Analysis of the 2020/2021 budget Framework paper: Where the young people’s interests? A look at ICT and taxation
By Prosper Mubangizi
Article 9, section 5, of the 2015 Public Finance Management Act warrants that the “Minister shall, with the approval of Cabinet, submit the Budget Framework Paper to Parliament by the 31st of December of the financial year preceding the financial year to which the Budget Framework Paper relates”. Section 8 of the same Act stipulates that “Parliament shall review and approve the Budget Framework Paper by 1st February of the financial year preceding the financial year to which the Budget Framework Paper relates.”
As such, the 10th Parliament is extensively reviewing the submitted Budget Framework Paper (BFP) for Financial Year 2020/2021, before the national budget can be passed. What is of interest in this BFP is that it is the vehicle to the conclusion of the 2nd Development Plan, and kick starts the 3rd National Development Plan, as Uganda gears itself for lower middle income status in 2020 where the GDP per capita is anticipated to have reached USD 1020 and upper middle income status as envisioned in Vision 2040 with a GDP per capita of USD 9500.
This means that all efforts to make the budget work for the citizens are noble efforts. With this in mind, some of the questions that arise are; where are Uganda’s young people in this Budget Framework Paper? Is our national planning cognizant of the needs of this young population? Are there enough efforts to harness the potential of Uganda’s young people and facilitate the reaping of a demographic dividend? With a very young population where 49% of Ugandans are below the age of 15, 22% between 18 and 30 years, this portends a largely youthful country thereby calling for sectoral allocations in the national budget that capture and harness the dynamism, potential, will, energy and potential of this young population.
Figuratively, the proposed national budget for FY 2020/21 is UGX 39.64 trillion indicating a 2.1 percent decrease from UGX 40.49 trillion that was approved for FY 2019/20. This budget will be financed largely by domestic revenue sources by at least 81%. Whereas, this is a good indicator of how far we have gone as a country in becoming self-reliant, it portends a lot of things that could derail the youth agenda.
Firstly, taxation is the biggest source of government revenue, yet Uganda’s economy is largely informal. It is a gargantuan task to collect taxes from the informal sector, as informal businesses lack the necessary paperwork and documentation required to keep track of business for purposes of fixing taxes and enforcing tax collection. This leaves the formal sector as the only realistic option for efficient tax collection.
This means that the government will resort to deepening the tax base, which is regressive, instead of widening it, which is progressive. This will suffocate youth startups and entrepreneurship, as prospective businesses will face a huge tax burden. With a deepened tax base, it is very possible that many young people’s business will be sent to the death chamber. It will equally discourage them from taking up entrepreneurship, inevitably perpetuating the white collar mentality which is the reason Uganda is in this unemployment conundrum.
Secondly, failure to achieve the revenue targets will lead government into internal borrowing, which will crowd out young business people as they have no chance of competing with the government to access the credit and capital necessary for investment and job creation. For a clearer insight into the place of the youth in this proposed budget, let’s take a look at allocations to the sectors that are very pertinent to youth;
PROPOSED SECTORAL ALLOCATIONS
SECTOR AMOUNT ALLOCATED PERCENTAGE OF THE BUDGET
Agriculture 950.6 Billion 3.2%
ICT 136.2 Billion 0.5%
SCIENCE AND INNOVATION 163.3 Billion 0.5%
SOCIAL DEVELOPMENT 173.2 Billion 0.6%
ICT, for instance, is a sector that can be increasingly funded to benefit the young people. Statistics show that the ICT sector proves to be a good sector, whose potential if well harnessed can reduce the unemployment rate in Uganda, increase tax collections and also increase Uganda’s export package . India is a successful case study of how the ICT sector can be harnessed to enhance development. As Uganda has a predominantly young population, there is need to diversify the economy through such avenues like the budget and create opportunities in sectors that they can fully exploit. This notion is based on the theory that economics is a behavioral science and so is the economy. More youth would feel more comfortable in sectors that favour them.
As of 2014, the ICT sector employed 1.3 million Ugandans, with telecommunication companies contributing a total revenue of 416.7 billion shillings. It should be noted that the tax from telecommunication companies increased by 25% per annum . From this, it can be argued that neglecting the ICT sector as evidenced in its abysmal and meagre funding by the government, amounts to neglecting the young people’s interests in Uganda. The national budget is the biggest indicator of a government’s policy priorities. Therefore when sectors like ICT, Science and Innovation, Agriculture, Social Development and Tourism are poorly funded, as indicated in the table above, then we have cause to question the government’s policy priorities.