The Uganda Revenue Authority (URA) will lose almost 56 per cent of the tax revenues collected from international trade in the next five years the moment Uganda signs the African Continental Free Trade Area (AfCFTA) treaty.
Almost a year ago, all African countries, apart from Eritrea ratified the AfCFTA with the aim of bringing together all 55 member states of the African Union – covering a market of more than 1.2 billion people – including a growing middle class, and a combined gross domestic product (GDP) of more than US$3.4 trillion.
According to estimates from the Economic Commission for Africa (UNECA), AfCFTA has the potential both to boost intra-African trade by 52.3 per cent by eliminating import duties and to double trade if non-tariff barriers are reduced which have been hindering intercontinental trade and movement of people and goods for centuries.
One of the conditions in the treaty countries under this trade organisation will have to open their borders for goods from other countries to enter freely without any taxation, yet currently, 42 per cent of URA’s tax collections come from international trade, that is approximately Shs6.8 trillion as per FY 2018/19.
While speaking during the second Strategic Leaders’ Summit on Thursday in Kampala, Ian Rumanyika, the URA assistant commissioner Public and Corporate Affairs said the tax body has now to find ways of increasing domestic tax collection percentage.
“We have to open up these borders [under AfCFTA). There is no doubt that the goods that will be coming in will not be taxed. Currently, our domestic revenue collections contribute around 58 per cent, while international trade that brings in 42 per cent. Now the 42 per cent is going to reduce further to 20 per cent,” he said.
He added that the rest of the revenue collection must come from the domestic market. That is why URA keeps on asking all Ugandans to be tax compliant.
Among other things, AfCFTA seeks is to liberalise trade in services and progressively cooperate on investments, intellectual property rights and competition policy and cooperate on all trade-related areas.
AfCFTA is to be put into implementation on 1st July this year, according to research AfCFTA will enhance trade in Uganda since there will be broad market however there is a question whether Uganda is ready since even in East Africa Community her goods have not always satisfied the market.
However, if Uganda’s government does not come out and support the Small and Medium Enterprises, they may be suffocated by other countries SMEs which are more ready for this trade union. In case Uganda is not prepared other countries will selling than her own SMEs
Emmanuel Dei-Tumi, the Human Capital International president, one of the organisers of this year’s summit said that this year’s theme “Digital Innovation and Corporate Governance for SMEs in the New Market Frontier,” was decided to prioritise and assemble experts in business and continental trade to discuss AfCFTA because it has far-reaching implications on Small and Medium Enterprises (SMEs)
“This year’s summit has brought together the key players in the digital innovation economy and SMEs sector to provide an open platform to discuss the opportunities and challenges of the agreement and change ideas on leveraging technology and good governance for SMEs growth,” Dei-Tumi.
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