Opening remarks by H.E. Ambassador Kristian Schmidt
Head of Delegation
at the 4th African Fiscal Forum – Boost Revenue and Spending Efficiency
Lake Victoria Serena Resort, 21st January 2016
Right Honourable Prime Minister,
Distingusihed Participants from across Africa,
Members of the Diplomatic Corps,
Ladies and Gentlemen,
It is an honour and a pleasure to welcome you to the 4th African Fiscal Forum, organised for the first time here in Kampala.
I would like to thank right away the Right Honourable Prime Minister and the Ministry of Finances for their support in organising this event as well as our long-standing partner, the International Monetary Fund (IMF).
As you know, this year, the forum will revolve around the all-important double prerogative for fiscal policy makers of "Boosting Revenue and Spending Efficiently". Or as the EU strategy to foster development puts it: "Collect more –Spend better". Our vision for how to do so is laid out in the Paper you will find in this room. This conceptual outline was also the basis for EU contribution to both the Financing for Development Conference in Addis and the 2030 Sustainable Development Agenda agreed in New York.
And let me, by the way, again pay tribute to Uganda's Foreign Minister Sam Kutesa, whose masterful guidance as President of the UN General Assembly helped secure these consensus agreement.
In Addis and New York, domestic public finance was rightly put at the heart of all countries’ efforts to achieve inclusive growth, poverty eradication and sustainable development. Development co-operation remains crucial, but domestic resources are the future. Aid dependency is the past.
So how do implement this global vision?
To begin with, the global institutions must get their act together and offer coherent and coordinated advise. The IMF the World Bank, the OECD, and yes, the European Union: We need to come up with a well-coordinated approach. Our partners in developing countries should not be subject to conflicting guidance – this applies to all topics but especially to support in domestic resource mobilisation. The African Fiscal Forum is one among many joint initiatives we carry out together with the IMF, and we have also here a brochure on our cooperation that showcases collaboration on issues such as tax policy and the management of natural resource wealth.
Infact, you have so many things to discuss over the next two days. Let me give you just a flavour.
First, how do you "collect more"? Well, that issue was taken up in the Addis Tax Initiative, which the EU, as a member of the ATI Steering Committee, strongly supports. What are the requirements of the ATI beneficiaries and how do we expand collaboration to include the regional tax administration organisations (ATAF, CIAT, etc.)?
Right Honourable Prime Minister, I know for example that Uganda for sure is determined to "collect more" in domestic revenue mobilisation. Uganda's tax-to-GDP ratio remains low by regional comparision, leaving the fiscal space strechted compared to its regional peers. This puts the Government's ambitions to scale-up energy and transport infrastructure investment at risk.
Uganda has had some good success here with a recent tax effort producing a tax revenue increase by about 1% of GDP in FY 2014/15, thanks to the removal of unproductive tax and income exemptions. Despite these efforts, recent studies [TADAT, Tax Administration Diagnostic Assessment Tool, August 2015] of Uganda's tax administration system confirm that tax compliance remains a major issue. Also, with a large informal sector, a narrow tax base [with 90% of revenue coming from the top 1,000 taxpayers], there is still some way to go for Uganda to meet the target of 25% tax-to-GDP ratio in the medium term for East African economic integration. It has been suggested that one equitable way would be to enhance taxation of property and land. That is the fascinating topic for this afternoon' session.
Second, how do you "spend better"?
Well, where do I start on this issue? It is crucial. Inefficient and flawed public investment management undermines the social compact. With bad service delivery, no-one will want to pay taxes. This has been clearly expressed in the 'Collect More – Spend Better' Initiative. Our partner, the IMF has also launched a very promising tool for assessing Public Investment Management.
Right Honorable Prime Minister, Uganda has given itself a major challenge in this area. The Second National Development Plan makes public investment in infrastructure a pivotal part of your country's ambition to become a middle-income country. Yet the recent IMF Public Investment Management Efficiency Index indicates that Uganda has weaknesses in the management of public investment, characterized by under execution, poor planning and delays in procurement processes.
Failure of compliance with public procurement rules remains a significant brake on development in Uganda, as once more highlighted in the Auditor General's annual report. Flawed execution and oversight in the road sector recently led the World Bank to cancel substantial loans, and flawed procurement and execution of Global Fund grants is now putting the fight against HIV/AIDS and Malaria in Uganda at risk.
Uganda is not unique here, In fact, I think there is a general lesson here: A euro is a euro, a dollar is dollar, a Ugandan shilling is a Ugandan shilling, and so on…. Whatever the currency, funds entrusted to the treasury and to ministerial departments must all be treated with the same care, whether they originated from the African or from the European taxpayer.
We need integrated, coordinated, effective control systems, accountability and oversight. Transparent and competitive procurement. Professional and reliable execution. Whatever the source of public funds, -- "own money" or "donor money" as we say here in Uganda.
Right Honorable Prime Minister,
I now come to the end of these short remarks.
Dear Participants, You are lucky to have the opportunity to come to Uganda, to this beautiful nation at the shores of Lake Victoria. Please enjoy this wonderful setting, and the warm hospitality of the Ugandan people!
But make no mistake. What you are about to discuss is at the heart of the future of every nation – African, or European by the way. Nations fail if they cannot tax and spend well.
And so the African Fiscal Forum's purpose is to offer you—practitioners of fiscal policy— the opportunity to engage on fiscal challenges faced by your countries, to share your experiences and views, and build relationships that can help build capacity to deal with fiscal challenges.
On that note, I wish you fruitful discussions and look forward to benefitting from your insights to help us design together fiscal policies that are conducive to the achievement of the 2030 Agenda and the Sustainable Development Goals.
Thank you very much for your attention.