Government is doing a lot of business with foreign firms and individuals, who, once paid, quickly repatriate the money to their home countries and offshore accounts, Finance minister Matia Kasaija has said.
And this problem of capital flight, is greatly affecting economic activity and growth in the country according to the minister. Kasaija was speaking at a public policy dialogue on revisiting the tax regime at Uganda Management Institute.
Kasaija, a golfer, told the attentive audience that about a year ago, he visited Uganda Golf Club and was shocked with the poor attendance by its members. Kasaija said even the few members who went to the golf club, spent just a short time, spent less or nothing and hurriedly went home.
Concerned, Kasaija said he instituted a private research to find out what was happening with the once liquid club members. He declined to divulge his findings to the dialogue participants.
But when speaking with journalists outside the auditorium, minister Kasaija revealed that the real cause was that the golf club members had little money to spend because government has been doing a lot of business with foreign firms.
According to Kasaija, whenever they released funds every quarter, the bulk would go to these foreign firms and individuals who quickly repatriated the money - leaving Ugandans with very little disposable income.
"Do you know that most of the projects in Uganda are being done by non-Ugandan companies and that means that when I pay them, most of the money is gone…The solution you find it out yourselves...Much of the money is taken by companies outside this country so there’s therefore less money going into the pockets of Ugandans." Kasaija said.
Capital flight, in economics, occurs when assets or money rapidly flow out of a country, due to an event of economic consequence. This leads to a disappearance of wealth, and is usually accompanied by a sharp drop in the exchange rate of the affected country like depreciation in a variable exchange rate regime.
Most of the foreign companies operating in Uganda are from China, India, other Asian countries and Europe. The true extent or percentage of government cash releases that go to foreigners is not clear but should be huge.
CORRUPTION AND TAXES
Kasaija also admitted that there's a lot of theft and wastage of public resources and urged Ugandans to put to task government to show what their taxes actually do. He said without fear of contradiction, he sees a lot of wastage of public resources. There are sectors, he said, that seek for Shs 5 billion to organise an unnecessary conference.
"Some sector comes and the accounting officer comes and says; I need Shs 5bn to hold this conference. We have cars around, then he’s talking of hiring cars, we have free halls then he’s talking of Munyonyo to go and spend another Shs 1bn on hiring - not that am envying my brother who owns that facility but cut your cloth according to your size."
Kasaija also said, rather opposing taxes such as the mobile money tax, Ugandans should instead demand for accountability as no country in the world can develop without taxing its citizens.