A call to Action! End Harmful Tax Holidays in Uganda
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.