The Ministry of Finance says there are more ways to improve domestic revenue instead of abolishing incentives regime for new investors.Some analysts have been urging the government to abolish some of the incentives saying they have deprived the country of much needed revenues to reduce poverty and improve the general welfare of the population.The Deputy Secretary to the Treasury, Patrick Ocailap however says the money foregone is a cost recovered when the exemptions achieve the planned aims.He explained that if a company commits to create a given number of jobs and it achieves it, the objectives of the exemptions is also achieved. He adds that if the company fails to achieve the commitments, the offer can be revoked.Arthur Sserwanga, a Professor of Taxation at Makerere University Business School however said he was not convinced by the three-year tax waiver for startups in the budget.He says the policy, introduced in this year’s national budget was made without considering or understanding the minds of the micro, small and medium entrepreneurs in Uganda, especially regarding formalisation.One of the objectives of the policy was to help MSMEs grow through going formal.However, Sserwanga says some of the entrepreneurs are not interested in formalising their businesses for among others, fear of dealing with the taxman.Uganda has incentives aimed at attracting investors. They include income Tax Exemptions or companies exporting at least 80% of their production. Investors in industrial and commercial buildings can benefit from a 25% tax deduction on the cost of construction for four years.Hotels and TourismInvestments in the construction of hotels, hospitals, and other facilities in certain regions can enjoy tax holidays for up to 10 years.A 100% allowance is available for scientific research expenditure, training expenditure, and mineral exploration expenditure in the year of expenditure. Most of these incentives have been in place since in 1991.The incentives have increasingly become a centre of contention, with local experts and global financial organisations saying its benefits are outweighed by the disadvantages.The aim of the policy, according to the government, is to attract foreign investors and as well support local ones to grow by exempting them from payment of taxes for a period of up to ten years for large-scale investors in several key sectors, provided they meet specific investment and operational conditions.In their 2026 election manifesto, the National Resistance Movement (NRM) admits that domestic revenues are still low at 14.5 percent of GDP compared to 20 percent for the Sub Sahara African region.The World Bank in its latest Uganda Economic Update, urged Uganda to drop tax incentives so as to increase revenues.Qimiao Fan, the Country Director for Kenya, Rwanda, Somalia, and Uganda said the need to address the issues if tax exemption and incentives is part of the reforms that Uganda must do if it is to achieve the Tenfold Growth Strategy.The Tenfold Growth Strategy is a plan by Uganda’s government to rapidly grow the nation’s economy by ten times, aiming for a Gross Domestic Product (GDP) of nearly US$500 billion by 2040, up from approximately US$50 billion in 2023.Silver Namunane, a World Bank Economist says the incentives regime in Uganda can be taken advantage of, because, for example, if a company makes profits before the ten-year period, it can continue benefiting from the tax holiday.In the manifesto, which is expected to drive Yoweri Museveni back into the presidency, the party states that a number of commodities in Uganda are undertaxed due to slackness among the tax officials and policymakers, but that despite that, that tax effort has in the past two years improved by three percentage points.“This increase has been on account of the concerted effort of the NRM chairman to whip the policymakers and URA into waking up and enforcing a tax legal regime, which is comparable to global benchmarks,” it says. “Some studies indicate that Uganda could raise tax revenue up to 23 percent of GDP annually if we reduced the leakages and improved the efficiency of the revenue administration.”This is also supported by research studies that indicate that there is room for Uganda to expand its tax base and raise more domestic revenue without hurting the economy.“One study has found the VAT compliance gap (the difference between potential VAT revenues under the current legal framework and the actual VAT revenues) at 60 percent, which translates into 6 percent of Uganda’s GDP or nearly UGX 2.5 trillion,” says the manifesto. This is almost 70 percent of the amount lost to tax incentives in 2023/2024, according to a report by the Auditor General. Ocailap says the government and URA have put in place several measures to ensure sustainable revenue growth.The manifesto states, as a way forward, that URA has already started to implement the Digital Tax Stamps (DTS) to effectively collect applicable tax revenues from sectors that have been difficult to monitor — such as beverages like beer, spirits, wine, soda, mineral water and tobacco products, both locally manufactured and imported.It claims that the results of DTS are promising with an immediate boost of revenue, attributing the post-COVID-19 revenue growth recovery to these measures.One other plan by the party is to initiate and enforce more reforms to seal the revenue leakages, increase compliance and thus boost collection.“We have also learnt from our researchers that preferential excise rates charged on beverages and exemptions on automobiles and aviation taxes have for years been the main sources of tax leakages. We are going to study this and streamline policies in order to curb tax evasion,” Museveni’s campaign document adds.The NRM also vows to fight against tax fraud such as under-declaration, false declaration, tax avoidance and outright evasion, by collaborating with revenue authorities of countries where the affected goods are imported from.On top of increased staff training and skilling, there also plans to support to the businesspeople and investors to create more wealth and get more people out of the 68.9 percent in agriculture subsistence sector to help improve revenue collection.-URNThe post Tax Incentives for Investors to Stay-Gov’t appeared first on Business Focus.