A Must Read; How the East African Tax Policy is Failing the Youth

A Must Read; How the East African Tax Policy is Failing the Youth

The study of history is often lambasted for being of no use. Henry Ford famously said that it is ‘more or less bunk’, while the philosopher Hegel was of the view that mankind learned nothing from it.  All this is likewise true of tax history as a specific type of history as I’ll assert hereinafter. At its core, taxation is the monetary charge imposed by the government on persons, entities, transactions or property to yield public revenue. It is the driving force behind any established civilization.
John Locke, the great enlightened thinker, in ‘An Essay Concerning Human Understanding, Epistle to the Reader (1690a, pp.9–10)’, saw himself as ‘clearing the ground a little, and removing some of the rubbish that lies in the way to knowledge’, and starting with a blank slate, in everything from the generation of ideas to the development of political systems. In exploring Locke’s views on Taxation, we look at, first, his views on private property and government. John Locke developed an idea where natural law principles mean that man has a right to own the product of his own labours, including land which he has worked. His basic idea was that there was enough for everyone, but this was altered by greed and the introduction of money, enabling possession and exchange of goods which men might otherwise have acquired by labour. This distorted economic proportions and created frictions amongst people as they went about their daily lives, which were made worse by an increase in the population.
English Philosopher, John Locke, the architect of the ‘social contract ‘ theory.
Government and the social contract then became necessary to ensure that people could live together harmoniously. Presenting it as tacit consent, Locke reinforces the idea that uniting into a community means that individuals surrender power to the will of the majority, in return for the benefits obtained by living as a member of the community – protection of life, health, liberty and property. This is Locke’s form of social contract theory. That individuals must be prepared to pay for these benefits through taxes otherwise it would be a war of all against all; rape, robbery, murder, business malpractice etc. human life would be a solitary, poor, nasty, brutish and a short nuisance in the absence of political order and law, however arbitrary and tyrannical. This approach became the most generally accepted in the elite circles.

David Hume and Jeremy Bentham were philosophers who later, in their hostility towards the social contract theory, pointed out the fact that all primitive societies display at least a judicial system enforcing a customary law. That in that sense, the social contract did not actually create governments but rather governments created social contracts hoping to encourage efficiency in development, and doubtless, also, to increase tax income for their own smart practice. I opine that whatever it came from, had the fundamentals of capitalism instilled and readily churning an extra cushion of survival for the ruling class.  The problems arising with taxation are therefore inherently as dubious as the state itself. This makes taxation a double edged sword as it can either make or break a territory. For instance; while to some, tax adherence denotes the price for harmony, to others (the ruling class), taxes are simply compensation without accountability, for offering their ‘elite’ political and administrative services.

For the characteristics of a ‘good’ tax, it is usual to refer to the canons of equity/proportionality, certainty, convenience and efficiency put forward by Adam Smith in Book 5 of his work; ‘An Inquiry into the Nature and Causes of the Wealth of Nations, 1776’. It is trite observation that societies are directly affected by poor economic policies and people have time and again wielded the power inherent in their will to force change. A case in point is the French Revolution; King Louis XVI and his wife Marie Antoinette who met their death by guillotine because the masses were desperate and enraged by a shameless regime that imposed heavy taxes without any relief. source  This goes to show how sensitive the issue of taxation is both directly and indirectly.

The Youth is at the centre of the Social Contract.

By virtue of their big numbers, the youth are at the centre of the social contract. 60% of the African continent are below 25 while 82% are below 35 years of age. Similarly, the East African Community is a very youthful region and moreover it represents  over a quarter of the African population. source The average African woman is likely to have 4 more children than one from the rest of the world. Meanwhile given the youth bulge and the evident rising numbers, Africa’s GDP is barely a third that of U.S.A. About 76% of the East Africans are youths and this rate grows at 3.2% pa.  In Uganda, the youth contribute 78%, 60% are unemployed and 14% of that are literally living hopeless -no job and no employable skills. It is therefore quite obnoxious how then, out of the 528 Members of Parliament in Uganda, only 5 represent that bulge whose collective challenges are the most and almost behemoth. Despite the current struggle for political identity, the youths in Kenya, Rwanda, Uganda, Tanzania, Burundi and South Sudan are positive and optimistic about the future. source They are confident that the future will bring more prosperity and are willing to be part of the solution through a strong orientation to entrepreneurship. They have an overriding zeal to create and run their own businesses. However, as their numbers make them good targets for political campaigns, studies show that 50% of the youths can only vote when bribed due to their uninvited but unavoidable set of circumstances. The rest largely find it wasteful to vote. This puts leaders in power that have only prioritized their votes and not them.

