The Effect of suspending Graduated Tax in Lower Local Government: A Case Study of Mukono District.

Abstract

The objective of the study was to assess the effects of the suspension of graduated tax in the lower local governments. The findings reveal that GT formed a major source of the local revenue collection and this made it easy for the lower local governments to deliver some services to the people without depending so much on the central governments as it is today. GT was used to fund schools (both government and private), pay workers, garbage collection, routine road maintenance, buy medical equipment and furniture among others. GT was crucial for the functioning of lower local governments. Its suspension brought a very big task of finding about 59.0 billion Uganda shillings to replace it. With the suspension of GT, there were many negative effects that were faced by the lower local governments and these were: failure by the local councils to effectively collect garbage, low tax bases, council budgets were affected leading the councils to leave out some activities like contributions to the youths and the disabled, poor revenue generation, introduction of indirect taxes which are in a form of increased prices of various commodities like fuel and others. In order to minimize the effects associated with the suspension of GT, the researcher recommends that new sources of revenue for the lower local governments should be established. These include land tax, property tax, parking fees, taxes on charcoal and cattle, introduction of indirect taxes on essential household consumption, VAT, introduction of local government matching grant and others. However, the researcher suggests that the new introduced taxes should have a wide tax base, be acceptable and should be easy to collect in order to avoid the weaknesses that were associated with GT that led to its suspension. The dissertation is presented in five chapters.