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Gov’t Defends Tax Increase On Fuel Products, Says Economy Has Recovered From COVID-19 Impact

Government through the Minister of State for Finance, Henry Musasizi (pictured), has defended the increase of tax on fuel products from Shs1,450 to Shs1,550, saying Uganda’s economy has recovered from the COVID-19 pandemic and the increase is part of Parliament’s earlier recommendation to have tax on fuel products increased every two years.

The Minister said Gov’t is eyeing to generate additional revenue of Shs200.92Bn from fuel tax.

“You may wish to recall that previously, it was agreed with Parliament that Government would increase Excise duty on fuel products by Shs100 per litre every 2 financial years except the COVID-19 Pandemic period. Since the economy has recovered, we think it is time to make the adjustments. In addition, over the last periods, the Uganda Shilling has depreciated and the price of fuel has increased yet tax has remained the same which implies that the proportion of tax on fuel price has been declining. Therefore, the proposed increase which is equivalent to Shs1.9% average pump price is a modest increase,” said Musasizi.

Government also says expanding scope to apply to products which are similar to cement in nature and in use isn’t a new tax because Government already imposes a levy of Shs500 per 50Kgs of cement and URA has been collecting this tax.

“Therefore, the intention is to create fairness in the regime by imposing tax on similar products such as adhesives, grout and lime,” the Minister said.

Government is also imposing Capital gains tax of 5% on non-business assets such as land and rental properties.

“The current scope of capital gains taxation is limited, therefore, this measure is aimed at widening of the tax base to improve progressiveness of the tax system and generate additional revenue,” added Musasizi.

Meanwhile, MPs on Parliament’s Finance Committee have thrown out the proposal to exempt Bujagali Hydro-electricity Limited from paying tax for another one year, after discovering that the proposal was sneaked into the tax bills, because the provision wasn’t provided for in the Income Tax Amendment Bill 2024 that was tabled before Parliament.

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