Monthly Archives: June 2014

Why Raise School Fees?

Ever since the Minister of Finance read out the Government of Uganda’s Budget proposals for the financial year 2014/15, we have been treated to numerous threats by the some proprietors of Private Schools under the umbrella body of National Private Educational Institutions Association (NPEIA) to increase the School Fees charges. This came up as a result of the Government proposing to remove the Income Tax Exemptions currently enjoyed by the Educational Institutions.

As a parent I feel insulted by these continuous attempts to blackmail not only the Government but we parents into joining the crusade of these capitalists involved in our education industry. Do they think that they are dealing with illiterate parents who have no understanding of how the taxation system works? Do they somehow wish or hope that as parents we shall rise up based on mere emotions and lack of proper comprehension of issues to back their pleas?

Having read the Minister’s budget speech in its entirety, she stated; “… I propose to terminate the exemption on income derived by a person from managing or running an educational institution for commercial gain. This is consistent with the principle of equity and transparency in tax regime, and broadening the tax base by bringing more tax payers into the tax net.”

With all due respect and knowing that the proprietors of these institutions are all out to contribute to the Educational advancement of our population, why would one not want to pay tax on income accrued as a result of pursuing this agenda? Working class Ugandan citizens are taxed left right and center and Income Tax is one of those that they do not survive. While the Government might have given the Education industry a tax break in this regard, it didn’t mean that it would last a life time. Besides, the challenges that brought up this decision years back by Government to waive income tax seem to be no more. The proprietors of these institutions should just be ready to file their income tax returns and pay up.

I don’t see an argument of being over burdened by taxes as holding water. This tax only applies to those schools that are making profit. If no profit is made, then it doesn’t apply. This therefore means that the so called struggling schools will still not fall victim to this tax.

To simplify this, add up all the School income from school fees and any other sources then subtract expenses like costs of feeding, salaries for Admin, teaching and support staff, utilities, Local taxes among others. Whatever remains is expected to be the profit and that is what the 30% Income Tax is applicable to. Profits after expenses belong to the business owners and that is probably the bone of contention to many who have been enjoying a free ride making massive untaxed income.

Another argument that is being forwarded is one of loans that are even causing some of the schools to close. The performance of a school in regard to loan repayment cant be directly attributable to the existence or lack of Income Tax. In Uganda, most financial institutions lend against assets. It is highly unlikely that a school with assets worth Ushs 100 Million will be given a loan of Ushs 1 Billion.

It is a good idea for all actors in the Ugandan economy to realise that as we move towards full funding of our national budget, we have to bear the brunt of raising the much needed financial resources. This definitely might mean us remaining with less in our pockets in the process but lets avoid looking for scapegoats. Increasing school fees by the proprietors is not the solution to the Income tax resumption on the industry. Let the business owners readjust their expectations and those that have been stashing away massive profits, its the time to share the loot with Government. As for that poor struggling school that hardly makes a profit, they have no reason to be bothered by this tax resumption.

Fellow parents, let us not be drawn into this well orchestrated scheme by a few who want to continue earning untaxed income. Any school fees increments should be justified with facts.

@wirejames

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Copyright Case a tricky one for Al Haji Sebaggala

In 2012, Al Haji Nasser Ntege Sebaggala took MTN Uganda to court over the infringement of his copyright when the Telecom company availed a ringtone with excerpts of his speech to its customers for use commercially. MTN Uganda got this ringtone from one of its registered content providers SMS Media.

Sebaggala’s demands were that;

  • MTN gives him all the money earned in relation to the ringtones.

  • MTN pays him a monthly interest on the amount earned above, with a further interest on the damages and costs of the suit.

Now back to basics;

Copyright is a form of protection provided to the authors of “original works of authorship” and they could include literary, dramatic, musical, artistic among others.

Copyright in a work commences the minute it is put in a tangible form and this could include among others, in writing, visual or audio recording.

The Copyright and Neighbouring Rights Act, 2006 of Uganda in Section 4 (1) states: The author of any work specified in section 5 shall have a right of protection of the work, where work is original and is reduced to material form in whatever method irrespective of quality of the work or the purpose for which it is created.

Section 5 of the Act then goes ahead to define the works and in 5(2)(a) it includes Derivative works such as translations, adaptations and other transformations of pre-existing works …

What do we learn from the aforementioned facts so far?

  1. Copyright is only possible on works that are available in tangible formation

  2. Any one identified as the author of the works in tangible form has a right of protection.

  3. Transformations of pre-existing works is also protected as an original work.

Did Al Haji Sebaggala have a written speech in the first case prior to talking to the press? Were they off the cuff marks? If he had a written or pre-recorded speech and can prove it, then he has a clean bill as far as owning the copyright on the statements he made is concerned.

Did SMS Media record Sebaggala’s speech? If they did, then they have a right to that recording and the law protects them fully. In the Copyright Act, Section 28 (1) A producer of a sound recording or audio-visual fixation shall have a right to authorise the reproduction of that sound recording or audio-visual fixation. So, by SMS Media availing MTN Uganda with the ringtone, they were acting within their rights as producers.

