OJOK WILLIAM: Foreign capital and taxation as a matter of national interest
OPED | There is a general presumption and saying that capital has no home but within realistic parameters the home of capital is its place of origin because it always goes back with its profits or returns on investments.
Capital holds much more value in countries like Uganda where fixed deposits have monthly interest returns of up to 15% and 25 – 30% if invested in loans through commercial Banks as compared to developed countries where interest on loans is as low as 5%, 1% or even 0.5%.
In some countries deposits actually accumulate a charge instead of earning interest. Once foreign capital is brought in Uganda, it’s a requirement as provided under section 117 of the Financial Institution Act that a Financial Institution should acquire authorization from Bank of Uganda for regularization of such Financial Institution business meaning equally such Financial Institution Business attracts income Tax liabilities that should be paid to the Ugandan government for collective National development.
Foreign loans are very healthy for the economy as they attract capital, however, they should be done within parameters of the law where both the banks and Uganda as a nation benefit with government taxes paid instead of the current unlawful transactions in commercial banks where both the principle capital and profits are all fully repatriated without any taxes paid leaving the economy in absolute poverty.
Majority of commercial Banks in Uganda operate with foreign Capital, make huge profits as a result of high interest rate charged on loans, repatriate all the profits and all the principle back to its place of origin with zero Taxes paid.
Unregulated foreign capital is more of a liability than an asset to the economy. As a result, Ugandan local businesses are heavily taxed with many collapsing simply because the existing Tax burden in the country is not evenly distributed as the huge economic players like Commercial Banks are paying less or nothing at all.
Every independent sovereign state protects its financial boundaries within parameters of both local and international laws to facilitate national growth.
However untaxed, uncontrolled and unregulated foreign capital, Case in point Uganda, sweeps the economy dry leaving the country in a constant state of absolute poverty.
Majority of Ugandans are not poor because they are weak, they lack capital to start anything reasonable in line with their individual progress or to invest towards national development.
All capital is being repatriated out of the country by foreign commercial banks in the disguise of unregulated foreign exploitative one-way capital.
Uganda holds a population of 46M people with a limited narrow tax base of 2M registered taxpayers. The growth in population doesn’t reflect growth in our tax base because of lack of capital to start developmental projects that require huge capital investment.
Growth in population calls for growth in the national budget every year, however, with such a narrow tax base and given dynamics at hand, how then can the government provide the required collective services like more roads, hospitals, educational services etc. to meet the population growth. That’s why URA keeps on revising tax rates upwards for the already existing few taxpayers to meet the budget which has seen so many small businesses collapse yet the solution would be in widening the tax base through making more Ugandans productive. This has equally proved hard due to limited capital as a result of unregulated profit repatriation through banks and foreign investors.
Secondly that’s why the Government keeps borrowing and looking up to donations to support our national budget every year.
Government equally heavily borrows from commercial banks as well yet it’s the same funds that have exploitatively been taken off Ugandans through high interest rates on unregulated foreign capital. Commercial banks heavily invest huge in government treasury bills and bonds for effective national exploitation with reduced risk as compared to lending to individual Ugandans.
As an effect of unregulated foreign capital, this has led to an increase in government borrowing, that’s why our national debt grows at a higher rate than national development. If this is not addressed as a matter of national interest in time, at a given future point in time the country shall stand too deeply indebted to save.
Foreign capital has to be controlled, regulated and taxed within parameters of both local and international laws for national collective development as a matter of national interest.
Commercial Banks smuggled regulation 13 of the Mortgage Act into law which requires a person with a financial dispute with any Bank to first deposit 30% of any disputed amounts with such Bank before one can be heard by courts of law.
Which regulation stands repugnant and inconsistence with Article 21 of the constitution that provides for equality before the law and freedom from discrimination and Article 28 that provides for the right of fair hearing before courts of law. Why should Ugandans be subjected to payment before they can be heard by courts of law as if justice is for sale to Ugandans when it comes to commercial Banks.
This condition has seen many Ugandans unlawfully lose their property.
Mr. Ojok is an America- based Ugandan Financial Analysts.