Finance Minister Matia Kasaija has said the government can only deliver services if people pay taxes.
Speaking at the opening of the Global Entrepreneurship Forum in Kampala, Mr. Kasaija, said entrepreneurs must honor their tax obligations to enable the government to develop necessary infrastructure and amenities that support business development.
“You must pay taxes because we need tax to provide services. I encourage you to report all those who are dodging because they will unfairly outcompete you,” Mr Kasaija said.
At a rate of 14.2 percent to the gross domestic product, tax revenue performance is still too low to support the country’s development needs.
This is mainly because some people and businesses that are eligible to dodge on their obligations.
According to the Uganda Entrepreneurial Ecosystem Initiative survey phase one, most businesses in Uganda opt for horizontal growth because they intentionally want to remain small and informal so as to avoid paying taxes.
The survey also found that instead of growing vertically, most Ugandan businesses opt to expand horizontally by opening up other small businesses so as to remain below the taxable radar and avoid paying taxes.
The survey was conducted by Aspen Network of Development Entrepreneurs, Centre for Development Alternatives, Argidius, Dutch Good Growth Fund, and Enterprise Uganda. Expanding horizontally is responsible for Uganda’s large informal sector and the low tax-to-GDP ratio, estimated at 14.2 percent since informal businesses evade taxes.
To ease access to capital for small businesses, Mr. Kasaija said, the government would allocate Shs100b in the 2020/21 financial year to enable smaller scale entrepreneurs access soft loans.
The money, he said, would be loaned out through associations or cooperatives but cautioned against misusing the loans, saying the money should be used for the purpose for which it is borrowed.
Mr Charles Ocici, the Enterprise Uganda executive director, urged entrepreneurs to always work around customer retention to ensure business growth and sustainability.
He also warned against uncontrolled expansion, saying it could result into enterprise failure.