The Resource Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries

Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries

Label
Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries
Title
Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries
Creator
Subject
Summary
Using the marginal effective tax rate (METR) analysis for Uganda and its neighboring countries, this study demonstrates that it is indeed possible that, even when a country's public revenue is low at the macroeconomic level, rapidly increasing taxation may pose a constraint to private investment at the microeconomic level. There are two reasons. First, while the enterprise sector in these economies is typically small, it represents a high proportion of the effective tax base. Second, access to credit is limited, particularly for smaller firms, and hence most private investment is financed by profits. As a result, taxation reduces both the expected revenue from investment projects and the liquidity to finance them. From the perspective of foreign investors, Uganda is more highly taxed than Kenya and Tanzania. Uganda's tax disadvantage results mainly from its property tax, the depreciation allowance on buildings, and its high fuel taxation. As inventories and buildings are the highest taxed assets in Uganda, industries investing heavily in them (tourism, manufacturing, communications) incur a higher METR than the other sectors. Tax administration, if not fair and efficient, can distort the best intentions of policy-makers and can in practice produce a very different tax burden than intended. Using firm survey evidence, the authors identify several factors that can alter a METR based on the formal tax regime, including wide-spread tax evasion, delays in the VAT refunds, arbitrary tax assessments, and bribes
http://library.link/vocab/creatorName
  • Chen, D
  • Reinikka, R
Geographic coverage
Africa
Language note
English
Series statement
Africa Region Working Paper Series
Series volume
no. 3
http://library.link/vocab/subjectName
  • business tax
  • effective rate of tax
  • foreign investment
  • tax incentive
Label
Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries
Instantiates
Publication
Extent
34 p.
Label
Business taxation in a low-revenue economy : a study on Uganda in comparison with neighbouring countries
Publication
Extent
34 p.

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