The Art of Deficit Financing: Budget 2020/21

“Deficit financing, however, may also result from government inefficiency, reflecting widespread tax evasion or wasteful spending rather than the operation of a planned countercyclical policy. Where capital markets are undeveloped, deficit financing may place the government in debt to foreign creditors. In addition, in many less-developed countries, budget surpluses may be desirable in themselves as a way of encouraging private saving” (Encyclopaedia Britannica – ‘Deficit financing’ (25.08.2015).

What is striking from the 2020/21 budget is that its not only 45 trillion shillings, but the way they are financing this spending. Because, the budget need financing or revenue to pay the expenditure. You cannot use air to pay the bondsman. The people you owe money or supposed to spend on needs real cash-flow and liquidity to be fiscal responsible.

What we learned again is the debt deficit financing, which has been common staple in the Republic. Since domestic revenue or tax revenue is about 20 trillions shillings. This means that the rest of the budget has to paid for in various of other ways. In this regard, the state are borrowing, refinancing and gaining more debt. As the state is also wasting more of the budget on paying interests.

This is really making a evil circle and continuing debt trap. Even if the trillions upon trillions owned by the state is growing. That this still haven’t hit a debt ceiling. However, the issue here is the amount of paying interests. They are wasting away money on paying for old loans. This is what the state is initially offering. While it is gaining new debt to finance the over-expenditure today.

When the state pays 4 trillion shillings (9% of the budget) in interests. That shows how destructive this is for the budget. How important it has become. When 1 in 10 shillings of the budgets are paid in interest. This money could have been spent in all parts of society. It could have changed people’s lives and invested in the future. Instead its paying on the debt trap created by the same state.

Deficit financing and refinancing will only ensure the future generations are paying for the growing debt created by the current government. They are borrowing on the future growth and supposed revenue. Even as the state is ballooning the budgets, that they are not able to cover more than half. That is worrying and should worry the republic too.

Yes, that budgets get ballooned in election years are common. That the budgets are insincere and write of taxes in these years are typical too. All of this isn’t new. It is what happens when the Republic is preparing for elections in the coming year. Therefore, the state needs a treasure chest to bling out on chiefs, voter tourism and whatever else to look good for everyone.

That is why this budget is like this. We can clearly see that the state are continuing to acquire more debt, which means the interest payments will grow every year. This is why the refinancing and growing debt should worry everyone. Because, just like the interests payments are now at 9% or 4 trillion shillings this year. We can wonder how it will look when the grace-periods of several of loans are over and the initial price of these as well.

The Republic of Uganda deserves better, but the leaders and the ones in-charge are making it like this. They are not concerned about the future and that is very clear. As they are spending and squandering away the future today. Then someone have to pick up the tab in the future. Peace.

Malawi: MPs soon getting tax-free rides!

In June 2019 with the newest salary increases, the Members of Parliament was getting 2,5 million Malawian Kwachas monthly, while the average median salary is about 159,000 MWK. However, this is what 50% of workers earns or lower. Meaning the MPs before the newest pay-rise they are earning around 15 times more than over 50% of the general population.

So with this in mind. There is new reports that the MPs whose already rich by all standard in the Republic. Are ensuring their own wealth with more incentives. This being tax-exempt cars. They can buy cars without paying taxes. Before, the newest incentive, they we’re not paying for it anyway during their elected term. However now, it is totally tax-exempt. They will not have to pay exercise duty nor paying customs after the fact. Meaning its only the cost of getting it from abroad and shipped to Malawi.

The MPs are not paying taxes on their cars. MPs will be allowed to do this with two cars during their term, while the Ministers are allowed to buy three.

So, they are getting a real bargain. While the ordinary citizen has to pay added taxes on the commodity. The MPs and Ministers will drive around in cars, which they never paid taxes for. This is all for the up-coming term from 2019-2024. The MPs will all have a capital gain and able to save money. Even not really loose to much using the cars and then trading them when their term ends. It is a real incentive to buy extra cars during their term.

This is all a small heist by the MPs. They are getting cheap cars, easily access to cash to buy it with allowance, sitting fees and whatnot. All of this blended with incentives to buy two cars during their term without taxes. This makes the cars cheaper and makes it good deal for them.

Every single citizen has to pay the levies and taxes on their cars. Only the MPs and Ministers are exempt from it. These people are ironically representing the people. A people who has to pay taxes for the same product and vehicle. While the MPs are getting a free-ride, the public have to cough up the taxes for it. That’s shows how unfair it is and the public cannot stop them. Since, this is something they vote for themselves. Just like they do it with the salaries. Which is already superior to most in the Republic.

The rich are getting richer, while they poor continue to struggle. These are the representatives of the people. They are acting like kingpins and forgetting their part. They are enriching themselves on a position, which is bestowed on them. Instead of showing gratitude and serve the public, they are finding new ways of gaining wealth. This is misuse of office and this should be the perfect excuse of getting new leadership. Which represents the public and their needs, not only fill their own pockets. Peace.

Opinion: Chameleone needs to “pimp his ride” or just pay his taxes!

