An Evaluation of Uganda's Tax System Using the Criteria of a Good Tax System

Abstract

Most developing countries devote their attention to designing taxation policies that promote economic development, since taxation policy is a very important instrument for augmenting revenue if not the primary domestic revenue source. This paper aims to evaluate Uganda’s tax system by subjecting it to principles of a good tax system and comparison with tax effort/performance from other sub-Saharan Africa countries. For the purpose of the study, the criteria of determining a good tax system border on effective administration, equity and fairness, convenience of payment, certainty, transparency and accountability, simplicity, efficiency, neutrality and one that has a minimum tax gap. The data sources include the Uganda’s fiscal policy environment, legal framework on taxation and tax reforms. Study found that despite undertaking more favorable tax reforms over the last three decades, Uganda’s fiscal policy is marked by high budget deficits, suffers substantial imbalance in the tax incidence, low impact and limited tax base, low levels of tax compliance and high tax evasion as well as tax avoidance. The study concluded that these characteristics of Uganda’s tax system are synonymous with a country whose tax system falls below the criteria of a good tax system and may therefore need continuous review