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Gov’t Slaps New Tax On Fuel After Abandoning Annual License For Car Owners

Each litre of fuel will be charged extra Shs100

Government has finally backed out of the proposal to tax on owners of vehicles and motor cycles.

The controversial tax has instead been transferred to fuel.

The Government decision was revealed by  David Bahati, the State Minister for Planning in the Ministry of Finance, Planning and Economic Development while appearing before Parliament’s Finance Committee, three days before Parliament embarks on debate on the tax proposals next week.

While tabling the new amendments to the Excise Duty Amendment Bill 2021, Bahati admitted that it would be hard to implement compliance on vehicle license fee and instead opted for the common tax on fuel so as to compensate for the revenue gap created after abandoning tax on car owners.

In the proposed amendment, Shs100 will be charged on each liter of diesel and petrol, and Bahati said the increase on fuel prices won’t create a big impact on transport costs because Uganda’s roads are in a good state and won’t affect wear and tear of vehicles.

 “This increase is not expected to cause significant increase on the pump prices. The impact on transport will also be minimal because of the good infrastructure which reduces on the wear and tear of vehicles and time spent on the roads.”

Government had anticipated to generate Shs20.5Bn from vehicle license fees although the tax measure faced protest with MPs arguing it would increase corruption within traffic officers while enforcing the said tax proposal.

Government has also backed off plans to impose USD0.4 per kilogram on wheat bran, cotton cake, maize bran which was expected to generate Shs20Bn.

The Ministry of Finance also amendment proposal to impose Shs70,000 on each kilogram of fish maw after complaints that it was unfair, and instead, Government settled for 10% charge on each kilogram of fish maw exports.

There has been a charge of Shs100 slapped on each kilogram of wheat grain expected to generate Shs30Bn.

Minister Bahati said that the move is intended to discourage imports of wheat flour after realizing that in 2019/20 Uganda imported wheat to a tune of Shs600Bn yet there are substitutes like cassava, millet.

Relatedly, a 2.5% tax has been imposed on plastic products to curtail importation of plastic products, although, this tax will be exempted on manufacturers of plastic products with recycling plants. This proposal if approved by Parliament would generate Shs20Bn in taxes.

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