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;
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.