During the World Economic Forum on Africa, held in Rwanda this past May, Mr Keith Muhakanizi, the permanent secretary in the Ministry of Finance, stated that tax compliance is Uganda's main reason for still having a mere 13 percent tax-to-GDP ratio.
According to Mr Muhakanizi, their tax policy, including their internationally competitive rates, is not to blame for their low revenue. They simply need to devote a larger portion of their resources to investments which would enhance tax administration. This would increase tax compliance and the resulting added revenue would then enable them to invest in critical sectors and stimulate the Ugandan economy.
A common problem in developing countries are the tax exemptions provided to large companies in order to attract investments, a practice which used to be common in Uganda as well. But Mr Muhakanizi says those have been largely cleaned up. Another problem are the tax avoidance schemes that many multinationals have set up, which deprive African countries from much needed revenues. This, however, is a problem that can only be addressed internationally.
Recently Uganda's economy suffered from a slowdown in 2015. The Uganda Shilling depreciated almost 20 percent that year, and in order to avoid a surge in inflation, the Bank of Uganda had to raise lending rates. The fact that Uganda is an importing country is a big concern, seeing as this leaves it vulnerable to external shocks, like the depreciating shilling. Mr Muhakanizi noted that the 2016/17 budget addresses this problem by focussing on infrastructure, which should bring the required growth and stimulate the economy.
Ms Razia Khan, the chief economist, Africa at Standard Chartered Bank, confirms that the prospects for Ugandan growth are positive, but that there is still a problem with distribution. By stimulating agricultural processing and tourism they can accelerate the dispersion of growth beyond Kampala, so a majority of the people can feel its benefits.
At this forum, questions were raised about the quality of growth on the African continent as a whole. Ms Winnie Byanyima, the executive director of Oxfam International, was one of the critics of growth simply for the sake of growth. "We focus too much on economic growth figures. What we need to question more is the quality of this growth. Growth in Africa has been delinked from poverty alleviation and tackling economic equality."
To learn more about the tax avoidance schemes set up by multinationals and see what you can do, please visit the site of Even It Up.