This is not the first time Jose Chameleone struggles to pay taxes. Jose has forgotten to this several of times. It is actually his M.O. and a thing he does. It is just his arrogance as he lives in a house on a hill and the rocky road to it. Makes him think that the Uganda Revenue Authority will not touch him.

In 2012 Jose got in trouble over a 2004 Toyota TX Prado, as he undervalued the car to URA and therefore the car got impounded by them. In 2014, the singer had to answer for back-taxes on his Cadillac Escalade , as he had tax-arrears on it. Also in 2016 the singer had tax-arrears on another Escalade.

Now in 2020, the same issues happens again. Now with his Toyota Land Cruiser V8. It is like this man doesn’t like to pay taxes or try to avoid it. Chamelone tries to run away from the tax-man. The man doesn’t want pay the state. This is how it seems, since he cannot manage to cough up for the cars he buys.

This is the third car he haven’t paid properly his dues. The man is incapacitated or ignorant of the levies of taxes on motor-vehicles. Seems, like someone needs to give the Mayoral Candidate a lesson or get him to meet URA. Since, this is something he repeats. He rewinds the same story, only to switch with car and what type of car. The rest is the same.

Chameleone can blame others, he can throw under the bus and say that URA is on a vendetta. However, most likely his lazy and his Team isn’t covering for the man. The auditor and the ones running Leone Island isn’t doing it well. Since, this continues to happen. If they have the same person running the books of the company. Than that man should get the axe and the singer hire someone new. Because, this practice is getting old.

You have three cars in questions of the years now.

First in 2012: Toyat TX Prado.

Second in 2014: Cadillac Escalade

Third in 2020: Toyota Land Cruiser V8

As we see, the theme continues with just another ride. He could either pimp his rides or do himself a favour. Pay the damn taxes and move-on like a grown man. You own things, now cough up the dough and let it be. Peace.

Bank of Uganda: Measures to mitigate the economic impact of COVID-19 (20.03.2020)

Mobile Money Tax shortfall: People change behaviour after levying an unfair tax

“Levy on mobile money contributed a deficit of UGX 30.48 billion which can be explained by the fact that high value clients withdraw their funds from agency banking e.g MTN has had a drop of 36 percent in MM transaction values since the introduction of the levy on mobile money” (Uganda Revenue Authority, 06.02.2020).

There is also reported that it has been a 36% drop in Mobile Money Transactions since the enaction of the Exercise Duty in 2018. That means, the added tax on the MM transactions are backfiring. The State isn’t adding revenue, but ensuring that people are finding other ways of moving their money.

This is not shocking, that people change behaviour, when the state makes it more expensive. As the people used these services to send each other money by convenience. Now, one third of the transactions are gone. Meaning, the ones that can change their ways has done that.

The losers are not only the Telecoms, but also the state. As the shortfall of taxes got to be covered elsewhere. As the state had put this into the budgets to cover other state works. This means the targets for domestic revenue wasn’t considering the implications of doing it. As, there wouldn’t be an natural reaction to the consequences to the new taxes.

Instead of increasing the tax base, they are making it smaller and not able to find measures that makes sense. The state has clearly done this without due diligence, neither also configured the stats and the possible behaviour of the public. As their ways gotten more taxed and not considering that they would stop, if they found it to expensive or unreasonable.

The MM tax and the OTT taxes was measures made to tax the digital market-space in the Republic. However, they have both been flawed and also not met their targets, because the public found other ways of doing things.

The ironies about the MM saga is that before the tax, the business of MM was growing. A natural growth and having more transactions every year. Now, that they levied the tax its has a big fall. That is a result of the MM Tax and the public is not having it. Peace.

Kenya Tuitakayo Movement rejects the Turn Over Tax aka ‘Mama Mboga Tax’ (31.01.2020)

Opinion: OTT Tax on Data Bundles is like a dual-VAT

“URA Commissioner General Doris Akol told the Finance Committee of Parliament chaired by Henry Musasizi that the controversial OTT Tax will be charged directly on data instead of mobile money to curb the evasion” (NBS Television, 14.01.2020).

I wonder if Doris Akol has thought this through or is winging it? As she see the losses and lack of results, revenue or tax base with the 200 shillings of doom. The whole OTT Tax is to expensive for the public daily. Now, she wants to move it and indirectly tax it instead.

Surely, they will get revenue, but this will make it more expensive to buy data-bundles for the customers and make the packages more viable. VPN and similar networks to circumvent the usage and payments of the daily OTT Tax have beaten the Uganda Revenue Authority (URA). That is why URA does this now.

It is a sign of defiance and civil disobedience. They are trying to patch the hurt. But will this succeed? Will more try to only load data through Wi-Fi networks and wireless networks in general. Not load so much data on the go. Because, people are smart and tries to undercut extra taxes. Especially, when on the data is already paid VAT and the Mobile Company pay their taxes on the profits too.

Therefore, URA and Akol seems fishing. They will raise revenue, but also make the data bundles more expensive and with that stop plenty of people from buying bigger data bundles for surfing online on your smart-phone.

That is just the mere reality. It is a sign, yet again that the OTT is a failed project, who didn’t hit the targets and wasn’t measured right. If it was, the aim and the bargain wouldn’t be like this. That is not happening.

