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Taxation and its impact on economic growth in Uganda. A case study Of Kamapala District (issue 2)

This research paper aims to empirically analyze the interlinkages between taxation policies implemented by the
government and macroeconomic performance trends observed within the key district of Kampala, Uganda over the
past decade from 2010 through 2020. Utilizing an array of time series data procured from reliable sources such as the
Uganda Revenue Authority and Uganda Bureau of Statistics, a rigorous analytical methodology is undertaken
leveraging statistical software programs SPSS and Stata to identify relationships between quarterly tax revenue
aggregates, real gross domestic product, sectoral output indicators, and assorted control variables through descriptive
statistics, bivariate correlations, multivariate regression modeling techniques including ordinary least squares, two
stage least squares, and vector autoregression while accounting for potential endogeneity and serial correlation
concerns. The results provide robust evidence that prudent, business friendly tax systems played an indispensable role
in facilitating Kampala's dramatic transformation into one of Sub-Saharan Africa's fastest growing regional hubs amid
continuous expansion of total tax proceeds and robust synchronization with macroeconomic indicators. However, the
analysis also exposes critical challenges constraining optimal impact such as overdependence on indirect taxes
vulnerable to external shocks, rampant noncompliance amid lax enforcement, disproportionate incentive schemes
lacking transparency, and deficiencies in public services partly attributable to chronic revenue shortfalls. The tax
compliance burden had a moderately strong positive correlation of 0.545 with tax rates adopted in the economy. This
correlation was statistically significant at the 1% level. It implied that higher tax rates tend to increase the paperwork
and compliance costs borne by taxpayers. Simplification of complex tax codes and rationalization of tax rates could
help reduce such administrative onus on businesses and individuals. Hence, the paper concludes by recommending
strategic policy reforms centered on broadening the tax base, strengthening administration, rationalizing incentives,
and prioritizing efficient social spending to maximize sustainable, inclusive development opportunities through
Uganda's principal taxation framework serving as an instructive case study.

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