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Day May 19, 2013

The whole notion of ‘tax-payer’ is completely out of place in Uganda

The whole notion of ‘tax-payer’ is completely out of place in Uganda.The population of Uganda has no solid stake in the management of public affairs because it lives outside that domain: 85% peasants, dying at 45 years of age, living in a non-monetary sector, in the rural countryside, untaxable because they do not produce any surplus to be taxed, about 50% of them are illiterate, 50.2% 15 years and below, wearing nappies, the highest in the world….that is not the kind of population that takes its government to task. Never!

As you know Ugandans have no fiscal contract with their politicians. If you do not pay the piper, you cannot call the tune.If you look at the 1,000 top tax payers in Uganda, you will find that the top two, MTN and Shell BP pay 12% of all the taxes. The top 10 pay 28% of all the taxes. And those top 10 are petrol vendors (Caltex, Total, Shell), mobile phone vendors, soft drinks and beer makers (Century bottling, Uganda breweries, Nile breweres), cigarette makers (BAT)…all foreign. No real production, no indigenous stake holder on how public affairs/finance should be managed. The other day graduated tax was scrapped…So?

The ‘donors’ contribute up to 53% of all recurrent expenditures. Th so called tax payer is in Brussels and Paris, London and Stockholm, Amsterdam and Copenhagen. More than 80% of the population live outside the monetary sector…peasants. So, which tax payer? To whom, then, are your politicians accountable?

That is why I always wonder what we mean on this forum (and indeed in Uganda) when we keep talking of the lack of democracy, accountability etc. In a country where there is no fiscal contract between the political class and the population as we have in Uganda, there can never be a social contract. Democracy, accountability, ‘good governance’: all that is rubbish. The content of democracy is a fiscal contract.

We need to come to grips with the real content of democracy. Very clearly, in Uganda, there is no foundation or basis for democracy….a cabinet of 500 is feasible.

Unless the country is radically shaken up, to transform the socioeconomic basis in the direction of making the political class dependent on the majority of the population, for get about democracy, keep mum about the ‘tax payer’.

That aid is unearned income and you know what unearned income does. If government was depending on mony deducted from 20 million Ugandas wage earners, it wold think twice before squandering it. It would be someone’s sweat and they would demand for accountability. But who in Uganda identifies with ‘donor’ aid as his money? If we do not come to grips with the relationship between paying tax and governmental accountability, then we shall keep fooling ourselves for ever with democracy for ever.

That is why I always insist that we need to proletarianise the population-urgently-create wage earners, get rid of the passive peasant class. A population that is largely wage-earners or proletariat is a population that you do not foll around with. The impunity of our political class now is a logical consequence of the fact that the country is largely peasant. That is why some of them are interested in preserving that passive class that will vote for them just because of a piece of soap. A wage labourer will tell you not to insult him by bribing him with money he contributed as PAYE or income tax.
What tax do the peasants pay?

We know that Uganda was broke right from the cradle: independence was on 9 oct 1962, 24 hours later, on 10 oct 1962 there was no money to finance the return of the colonial administrators to London. The first structural adjustment facility was arranged there and then (what ever structures there were to adjust on day one). If AM Obote had asked for grants to finance his ‘public spending’ (whatever that means) instead of expropriating foreign multinationals, he would probably have lived longer and may be succumbed to internal contradictions.

L/Cpl (rtd) Otto Patrick


LAND4The market for land collapsed long ago. And it collapsed because the govt messed up with the incentive structures. Actually several things are happening simultaneously in the land sector. The land bill Act of 1998 or 1997 offered full insurance to land squatters/bibanja holders/and so called bonafide land tenants (read land grabbers). I equate land to insurance. Once the laws was passed things fell a part literally. There has never been order/certainity in the land sector ever since. I invite you to wonder why it is that insurance firms discriminate on the basis of age, gender, and even race.

