How a country can kill it's development initiative through taxation

How a country can kill it’s development initiative through taxation

Taxation can be a good incentive for the country to archive growth when taxes are collected and used responsibly by government. It can also stagnate businesses, frustrate entrepreneurs and deter fiscal national development. Taxation is very complicated and confusing. Though government and taxation experts always would want to cushion businesses and individuals against double taxation, it is inevitable that it can ever be wholly avoided.

Today we shall consider taxation of building materials. Let’s take an example of Steel from China. Here we go; A Ugandan business man imports steel from China. It comes by ship to the port of Mombasa, Kenya. It’s then transported to Malabar or Busia custom boarder for clearance into the country. Uganda Revenue Authority (URA) assess the goods and determines the appropriate import duty. Here the taxation conundrum begins.

The goods are transported to Kampala by a trailer that paid taxes using diesel where government got tax. The driver of the trailer sleeps in a hotel that pays tax. When the goods arrive in Kampala, they are stored in a bonded warehouse which pays tax. The goods are finally delivered to the wholesaler in Kampala industrial area. The wholeseller pays taxes. The in-country distribution process now begins.

A trader from Arua comes to industrial area to pick the steel. The steel is transported in a lorry. The driver of the lorry sleeps in a hotel which pays tax. The lorry paid tax and the fuel it uses paid tax. The driver takes the goods safely to Arua. The businessman from Arua is a wholeseller. His hardware in Arua pays tax. A businessman from Vurra township comes to the wholeseller in Arua to pick the steel. The driver has lunch in Arua in a hotel that pays tax. The truck to transport the steel pays tax and so did the fuel in the truck. The trader from Vurra stocks the steel in their local hardware store ready for the final consumer. In the meantime, the labourers at each stage who load and offload the steel on to the trucks at every stage pay taxes.

The final consumer of steel arrives at Vurra store to pick the material for their building. They come in a pickup truck which paid taxes using fuel that paid taxes. Double taxation is a common phenomenon. The tragedy wouldn’t be double taxation perse. The tragedy is that the taxes collected are spent carelessly by government. The common man pays taxes as politicians continue to squander the resources. How can one avoid tax?