Uganda - Politics, government, and taxation

Like most African countries, the territory known as Uganda was an arbitrary creation of the European colonial powers. The borders cut across and brought together a whole range of ethnic and linguistic groups. Since gaining independence from Britain in 1962, the history of Uganda's politics and government falls into 4 broad periods.

The first period was opened at the country's independence with multi-party elections which brought the Uganda People's Congress (UPC) to power, led by Prime Minister Milton Obote. However, the Obote regime soon opted for a more authoritarian leadership. By using its base of support in the north of the country and the military to discard Uganda's traditional kingdoms and check its historical rivals in the south (who had been the country's elite during the colonial administration), Obote became the self-appointed executive president.

The second period began in 1971 when Obote was ousted from government by one of his key pillars of support, the military, led by Idi Amin. This was a major turning point for Uganda as Amin's 8 years of rule (1971-1979) saw the economy and political process collapse. Amin's regime used fear and racism as central instruments of policy and social control; over 300,000 people were murdered by the regime, and the vast majority of the country's 88,000 Asians were forcibly expelled and their land and other assets divided amongst Amin's followers. Economically, this was a disaster. After this policy had been enacted, the redistributed assets were placed in the hands of people who were inexperienced and lacked established business networks; this led to the decline of the productivity and efficiency of Uganda's business sector. Moreover, as Uganda's citizens became less confident in the stability of the formal economy due to Amin's unpredictable rule, they increasingly began to turn to the informal sector, thereby bypassing the state and its revenue-collecting authorities. In sum, the economy became less productive and more reliant upon the informal sector, both drastically reducing state taxation revenue. As state revenue was so depleted, the government began borrowing from international lenders at such a rate that Uganda became heavily indebted. These factors, in combination with the deteriorating terms of trade for Uganda's products on international markets after the decline of world economy in the 1970s, explain why the Ugandan economy was in dire crisis by the end of Amin's regime.

The third broad period of Uganda's political history began when Amin was finally overthrown in 1979 by a coalition of domestic forces under the banner of the Uganda National Liberation Front (UNLF) and the neighboring Tanzanian army. This led to an 8-year period of crisis and uncertain rule that plagued the country. After Amin's defeat, a string of 3 limited and short-term governments followed, led by the UNLF, President Binaisa, and President Lule, respectively. This period was one in which the economy was devastated further by continued widespread disruption, huge military expenditures, and the effects of the international rise of oil prices in 1979. This quick succession of regimes culminated in the corrupt and widely disputed multiparty elections of 1980 that reinstated Obote as president. Commonly known as Obote II, this period was characterized by 2 central dynamics. First, Obote attempted to address the country's considerable economic woes by approaching the IMF and the World Bank for financial aid. This aid was dependent upon Uganda liberalizing the economy with the hope that free market forces would make it more competitive in the world economy. Second, the social effects of this reform were negative, which in combination with the corrupt and heavy-handed rule of Obote II, culminated in growing popular support for the National Resistance Movement (NRM) led by Yoweri Museveni that was waging a guerrilla war from its support-base in Uganda's south.

The fourth key period of Uganda's political history began when the NRM took state power in 1986; the NRM remained in power in early 2001. With Museveni as president the NRM had seized power on the back of a set of left-progressive, anti-imperialist policies. However, because of the legacy left by Amin and his successors, the country was in a state of severe social, economic, and institutional crisis. Consequently, by 1987 the NRM was forced to go back on its initial left-progressive developmental policies simply because there was insufficient revenue to pursue such an approach. In fact, like Obote II, the NRM applied to the IMF and World Bank for aid that was conditional upon adopting free market reform.

Although Uganda's economy is claimed by many to have been in a relatively good state of health since the opening to free market forces from 1987 onwards, the political situation is somewhat more ambiguous. The country remains a "no party democracy." Museveni stresses that the NRM is not a political party but a national "movement" of a broad coalition of societal and political forces. As a result, while Uganda maintains a high level of press freedom (especially in comparison with most other African countries), political parties are illegal. A referendum in July 2000 saw 90 percent of voters favoring the continuation of the "no party system" which seems to have justified the NRM's political stance.

However, a level of contention remains about this system's legitimacy as the 2 most prominent opposition parties, Uganda People's Congress (UPC) and Democratic Party (DP), boycotted the referendum. Furthermore, the U.S.-based human rights group Human Rights Watch claimed in a 1999 report that, due to the illegal nature of organized opposition, the country has "a restricted political climate." Contemporary indications of discontent in Uganda are clearly illustrated by a series of violent insurgencies by dissident groups such as Joseph Kony's Lord's Resistance Army in the north and the Allied Democratic Forces (ADF) in the southwest. In order to counter these rebellions, the army now has permanent barracks in these volatile areas.

Presidential elections were held at the beginning of March 2001. Museveni won an easy victory with 69.3 percent of the votes compared to the 27.8 percent of his closest competitor, the politically progressive former army colonel, Dr. Kizza Besigye. Although Museveni's victory was tainted by accusations of intimidation, fraud, and violence (an estimated 5-15 percent of votes cast could have been compromised), this margin of potential electoral corruption still gave Museveni a sufficient mandate to hold onto the presidency.

Since 1998 Uganda has been at war in neighboring Democratic Republic of the Congo (DRC) to depose the Kabila regime first led by Laurent Kabila (who was assassinated in January 2001) and then by his son Joseph. This is a very complex war involving Rwanda, which supports a separate but similar anti-Kabila faction, and Angola, Zimbabwe, and Namibia, which all support the DRC government. The war is a considerable drain on the government's already sparse revenue; the Ministry of Defence received 33 percent of all ministerial allocations in the 1999-2000 budget. Yet by March 2001, Uganda was beginning to withdraw some troops from the DRC; however, this conflict has subsided and re-ignited before.

A key reform promoted by the IMF and World Bank was the restructuring of Uganda's taxation regime. One of the intentions was to lower the dependence on trade taxes, which reduced incentives for production, and to rely instead on indirect taxes on goods and services. Indirect taxes provided an average of 79.8 percent of total revenue between 1990-1998. Taxes on income and profits have steadily increased from 9.8 percent of total revenue in 1989 to 15.2 percent in 1998. Yet, of total taxes, about 50 percent still emanates from indirect taxes on only 4 products—petroleum, cigarettes, beer, and soft drinks. In fact, Uganda's tax revenue to GDP ratio is fifty percent below the African average.

The Uganda Revenue Authority (URA) was established to address the priority of improving government tax-collecting abilities. However, it is claimed that almost immediately after the creation of the URA its officials were involved in the major embezzlement of the funds it was set up to collect. In addition, throughout the government departments in 1997-98, US$120 million in tax revenue and government spending was unaccounted for. Due to these high levels of ingrained corruption, low levels of household income, and a small proportion of waged (thus taxable) labor, the majority source of government revenue still emanates from external donors. Of the government's estimated total financial requirement for 2000, US$1.467 billion was expected to come from domestic resources, whereas US$2.255 billion was required in external aid. It is due to regular deficits such as this that Uganda's external debt as a percentage of GNP has risen from 35.5 percent in 1985 to 58.2 percent by 1998.