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A call to Action! End Harmful Tax Holidays in Uganda

 

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SEATINI Uganda alongside members of the Tax Justice Alliance including; Oxfam in Uganda; Civil Society Budget Advocacy Group (CSBAG); Uganda Debt Network(UDN); Action Aid Uganda (AAIU); Citizens Watch-Information Technology (CEW-IT); Women and Girl Child Development Association (WEGCDA); Water Governance Institute (WGI); Africa Freedom of Information Centre (AFIC); Inter University Tax Justice Forum (IUTJF); and Initiative for Social and Economic Rights (ISER) organized a press conference at SEATINI Uganda offices in Kampala this 29th May 2017 to present concerns, observations and recommendations in respect to tax holidays in Uganda.

 

The Tax Justice Alliance recognises that Foreign Direct Investment (FDI) is critical in fostering economic growth and development. There is awareness that tax incentives such a tax holidays and exemptions can promote investments in the country if they are transparent and equitably accessed, awarded and managed. It’s also a fact that tax incentives when mismanaged can distort internal market dynamics and bleed corruption. 

 

However, an analysis conducted by the Tax Justice Alliance suggests that developing countries do not need to grant tax incentives, exemptions and/or holidays to attract Foreign Direct Investment (FDI), because the decision to invest by genuine multinational corporations is largely based on other parameters such as cost of labour and energy; presence of adequate infrastructure; and the country's overall investment climate. This has also been confirmed numerous times by IMF and the World Bank, which state that countries that are most successful in attracting foreign investors did not have to offer tax holidays, but rather invested in other important factors such as good quality infrastructure, low administrative costs of setting up and running businesses, political stability and predictable macro-economic policy that will encourage growth and expansion of indigenous investments. The same questions abound whether it is relevant and critical to offer tax holidays to attract FDI. 

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SEATINI-Uganda in partnership with Eco News Africa, Africa Trade Network and Open Society Initiative for Eastern Africa (OSIEA) organized a multi-stakeholder consultative meeting on the continental free trade area from the 16th – 17th May 2017,at the Imperial Golf View Hotel in Entebbe. The meeting brought together members from the Civil Society Organisations, Private sector, Uganda Manufacturers Association, Ministry of Trade, and representatives from Kenya, Tanzania, Rwanda, Burundi, and African Union among others. Objectives of the meeting;

  • Determining the approaches, processes and critical issues in the Continental Free Trade Area (CFTA).
  • Analysing the relationship between the CFTA and development visions, priorities and policies in EAC partner states.
  • Discuss and analyse stakeholders concerns on the CFTA in terms of job creation, industrialisation, gender, structural transformation and sustainable development
  • Gather stakeholder’s positions on strategic issues that should be given to negotiators representing member countries at the CFTA meeting set for June this year.

In January 2012, The African Union Summit decided to establish the Continental Free Trade Area by 2017, in a self-proclaimed attempt to fast-track the continental trade integration process as per the 1991 Abuja Treaty. Full negotiations to this end were launched in January 2015 and are expected to come to a conclusion by June 2017.

Once in place, CFTA will create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation and instruments across the RECs and across Africa in general. The CFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources.

The CFTA Negotiations will evolve around issues addressing the NTBs, Sanitary and Phytosanitary standards, Trade facilitation, among others. It is believed that cooperation in these issues will be a step towards the creation of the African Economic Community as envisioned in the 1991 Abuja Treaty. However, the key guiding principles have tended to over-emphasize the need to build on existing trade regimes, including those between African and non-African countries and regions. This result is a tendency towards an inbuilt bias to trade liberalisation and deregulation are the main motor of Africa’s trade integration.

Some emerging issues;

  • Small scale farmers expect to be empowered with information about CFTA to find out how relevant CAFTA will be to them. In its current form, issues of farmers haven’t been highlighted and they have no idea of what is in CAFTA that will benefit them.
  • Currently there is low intra-regional trade among the African Trading blocs. However with CFTA in place, there is a belief that this will all change as the market is in abundance.
  • CFTA is seen as one of the pillars that will drive the continent towards the development Agenda of 2063 of the Africa Union (AU), alongside other continental action plans such as the Action Plan for Boosting Intra-African Trade (BIAT), the Accelerated Industrial Development for Africa (AIDA), and the Program for Infrastructure Development in Africa (PIDA).

In conclusion, the CFTA is a great idea, but can & will only become a grand project upon inclusion & action being taken  of the views and concerns expressed by none political / none state actors mainly Africa’s Private Sector & Civil Society Organisations.

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 Developing economist Fred Muhumuza addressing participants during the meeting on Economiv Partnership Agreements at Piato Restaurant in Kampala.

Ugandan manufacturers should get worried of increasing number of imports from Asian countries instead of worrying about the Economic Partnership Agreements between the European Union (EU) and the East African Community (EAC).

Uganda and other EAc countries have been discussing the EU-EAC-EPA agreements for the last 12 years; some are not convinced that its a good deal like Uganda while Kenya has already signed partly to secure markets for horticulture products.