About me.

Andrew M. Mwenda is the founding Managing Editor of The Independent, Uganda’s premier current affairs newsmagazine. One of Foreign Policy magazine 's top 100 Global Thinkers, TED Speaker and Foreign aid Critic

Monday, July 16, 2018

The poverty of Ugandan elites

Bursting the bubble of our `intellectuals’ by exposing their most cherished ideals as a bunch of delusions 

Many Ugandan elites have been shouting themselves hoarse denouncing the tax on social media. They also claim they are already burdened paying “too many taxes”. With a tax to GDP ratio of 14%, Ugandans are among the least taxed people on this planet. And after the abolition of Graduated Tax (or tax per head), only 621,366 people are registered to pay the direct personal income tax, Pay As You Earn, in an adult population of close to 18 million people.

But let us for argument’s sake say the tax is bad. The solution is simple: organise politically and stop government from collecting it. But I know Ugandan elites are politically unreliable. They dare not stand for their beliefs. They prefer to sit in the comfort of their offices, houses, and bars and pontificate against the government as if Uganda needs the intervention of foreigners to be saved from President Yoweri Museveni.

This is where Museveni outshines all of us: when he felt the election was rigged in 1980 and the country mismanaged, he did not sit idly complaining. He picked guns, organised people, mobilised resources, built a national political coalition, and rallied international forces to this struggle. After five years of combat he triumphed.

Ugandan elites lack patriotism. They want to get public goods and services for free. They do not want to pay taxes that fund such services. They see the state as a cake to eat, not a cow to feed. Everyone comes to the state in search of personal advantage. Few see it as an institution to build for the collective good. This attitude stands in stark contrast to how Ugandan elites relate to social events like weddings, funerals, and churches to which they devote so much money without demanding accountability.

Some Ugandan elites claim they are too poor to pay Shs200 per day for this tax. But this tax is imposed on social media, which is used on smart phones. How come “poor” Ugandans afford expensive smart phones? The social media tax is imposed on the middleclass, not on ordinary peasants. However, these elites use the institutions of mass communication to project their peculiar interests as those of everyone. This is how democratic debate in Uganda is rigged in favour of a few.
All governments need revenue: to keep law and order, to co-opt elites, and to provide public goods and services to their citizens. When a government’s political survival depends on generating revenues from its people, it will be driven by self-interest to govern in a more enlightened fashion. It will listen to its citizens about the policies necessary for growth so that it can generate more revenues.

For many years, the productive margin in Uganda’s search for revenue did not lie in the domestic economy; in our gardens, factories, and shops. It lay with foreign donors. For every fiscal shortage, our government would take a begging bowl to Paris, London, Brussels, and Washington. This disarticulated the state from citizens and made international donors the most important influence in policy making. It is impossible to build a democracy where foreigners fund the government because he who pays the piper calls the tune.

Uganda’s actual liberation came accidentally, when international donors cut aid over the passing of the Anti-homosexuality Act. The government of Uganda could have compensated this with new taxes. It was afraid of a political backlash and went on a borrowing spree from the domestic market. In only five years, the domestic debt has ballooned to Shs12.4 trillion, and interest payment is now Shs1.9 trillion. The same Ugandan elites who have been complaining against this growing debt do not seem to realise that only taxation can get the country out of the debt spiral.

If this tax is economically destructive, it will correct itself. The advantage with a modern economy is that it has high revenue elasticity. By elasticity I mean responsiveness – the tendency to grow in the face of positive incentives and to decline in the face of negative ones. If the tax on social media and mobile money hurts the economy, it will cause a decline in the rate of growth. It will not take long for government to discover that it has harmed itself.

When a government extracts revenues from its people without formulating favourable economic policies and providing public goods and services in return, private economic agents will most likely withdraw or fail to invest. Physical capital will depreciate, the economy will decline. A government that sought short-term gains through destructive taxes will find that in the long term it has undermined the economy and, therefore, its source of revenue. Any government facing a fiscal crisis will be in political decay.

The claim that Ugandans do not want to pay taxes because government is not accountable is nonsense. In the last election, opposition leader Kizza Besigye got 3.5 million votes (he claims 7 million). If every one of the 3.5 million contributed just Shs 1000 per month to FDC, the party would raiseShs42 billion per year or Shs210 billion over five years, or Shs558 billion if the 7 million votes is the correct figure. With such financial muscle, Museveni would become history. If Ugandan elites want change, why are they not investing in the man fighting for it and who has never stolen the money they have contributed to his cause?

Ugandans lack commitment to the state and its politics because they see is as a place you go to extract things, not one where you grow the wealth of the nation. That is why all our political parties are cash-starved. No one wants to contribute to politics, regardless of whether there is a precedent of their money being stolen. This sharply contrasts with Rwanda where citizens pay taxes diligently and even make voluntary contributions to the state whenever need arises.

For example, Ugandans want increased wages for teachers, medical workers, and other government employees. They also want free education, healthcare, cheap water and electricity, good roads and bridges etc. But they do not want to pay for them. This shows we treasure our faith, weddings, and funerals because they are socially rewarding but we do not treasure political liberation and economic advancement. For example, if you call a wedding meeting, everyone will come and contribute generously. But if you call a meeting to raise money to begin a business, no one will show up. That is the real problem of Uganda.

No comments: