Makerere University don advises on economic squeeze

By Sylvia Nankya

THE Government has been urged to revisit its taxation on petroleum products to salvage Uganda’s economic situation.

The call was made by Makerere University lecturer Prof. Augustus Nuwagaba during a public dialogue on promoting accountability in economic governance and management in Kampala on Friday.

He said tax reduction was the only practical short-term measure to Uganda’s economic problem.

Nuwagaba’s comments come a few days after finance minister Syda Bbumba rejected pleas to reduce taxes on fuel, arguing that the move would destabilise the budget.

Nuwagaba argued that tax reduction and civil engagement between the Government and the people would create confidence and enhance the Government’s capacity to handle the crisis.

He said lack of appropriate government response may aggravate the problem which has already caused unrest in several parts of the country.

Several politicians had also raised the same demand, saying the current tax regime was making life unbearable for ordinary citizens.

Currently, the Government levies sh850 from each litre of petrol, sh530 from each litre of diesel and sh200 from each litre of kerosene.

URA figures indicate that the tax body collects around sh700b from fuel annually and the net revenue collections for the month of March this year was sh412.3b against a target of sh392.26b. For April, the target was sh397.15.

Nuwagaba said retention of high fuel taxes will make the Government lose revenue since it will make many people unable to drive.

He said although the conflict in the Arab world had led to the rise in the cost of petroleum products, Uganda was feeling more waves because of high tax regimes particularly on fuel and due to political commercialisation.

Nuwagaba advised the Government to invest in food security through developing irrigation systems and enhancing export sector performance so as to have favourable balance of payments. He, however, said these could be adopted as long-term solutions to the problem.

Speaking on behalf of the development partners, World Bank’s Dr. Obert Pimhidzai said the increase in fuel prices, if not addressed, would hurt the purchasing power of the rich and middle income earners.

He expressed concern at the rate at which Uganda’s headline inflation is increasing, leading to doubling of food prices.

The headline inflation rose to 14.1 percent in April from 11.1 percent in March.

Pimhidzai said the trend is likely to increase the number of desparate people in the country.