Does MTN Uganda have the rights to commercially gain from the work? Section 28 (2) A producer of sound recording or audio-visual fixation shall have the right to authorise the distribution or making available to the public of the original or copies of the fixation through sale or other transfer of ownership. Section (4) is even more relevant to this case “A producer of sound recording or audio visual fixation shall have the right to authorise making available to the public of the fixation, by wire or wireless means, in such a way that members of the public may access the fixation from a place and at a time individually chosen by them.” So, Yes they do if SMS Media granted them the rights.

For court to find MTN Uganda guilty of copyright infringement, it must establish that:

  • The infringing work is “substantially similar” to the copyrighted work.

  • The alleged infringer had access to the copyrighted work — meaning they actually saw it or heard it.

The case is still sub judice as of today but it will be interesting to see how it finally ends considering that its a tussle between a renowned public figure and Africa’s largest Telecommunications company.

@wirejames

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Ugandan Budget Transparency to be Achieved through ICT

Ugandan Budget Transparency to be Achieved through ICT

The Ministry of FInance has outlined measures aimed at enabling citizen monitoring of the Budget. This is a step ahead in the fight against corruption and accountability by Government officials. Follow the Link to read the full article.

Uganda’s Budget, A Glimmer of Hope

Having had a chance to read through the Budget speech by the Minister of Finance, I have to say that as a patriotic Ugandan, it is a God send. For years I have been one of the silent complainants about our continuous never ending begging sprees that see us parading begging bowls before various Developed nations. What hurts most is when the very nations we are begging start making us dance to their tunes with total disregard of our needs as a nation and society of people with our own values.

Starting off with the Theme “Maintaining the Momentum: Infrastructure Investment for Growth and Socio-Economic Transformation” it is very clear that the investment in Infrastructure that has been kicked off in the recent past is not about to become history. Uganda is in need of a thorough revamp, upgrade or added investment in infrastructure like Transport (Roads, Railways, Air), Electricity (Generation and Distribution), Communication (Broadband, National Backbone, hardware systems), Water (Processing and Distribution), Agriculture (Irrigation Schemes, Processing) among others.

Due to the negligence over the past 20 – 40 years in addressing infrastructure needs in tandem with the growing population and economy, the country is now at that point where everything needs urgent attention. Unfortunately, its even complicated by the fact that for any meaningful economic growth, most of this hitherto ignored infrastructure cannot achieve results in isolation.

You for example cannot talk of constructing new roads when they have nothing to transport once done. The areas these roads are opening up should be stimulated into increased production for effective benefit of the masses and nation as a whole. A good example is the roads being built in the oil rich Bunyoro region as a result of the Oil exploration going on there.

The budget’s strategy is built on four key inter-linked interventions that are summarised as;

  1. Improving the business climate by undertaking key economic infrastructure investments.
  2. Leveraging Government assistance in Agriculture, Agribusiness, Agro-processing, Tourism, Industry and Services like ICT.
  3. Improving Human Resource productivity by enhancing provision of quality education, health and water services
  4. Strengthening Institutional Governance, Accountability and Transparency.

In brief, the Government would like to stimulate the private sector to grow in the sectors that Uganda has a core competence in by investing in key infrastructure, ensuring good health of the working population and addressing corruption. What more would one ask for?

On the Science and Innovation front, the Government plans to enhance support to industrial research institutions in order to develop and commercialise technology innovations. Uganda needs this in the same measure that we need good roads. Asa country, we have fallen victim and shall continue to fall victim of imported technology that is not suitable for our environment. No attempts at modification are even made and after being flooded with all this dumped technology, nothing gets off the ground and we are back to square one. Lately there has been a drive at a number of local Universities to foster innovation among the students. This has led to initiatives like the Food Technology Business Incubation Center at Makerere University, Tooke under the Presidential Initiative on Banana Industrial Development (PIBID), IT Innovation hubs like Outbox e.t.c. I am optimistic that in the next ten years, we shall have decent home grown innovations that can compete favourably on the world stage and emulate what our Agriculture scientists have been doing at the National Agricultural Research Organisation (NARO) for years.

Finally there has been a turn around by Government after having led a lie all these years believing that the solution to our unemployment challenge is to attract foreign investors who will create thousands of jobs. Those investors are either rare or have taken the country for a ride for too long. Cases are rife of so called investors shipping in cheap labour from their homelands especially those of Asian origin thereby defeating the very purpose of the investment sweeteners they are benefiting from. In this budget, there is clear recognition of SMEs being critical towards creating jobs while at the same time mobilising the informal and rural economic activity. I sincerely hope this can be followed through.

On the ICT front, the push by Government to extend the reach of the fibre backbone i.e. National Transmission Backbone Infrastructure (NBI) as well as commercialise its operations is very commendable as it is definitely going to stimulate the growth of ICT services beyond the key urban areas. It will also enable the faster realisation of countrywide e-Government initiatives that are infrastructure dependent.

