Reform tax system to promote growth, World Bank tells Uganda

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While Uganda’s economy is expected to grow at 5.5 percent this year, and keep a growth rate of over 6% all through 2019, the country could reform its taxation system to promote further growth, the World Bank has said.

Last year saw a 6.3 percent growth in agriclutrue which accounts for 25 percent of Gross Domestic Product (GDP). Good weather and pest control helped the sector reverse its decline of 1.9 percent in the previous year.

Services — which contributes 47% of GDP — grew 8.8%. Industry showed a 6.4% growth.

The banks said that althought the country has one of the most modern tax systems in the region, tax revenue collections, at 14 percent of GDP, are low.

Weak tax administration, presence of a large informal sector (now at 80 percent), and tax avoidance and evasion are the major areas where the country needs to improve, the Bank said.

The country can tap into areas that are outside the tax net; apply tax instruments correctly and fairly; improve efficiency, transparency and accountability in tax administration; and deliver better public services, it suggested.

“Making more people and firms pay their taxes rests on improving delivery of public services, and requires Government to close loopholes and stop doling out discretionary tax exemptions. Citizens are more likely to pay tax if they see public services improve,” said Christina Malmberg Calvo, World Bank Country Manager for Uganda.

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