An incredible 76% of all East Africans are youth.
Youth Challenges with tax.

Much as the youth, by large, make up the total population, their participation and inclusion in fiscal governance processes has remained low. This automatically creates a huge problem each and every one gets to deal with on a personal level. A case in point is the high cost of Internet Data Bundles worsened by the exorbitant OTT Tax. The flat rate presupposes that all consumers have the same purchasing power. The initial proportionality objective instead becomes a regressive tax that stifles the lives of those at the detriment. For instance, the wholesome operational costs that a one Masendi, a 25 year-old graduate operating an online business will have to incur then becomes immense enough to fell  his whole start up.  

According to the social contract, the government is supposed to provide public needs and also create avenues that make the transitions of the lives of its citizens easier and more civilized. Take the case of the aforementioned Masendi who, after being shunned away from employment opportunities for unmentioned but reasons so appalling like nepotism and tribalism, will go on and start up his own business. At this point, he is entering a field where the foreign players are much more favored than the indignant ones. There is no such thing as a tax holiday, tax exemption or even a waiver for Masendi, the youth entrepreneur to expect. The foreign investor though, with tons more capital and traction will still receive the incentives and grow further. Masendi collapses once again, where his government was meant to help him fly.

Foreign investors enjoy great privilege in terms of tax cuts. These opportunities are not available to most locals or youth.

I then examine the laxity that is wooing teenagers and youth away from purposeful educational and personal development. A problem caused not by their own failure but by the governments’ poor socio-economic planning. The tax structuring that makes the young person come to the world half baked as a result of being under-taught. It all comes from the excruciating teacher absenteeism. Teacher R leaves school S at time T to go devote attention to a side hustle, every week, every time..; many have admitted to engaging in private school part-timing, others have started up small scale businesses to help boost their income. Most of whom will never return to the ‘noble’ profession after the mumbling and rumbling occasioned by Corona. The students miss out on proper handling because the teachers are remunerated peanuts yet they have families that also want chicken. In the same spirit, poor follow up of directives and tax cuts has affected the youth. A girl in the village, ghetto or a refugee camp can not afford to purchase sanitary pads, the nice ones okay.  Despite being zero-rated, pads are still quite expensive for the ghetto ‘yut’. That and a lot more emanate from the failure to pay attention to the issues affecting the non-policy makers.

What the Youth can actually do about it.

With reference to the 4Rs; Revenue, Repricing, Redistribution and Representation, tax is a tool that can be used to address the nation’s challenges, the youth in this context. Through effective and efficient fiscal policies and practices, East Africa can overturn the youth problem. The youth in Kampala took to the streets in 2017 in passionate protest against the Social Media Tax. The argument was that this tax tends to suffocate their access to information as a fundamental human right. The campaign, much as it was justified and highly embraced by the youth community of Uganda, was all in vain; the tax still stands. Further activism is required to push Parliament to expunge Item 13 (b) in the second schedule of the Excise Duty Act of Uganda, 2014.

Ugandan Youth took to the streets to battle social media tax also known as OTT tax.

Since the youth and youth owned businesses are playing their role by working harder and strictly adhering to their bargain of the social contract; it almost immediately reinforces the right to demand for accountability and justification of their respective countries’ resource and relief allocation. The right to be addressed for their special place in the community’s future and not only for their voting rights. Instead of awarding tax incentives and holidays to foreign investors, it should be the youth owned businesses. The East African youth ought to assert their right to have the government work for and not against them especially in fiscal matters. This will be in direction to level up the playing ground whence both local and foreign investors  have an equal opportunity to compete for the East African markets. This may even solve the problem of actual standardization of goods.

Finally, the need to actively watch our local politics. Even when our numbers are so overwhelming, we are swamped up into the daily hustle and a lot of irrelevancies to deal with our poor state of life. The time and energy previously spent on irrelevant things should be re-allocated to matters that concern our welfare. Should this level of concern be achieved, our lot will manage to push the legislatures to re-evaluate the need for continued and strengthened but specifically, adequate representation. More young people will eventually see the need to come out to compete for political posts, so as to cause more attention to the issues that affect them. Those blessed with taxes to file will also do it with a smile.

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