Taxation intrudes into every home to the extent that it can cost one the loss of liberty and property. This begs the question, ‘what happens when the state’s appetite for revenue breeds unpopular revenue raising reforms or when a group of businessmen is desirous of having their tax burden lessened by statute?’ The current literature on taxation and governance addresses representation, accountability and expenditure priorities. This has left the issue of influence over tax reforms understudied yet it is important because contestation over reforms underscores the rule of law and strength of business interest associations.
This thesis presents an analytical framework that demonstrates the link between taxation and the rule of law. In short, the need for additional revenue leads to enactment of tax legislation (tax reforms) or enforcement of existing laws which tend to increase the tax burden. Consequently, contestation ensues between the State and business interest groups or firms which may seek the intervention of the legislature (lobbying) or judiciary (litigation). Conflict between business interest groups and the State is bound to emerge because the reforms tend to reduce profitability or undermine the cash flows of the enterprises.
Using case study approach, I analyse various cases of tax reform which are carefully selected from various Bills and Acts of Parliament in a bid to demonstrate the diversity in tax reform. I use data from newspapers, debates in the parliamentary hansards, information from budget speeches, court decisions and interviews to analyse the interaction between business interest groups and the State.
I find that the character of the State has changed between the Colonial era and today hence affecting revenue bargaining environment (Chapter 3), business interest groups influence tax reforms by blocking the reforms, softening their implementation (Chapter 4 and 5) and do so through lobbying, protests and litigation (Chapter 6). Firms also set the tax reform agenda by seeking tax exemptions from the State and cause reform by litigating against existing tax measures. The blocking or softening of a reform may not mark the end of the transaction because a blocked reform can be reintroduced. These findings enrich political economy theories of democratic governance by demonstrating the role of business interest associations in policy making and its implications for policy change.
I draw the conclusion that, since taxation breeds contestation, it presents positive implications for the rule of law when firms act collectively and when the courts enjoy judicial independence. I suggest recommendations towards the strengthening of the organizational capacity of business interest groups, increasing the independence of the judiciary and further areas for research i.e. the effect of oil revenue on democracy in Uganda and the influence of small scale business interest groups on policy. My most significant contribution is the identification of courts of law as an arena for revenue bargaining and analysis of litigation as a revenue bargaining strategy.