The Business Process Outsourcing (BPO) subsector has finally began getting the recognition it needs too. With over 4000 employees, it has been recognised as another growth area. My take here is that the Government shouldn’t leave the BPO operators to hang out dry and look for work from overseas only, charity begins at home and I believe that the Government should lead by example, outsource to these operators as soon as possible.

Agriculture and Agribusiness have also received prominence in this budget. For a sector that employs 70% of Uganda’s labour force while contributing about 21% to the GDP, I must say that the technocrats in the Ministry of Finance have finally come down to earth. Interventions will be supported through focusing on provision of inputs, targeting the needy and graduates, focusing on enterprises that provide high returns to small holder farmers and encouraging value addition for those in large scale production.

The efforts to refurbish and construct new referral hospitals in Kampala and around the country is a welcome call towards addressing the dire situation faced by the Health sector. Until one travels to the country side and visits some of these health centers, you will never believe that God exists.

As a service provide to Government, I do appreciate the proposed accountability measures aimed at effectively and efficiently utilising public resources. These are;

  1. Strict enforcement of the Commitment Control System which bars any Accounting officer from over committing Government beyond the available resources. Accounting officers will be required to honour payments to contractors and service providers within 14 days from receipt of invoices (If you have spent 6 months and more without receiving a payment from Government for work already delivered, am sure you feel me on this).
  2. Decentralisation of the payroll management from the Ministry of Finance to the Accounting Officers is likely to deal with the ‘Ghost’ workers while interlinking the Integrated Personnel and Payroll System (IPPS) run by the Ministry of Public Service with the Integrated Financial Management System (IFMS) shall enhance efficiency of operation.
  3. Budget Transparency and Accountability. Did you know that there is a Budget information website that provides all budget related data? It provides performance of Government programmes by locality and serves as a platform for the public to provide feedback and report any information related to implementation of the national budget. This gives us an opportunity to debate with facts on issues of National Governance.

One will ask but how sincere is Government when they talk of promoting Agriculture and ICT while at the same time levying more taxes on the sectors? The budget proposal is to levy 18% VAT on;

  • Supply of New Computers, Desktop Printers, Computer parts and Accessories and Computer Software Licenses
  • Supply of feeds for Poultry and Livestock
  • Supply of Agriculture and Dairy Machinery
  • Supply of Salt
  • Supply of Cereals gown, milled or produced in Uganda
  • Supply of processed milk and milk products
  • Supply of machinery and tools for Agriculture
  • Supply of seeds, fertilizers, pesticides and hoes

If we put aside man’s inherent laxity towards paying tax, I must say that this move is counterproductive to what the Minister told the nation about promoting ICT, Agriculture and Agribusiness. The Agricultural producer is likely to experience an increase in costs of doing business and so we should expect a corresponding increase in product prices or less private sector led investment in the sector or both.

However, when you analyse this move from a holistic perspective, you realise that VAT is a tax that is transferable and thus doesn’t have to be swallowed up by the producer. Even when the consumer eventually pays higher prices for the product, Agriculture being what it is, no one can avoid food so the consumption is not likely to cease though it may slow down. What producers need to do is come up with new ways of availing their products in a manner that allows the consumer to continue with their current consumption patterns.

By raising tax money from this very sector, it will also help fortify the overarching theme of this budget. I mentioned earlier that the infrastructure development priorities can’t achieve their goals in isolation. So, because of the need to raise money locally having experienced a big drop in the donors supporting the national budget, its the time to sacrifice. Over 60% of Ugandans are in the category that can best be defined as ‘hard to tax’ with those in White Collar jobs bearing the brunt of taxation. In the short term, this leaves Government with Value Added Tax (VAT) as the soft spot for spreading the tax net further.

As we brace ourselves for a potential increase in service and product prices, I am a lot happier because more Ugandans are now going to be co-opted into the tax brackets hence reducing the burden on the few that have been bearing the brunt.

Secondly, with more Ugandans paying tax, this will increase civic responsibility in the lowest levels of society where people have been accustomed to making decisions without thinking them through. Case in point, many voters who tend to be in the informal economic sector do not care much about pursuing accountability issues from the Public Servants as they are under the impression that after all money comes from somewhere else. By paying taxes and feeling the pinch, they will abandon their laissez faire attitudes and exercise their civic duties.

Thirdly, corrupt Government officials will soon be faced with more than just mere jail terms. An angry tax paying population is unlikely to tolerate theft of its resources as opposed to the current status-quo where the adage “babba za bazungu” (They are stealing foreigners’ money) is common.

Bye Bye Dependence, Welcome Independence. Independence comes with Responsibility. Lets brace ourselves.

@wirejames

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Value Addition. The missing link in Uganda’s Agricultural Produce industry

Value Addition. The missing link in Uganda’s Agricultural Produce industry

  • The cost of a basin of tomatoes during harvest season at the farm gate is equivalent to two bottles of tomato sauce, which are less than 300mls in size each.
  • The cost of a kilo of poorly handled mukene (silver fish) at the shores of Lake Victoria is equivalent to the cost of less than 200 grams of supermarket-grade packed mukene.