This method is a clever way of adding the costs of data, while charging for service not necessarily used. The OTT Services, which is the reason for why these are charged. Because, the data could be used for other things and therefore, is violating its attempt to make it costly for certain usage on online.

This is again, pushing one story, pushing one tax and trying to tax the public by any means. When the hook doesn’t work, they use the crook. Instead of doing directly, they want to do it indirectly and initially in some way adding a separate VAT on data-bundles masked as OTT Tax. That is really it.

We all know this, URA verify it today. That the only things certain in life is death and taxes. Thanks Akol for reminding us. Peace.

Brexit: A Shoddy Impact Assessment of the new Withdrawal Agreement Bill…

This was really inspired and not well thought out of, the Department of Exiting the European Union and the rest of the Tories. Really didn’t care much for the estimates of the costs, nor the consequences in concerns of their amended Bill to Parliament. Prime Minister Boris Johnson wants to just pursuit the ending without doing the proper work. This is shoddy, disrespectful work, which he wanted to be over within 3 days or so. Within the parameter of when he wanted to suspend the Parliament.

So, his acts and his vision is blurry, as the whole law and amendments of it. Is substantial and needs time to be addressed properly, that is if, the Brexit process and withdrawal of membership has consequences. Which it does, but apparently it is more important to leave, than to know why your leaving.

I have today looked through the Impact Assessment Report on the bill, which in itself is a sad report. A disgraceful attempt of justification and proving the possible outcomes of the withdrawal. Apparently, that didn’t matter, because my quotes are very striking. Take a look!

“There could be costs to business associated with the arrangements in the Northern Ireland/Ireland Protocol. But these are inherently uncertain in their nature and intensity, as such, these costs have not been quantified” (Impact Assessment, 2019).

Customs:

“Businesses in Great Britain and Northern Ireland may face familiarisation costs in adapting to the new customs processes, such as the requirements for customs declarations, in particular if they have not undertaken such processes before” (Impact Assessment, 2019).

This isn’t rocket science and will cost both the state and the businesses. It will cost both time and money, to fill forms and secure the movement accordingly to the regulations on both sides of the customs.

VAT:

“Northern Ireland will be required to align with certain EU VAT and excise rules. VAT collected in Northern Ireland will be retained by the UK. Specific practical arrangements will be the subject of discussions within the Joint Committee, and it is not therefore possible to assess costs or benefits at this stage” (Impact Assessment, 2019).

The taxation on goods will be an issue and how its issued. This will add prices possibly on the consumer and also on the businesses. But the HM Government don’t know to what extent and how to operate. That is clearly a smooth transition.

Tariffs:

“No tariffs will be paid on goods moving from Great Britain to Northern Ireland unless they are deemed to be at risk of entering the EU. The appropriate UK tariff will be paid on goods moving from outside the UK or EU to Northern Ireland unless they are deemed to be at risk of entering the EU. The Joint Committee will agree the criteria to be used in determining whether goods are not considered to be at risk of entering the EU” (Impact Assessment, 2019).

So, there will certain cost of moving goods into the EU as per the tariffs stipulated by the Joint Committee. This means, the UK-EU on accord will find the fitted prices on movement of goods form the UK into EU. That means, the goods moving across the borders will cost more, than today, as there is no-tariff on lots of products crossing the borders at this very moment.

Agri-Foods from GB to NI:

“Agri-food goods moving from Great Britain into Northern Ireland would need to be notified to the relevant authorities before entering Northern Ireland and would be subject to checks including identity, documentary and physical checks by UK authorities as required by the relevant EU rules. These processes would introduce additional costs, both from one-offfamiliarisation and ongoing compliance, to businesses compared to current arrangements” (Impact Assessment, 2019).

This will surely cost and make it more time consuming. Not making it easy or smooth either. Surely, all of this is hardening the trade of this to NI.

Manufactured goods from GB to NI:

“To ensure regulatory compliance, businesses in Great Britain selling to Northern Ireland may incur additional costs from product testing and corresponding administrative processes. The nature of the costs will depend on the product-specific requirements in EU law and on a business’s current approach to meeting these requirements. These costs may be passed through to businesses in Northern Ireland” (Impact Assessment, 2019).

Here the costs will be put on the consumer in Northern Ireland for the goods coming from Great Britain. The manufactured goods will not be cheaper, but more time consuming to get and has to follow other protocols, than the ones coming from Ireland/EU. This means for the NI it will be more profitable to get EU goods, than GB goods, because of the cost. That is simple calculation.

We can all see, that the Withdrawal Agreement and new legal text makes business, movement of goods and borders to the Northern Ireland more harder. That without swimming into the legal text nor the statutes of the Withdrawal Agreement. Because, this is just the mere chip-shape of the impact assessment of it all.

The whole thing is lazy and that makes me grim. Because, this shows the people releasing it. Didn’t do their job and show the real estimates nor the possible costs of doing business. Only that it might cost more, which it most likely will do, because you have more things to do before doing business. Peace.

Reference:

European Union (Withdrawal Agreement) Bill – Impact Assessment, 21.10.2019

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