For some strange/stupid reason the cabinet of Uganda wanted to treat every one in the land sector the same. Actually tenants were treated better than mailo land owners which in the insurance industry would be like treating young male better than middle aged women drivers. In other words, the land bill should have taken into consideration quality. Quality of land/location/size etc but also quality in terms of ownership.

To privilege the tenant/bonafide tenant over the mailo land owner was the biggest mistake the bill made. It may be the case that tenant/bibanja holders have groups that represent them but not mailo land owners because the regime hates them even as the big men in the regime have become the largest land holders in Uganda not by birth, but through land grabbing, okay blackmail purchases. Anyone who cares to know knows that the President Museveni is now the largest land holder in Uganda (that is why he and the twatera embuddu clique eschewed efficient tools such as land taxation). The consequences are there for all to see: the opposite has happened to the land sector. The order the bill wanted to introduce is now no more. Truth of the matter is tat the land sector is characterized by chaos and uncertainty.

That chaos and uncertainty has led to the second problem: multiple land titles. Mailo land owners have the original copy which by law-gazette notice -has never been annulled. The crooks with the right connections have duplicate copies. Mark you, the ministry of lands is a den of thieves who create land titles for the NRMO crowd. under such an environment, land buyers can never be sure that the land they are buying belongs to the person selling it in the first place. That is where the lemon problem comes in.

What you saw the IGP doing is the equivalent of what buyers of second hand vehicles in the West do: demand a certificate from govt licensed garage to verify that indeed the car is not a lemon. It is costly. With the crime levels in Uganda, the IGP is now in the business of verifying land titles. How did things get to that level?

Things will get worse not better. I suspect that as Kony terrorized parts of northern Uganda, some ‘bonafide’ tenants may have taken over people’s land. Mark you the Land Act does not take such developments into consideration. If someone takes over your land and can prove that they have been on that land since 1986 (notice the cut off year) for 10 years, they can invoke the law to protect them.

Basically, the Land Act assumes that if you let -never mind whether you were aware or not-someone on your land for 10, you are deemed to have slept on your rights and therefore out of luck. The bonafide tenants has all the rights to be issued land titles.

The insight I want to emphasize on you is that if NRMO really wanted to create efficient land use in Uganda, BUT it should have used taxation. All holders of mailo land holders/other forms of land would be subject to a land tax. It would have served multiple goals. a) it is more efficient than the current land Act. b) there would be no such uncertainty with regards to land titles and therefore minimal chaos in the land sector. C) It would have been more equitable in the end. The logic is that you tax heavily something you do not like(NRMO hates land owner).. Those unable to pay the tax on the expansive land would sell to return portions they can afford to pay the tax on. It is possible the govt could have generated bilions in taxes since land can’t be hidden to vade taxes.. I told why taxation was not considered: it would hit the new kids on the land block.

As Justice Wendel Holmes famously observed, taxes is what people pay for civilization. YKM wanted to avoid land taxes for personal reasons and created the current chaos in the land sector. Similarly, he hoodwinked Ugandans when he abolished the only taxes most people paid so today they have no voice. How can Ugandans complain that YKM is hiring only his relatives when they pay no taxes? If they want that voice they have no choice but pay taxes.

Let the embattled land holders counter YKM’s land reform with a proposal to be taxed instead on their land holders. NRMO would then have to explain why a revenue starved nation would leave money on the table. As they say kyoyagala kikusezza (sp)/you pay dearly for what you treasure. Imagine if the land holders were to call a national press conference and announce that they are willing to be taxed on their land holdings. Things would interesting would they?

This the what Akerlof talked about. the land market is full of lemons hence the uncertainty. No one can be certain of the land title they hold. It has now become so costly to a level where the IGP checks land titles. The picture of IGP with scared Katoto checking land titles said it all: the land market is Uganda is no more. that is the uncertainty Akerlof talked about. The govt offices are responsible for the lemon business. No one can be sure of the land titles they hold. Former Finances ministers are not pared and so is NSSF. I will summarize the Akerlof paper with concrete Ugandan examples very soon.



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