Uganda’s New Services Tax Proposal
In light of the situation in Florida (possibly reducing school property taxes in exchange increased sales tax on services, increased sales tax rates and reduced sales tax exemptions), I found this editorial about a new services tax proposal in Uganda quite intriguing. After Uganda eliminated its Graduated Tax (referred to in the editorial as the “GT”), it failed to look for viable alternative sources of government revenue for local governments. This has, in turn, forced the central government and local governments to seek out various new forms of taxes. While the central government looks to taxes on services, local governments look at things like taxes on church marriages (previously blogged here). Here is a short excerpt from the editorial in The Daily Monitor:
Currently local governments are faced with significant shortages of locally generated revenue hence their reliance on central government, a significant threat to decentralisation. The above situation hasn’t been helped by the rampant creation of new local government units especially districts, most of them not economically viable.
The result has been increased cost of public administration and unless the above trend is checked, Ugandans should brace themselves to pay many other taxes of a similar nature. For instance, it has been reported that in a bid to fill the gap created by suspension of GT, Sironko District Local Government (DLG) plans to levy a new tax on traditional and church marriages.
This follows a resolution passed barely a year by Bududa local government to tax traditional marriage (Kwanjula) ceremonies. The local service tax is therefore meant to salvage the desperate situation currently obtaining in most local governments but the implementation of the tax seems tricky. The tax is not much different from GT and one wonders why government should re-introduce GT in a new form.
For the entire story, see “Uganda; Local Service Tax; It’s Double Burden“ in the March 19, 2008 issue of The Daily Monitor.
DAB