SEATINI Uganda holds a multi-stakeholder dialogue on tax and Illicit Financial Flows

On 26^th February 2021, SEATINI Uganda in partnership with OXFAM and with support from the Money Trail Project and Diakonia held a multi-stakeholder dialogue on Tax and Illicit Financial Flows (IFFs) under the theme “Stemming Illicit Financial Flows through Regional Tax Harmonization in the East African Community”.

Illicit Financial Flows are recognized as a major challenge to creating and sustaining a sound revenue base in a country. According to the 2018 UNECA study on the global governance architecture for combating illicit financial flows the amount of IFFs from Africa are estimated to involve sums of upwards of $100 billion per year. IFFs therefore, constitute a major source of domestic resource leakage, which drains foreign exchange, reduces tax collections, restricts foreign investments, and worsens poverty in the poorest developing countries. This limits the amount of resources available to finance social sectors especially health, education, water and sanitation. This problem is not limited to Uganda but stretches to affect the East African Community and the African continent.

While giving her opening remarks, Regina Navuga, the Programme Coordinator, Financing for Development at SEATINI Uganda brought to light that the “Money trail Project” is a collaborative project that focuses on cross-border illicit financial flows and how they affect Domestic Revenue Mobilisation.

“As Uganda and the East African Community region at large, we need to come up with strategies to curb Illicit Financial Flows ensuring that key institutions like East African Community Secretariat, Uganda Revenue Authority and the Tax Policy Department under the Ministry of Finance, Planning and Economic Development work closely when it comes to the implementation process.  She also added that the dialogue will provide a platform to discuss Domestic Resource Mobilization, its fairness, equitability and pose ways to ensure that everyone pays their fair share of taxes.’’

Flavia Busingye, the Principal Customs Officer at the East African Community Secretariat on the other hand noted that Tax Harmonization under the Custom Union Article 32, calls on Partner states to allow free movement of goods and services and capital to promote investment in the East African Community.  Contrary to this, most people in the border districts especially those in Busia smuggle goods across borders and this reduces on the tax revenues.

Mariam Babu, a woman cross border trader, revealed that the majority of the people that carry out smuggling are women because they are the providers of their families.

“There is an information gap among traders engaged in smuggling at the border points and this is one of the major reasons why there is a lot of smuggling,” she added.

On the other hand, Nicholas Musoke, a research and policy analyst at URA informed the participants that in terms of formalization, small scale traders are not required to file returns and therefore some one can go for simplified regime of presumptive tax. He also added there is need for capacity building for security officials especially at the border points so that they can have knowledge that facilitates trade.

During the multi-stakeholder meeting, SEATINI Uganda launched a documentary on the; Impact of Smuggling on Domestic Resource Mobilisation: A case of Busia District.

Some of the key issues from the meeting included;

• Corruption especially at the border points encourages smuggling
• There is lack of harmonization of different laws at the East African Community level.
• The lack of the political will to implement processes and laws that can facilitate trade.
• Lack of sensitization for most relevant officials especially those that are still conniving with smugglers.

As a way forward, stakeholders recommended that;

• Awareness raising should be a key priority at all levels. For example, capacity building should not only target cross border traders but also the people who live around the border points
• There should be dissemination of the laws and localise them so that the beneficiaries can understand them;
• Harmonization of tax among member states of the East African community is much needed and reduces unhealthy competition.