Yesterday was a major milestone for myself and Boundless Minds. We made 4 years, last Monday, 1 February, and yesterday, for the very first time, we were able to deposit PAYE and NSSF contributions for every member of the team.
The last time I had made an NSSF deposit was April 2017, while still working at ACME. For the rest of my team, this was the very first time, because they’d not held contractual positions before.
4 years…that’s how long it has taken one enterprise to get to this point!!!
Why am I sharing this though? Well, you’ve probably seen that letter proposing to tax bank withdrawals, or are still debating whether to go back and pay OTT, now that Social Media is “back”.
It would seem that there is motivation to tax without investing in creating an environment that enables the growth of a tax base. Let me show you how.
In those 4 years, we have accrued tax penalties of a little over 8 million, which our Finance people has since managed to challenge and get reduced by about half. But how did we end up with a huge tax bill?
Well…most founders build out of passion and very rarely have financial and taxation knowledge. You know what difference you want to make and how, and the rest of this other stuff is learnt on the job.
But then you have to register and get a TIN, as part of the process to open bank accounts or raise revenues. Nobody tells you about filing annual returns at this point, or about your tax obligations. And even if they do, you probably don’t know how to or where to start. You are also just learning the ropes of a start-up and don’t have enough to feed yourself…so taxation isn’t the first thing on your mind.
Yet URA doesn’t stop it’s count. It has your email and number, and makes sure to remind you of what’s due.
That cycle, coupled with the difficulties of raising revenue – because you’re a startup and Ugandan/African, can take up to 5 or even more years for some people. In our case, it has taken 4 years.
Without even going the way of how our taxes are (mis)used, imagine how much it takes from small/young a business annually, if they have to remit say a monthly UGX 700,000 to URA – or get punished if/when they fail to.
Almost everyone I know runs a (side) business and there seems to be no incentive to legitimize it.
If the government is looking for taxes, it might actually make sense to do the opposite. Give tax holidays of about 5 years local enterprises whose income is within a certain revenue bracket. While boosting their knowledge and capacity to operate.
This would allow them to grow exponentially, free from the shackles of a bad business environment, and perhaps, get to a point where they are able to pay more consistently and much more.
Basically, a choice between fattening the cow first, so it attracts more on market day; or haranguing small businesses for taxes and killing them before they’re able to break even.
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