paying tax,” Rwakakooko remembered.

At that time a paramilitary organisation, the Anti-Smuggling Unit (ASU) was constituted to clamp down on smugglers but also apprehend tax evaders.

“ASU was becoming a big military unit. I said no. I even closed their accounts. I even declared the group a security threat and refused them entrance into the URA offices.”

A look back into the papers then shows that there was real tension around the situation reported as a standoff been Rwakakooko and ASU boss Kale Kayihura.

"Rwakakooko, who says he initiated tax education of the public at URA, said it is counterproductive to try and collect taxes by force....

“If you don’t educate people about the value of taxes they have paid, they will revolt and then what will you do?”

He remembers a survey he did of 36 of the then 39 districts and documented cases of the killing of policemen following a nominal increase in the graduated tax rate.

“You can only enforce tax collection if the people broadly agree to pay tax.”

Rwakakooko who worked Canada, Kenya, was once the chairman of Uganda Commercial Bank and a lecturer at the Institute of Public Administration (IPA) now the Uganda Management Institute (UMI) says the challenge for URA remains the continued informality among business men.

He says up to 80 percent of all taxes collected comes from Kampala as if nothing is happening beyond the city’s suburbs.

The economy is becoming more formalised by the day he recognises, but he frowns at the slow pace of progress.

“This process needs to be supported politically we have no choice we need to raise more revenue urgently.”

Currently Uganda’s revenue to GDP, an important measure of whether enough tax is being raised in a country, stands at about 12.6 percent. Below the Sub-Saharan Africa  average of 13.8 percent but way below Kenya or Mauritius where 18.4  and 19 percent of GDP is collected respectively.

He says there is one other thing let us down as a country.

“Strategic planning. If you do not engage in strategic planning you will have problems,” he said. We will be able to identify our priorities and tailor our expenditure with these expenditures in mind.

“Some politicians – not all, are too selfish. They don’t care about telling lies. We have to tell the truth. If a strategic plan is in place and people want a road and its not a priority tell them,” and he stopped at that.

"He rues that political expediency is dominating our actions, where more strategic thought should be applied...

Lest we forget Rwakakooko was also at the center of a very strategic question about twenty years ago.

“I opposed to privatisation. Not the principle but the methodology,” he recalls. At the height of the discussion he was the chairman of the committee on the national economy in the National Resistance Council (NRC).

HE argued then that if you opened the sale to foreigners who were better capitalised they would come in and drain out the lifeblood of the economy.

What did he propose?

“I wanted the UDC (Uganda Development Corporation) to take the lead.”

The argument against this at the time, was that we didn’t have the managerial capacity nor the capital to resuscitate these companies.

He acknowledges that management was a problem but that this could be contracted from abroad. As for the dearth of capital he says that was not true and if Ugandans were mobilised to take an equity stake in the companies that would not be a problem. More participation by Ugandans too would hold managements accountable.

“You see what is happening at Bugisu Cooperative Union (BCU). Once it is owned by Ugandans they will protect their interests.” But adds the proviso, “If you have the support of the center of course”.
  
The members of BCU have been fending off political interference in its operations recently.

"Does he think he is analysis was vindicated at the time? “Oh yes! But my friends complain that the realisation has come too late. But you hear it people are calling for the revival of UDB to unlock some of the issues in the economy.”...

If he had his way he would resurrect the coffee and produce marketing boards as well as our textile industries as trigger for self-sufficiency.

“Nobody owes us a living. We have to do this ourselves.”


Our conversation come to an end. Maybe too soon. So what is he doing with himself now? HE wants to retire to his village and push community development. He is already involved with more than 128 cooperatives and ten cooperative unions working to unlock the full potential of the dairy and beef industries in southern Uganda.

Monday, September 19, 2016

CONGRATULATIONS URA!

This week tax collector Uganda Revenue Authority (URA) celebrated 25 years of its existence, a laudable milestone not only because of the passing of the years but of how the institution has developed over the years.

After years of decay the old revenue office at the finance ministry had collapsed and would have been unable to meet the challenges of a society in urgent need of funds to for recovery. That being said it still had some human resource many of whom continued into URA and formed the initial backbone of the now autonomous tax collector.

The atmosphere at the time was a new government trying to find its feet.

The tussle between the command economists – mostly bush war veterans and the liberal economists – mostly technocrats in the finance ministry and central bank had only just been decided in the latter’s favour.

"Among many urgent reforms needed – breaking up government monopolies, liberalising the markets in everything from produce to currencies, was the urgent need to collect revenues...

The tax man has never been a popular member of society. It did not help that improved revenue collection was a condition for engagement for the donors especially the World Bank and IMF – the favourite punching bag for the post-colonial administrations on the continent.

As a condition for support it made sense to insist on better revenue collections, otherwise how would the donors get their money back?

In its first year of operation they collected sh180b or just under $180m, which figure is up to sh11.2 trillion in the last financial year or about $3.4b.

"The more than 60-fold jump in collection during the period is laudable in itself and reflects not only the growth in the economy but the increasing effectiveness and efficiency of the Authority....

Interesting too is  how we in those 25 years we have shifted away from reliance on taxes from external trade to domestically generated revenue. Can you believe that coffee exports were our biggest source of revenue at one time?

These improvements have not come without sweat, tears and even blood. Tax payers have fought the URA on the introduction of VAT, resisted the paying of road licenses and continue to weave and dodge against paying any number of taxes.

While there is cause for chest thumping about how much more tax we collect as ratio to GDP, which comes in at 13 percent, it below the Sub Saharan Africa average of 13.8 percent, and well behind Kenya at 18.4 percent, Mauritius 19 percent and South Africa 26.9 percent.

Increased revenue collection is critical to finance infrastructure, health and social services. But more importantly to wean us off aid, allowing us to determine and follow up on our own priorities.

"A need to collect more domestic resources will also improve our politics. As it has been because government was being financed externally – at one time more than eight in every ten shillings in our budget was from donor assistance, they did not have to negotiate with the population raise revenues. ..

As long as you could tick off some perfunctory targets like reducing the number of people living on a dollar day the aid taps would continue to flow. But to raise taxes there has to be a negotiation with the locals and they need to see some return on their money before they willingly pay up, that takes greater negotiation skills than is needed with dealing with donors, which leads to democracy.

So clearly URA is at the center of determining the future of this country.

Of course URA has little leverage over what goes into the tax code and is often criticised for doing their work in the classic case of shooting the messenger. There is really little scope for introducing new taxes, future progress will be determined by how effective URA is in roping more and more people into the tax net.


Despite some unwelcome sounds from our political elite it is safe to say that URA’s foundations are solid enough that it is possible they will be here to celebrate their golden Jubilee in 2041.