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Gov’t Considers Exempting Tax On Donations To Stimulate Economy

The Government of Uganda wants to exempt tax on all donations received towards combating the spread of coronavirus in Uganda with the aim of boosting the economy.

David Bahati (pictured), Minister of State for Planning made the revelation tabling four tax bills for the 2020/2021 national budget before Parliament today.

Government in the Income Tax (Amendment) (No.2) Act, 2020 seeks to amend the Income Tax Act, Cap. 340 to provide for the deduction of charitable donations made by persons to Government to fight against the COVID-19 pandemic.

If passed into law, the proposal will come into effect on 1st July 2020 with the proposal reading, “(1a) A person is allowed a deduction for a gift made to the Government during a year of income for purposes of facilitating the Government in the prevention, treatment and containment of the COVID-19 pandemic.”

Minister Bahati said that the move is intended to stimulate the economy, support the private sector and enhance domestic production capacity of goods and services.

He added that since this is an amendment to the existing tax provisions, there is no expenditure plan specifically different from the overall allocation of Shs438.26 billion for FY 2020/2021 and Shs484.53 billion for 2020/2021 to Uganda Revenue Authority.

However, the Ministry of Finance argued that the revenue gain or loss cannot be quantified currently.

The development comes at the time members of Cabinet joined the fundraising drive to contribute Shs1m each to the fight against COVID-19, with so far 47 ministers having contributed Shs1m each for six months to fight the pandemic.

The COVID-19 National Response Taskforce revealed that so far, the total collections stand at Shs32.5bn. 

Government further seeks to amend Value Added Tax Act, Cap 349 to exempt supplies of specified medical goods used in the prevention of the spread and the treatment of the Covid-19 pandemic, from tax.

Private sector will gain further in the Tax Procedures Code (Amendment) Bill, 2020 where Government proposed to defer payment of income tax for companies and other persons involved in the business of manufacturing, tourism and floricultural sectors, whose turnover is less than Shs500Million to defer payment of tax on employment income and to waive interest on tax arrears.

Minister Bahati told Parliament that the proposal will cost Uganda Shs50bn revenue loss as a result of waiver of interest on tax arrears.

Government in the Excise Duty Amendment Bill 2014 is proposing to vary the excise duty in respect of un-denatured spirits made from locally produced raw materials.

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