The proposal to have computers whose manufacture date is five years and below to be exempted from Value Added Tax was rejected by MPs despite some of them backing the proposal.
This followed a proposal by Muhammad Nsereko (Kampala Central), during the consideration of the tax bill in the plenary, where he proposed to have VAT exemptions on new computers, desktop parts and accessories, arguing that the current price of US$1000-US$1500 is high for most computer users in Uganda.
Nsereko argued that in the next few years, the whole world will be digitally connected and for young people who want to start early programming, software engineering and others, the current cost of new computers is expensive.
“With the fast growth in infrastructure development of technology, if our children of this generation are left at that, then we shall lose a lot. The region has embraced this, I would like to urge you to support me in this matter so that we can boost technological growth, so that we can boost digital transformation in our country that will in turn broaden our tax base,” argued Nsereko.
He was backed by Isaiah Sasaga (Budadiri East) who argued that students across primary and secondary schools are undertaking computer studies, yet in most cases, the purchase of computers is borne by parents and the exemption will help the parents purchase computers for their students.
He said, “If you look at the cost of the computer right now even on market, it is very high and the old computers aren’t compatible with some programmes if they are outdated, so for software to work well, it needs new computers, so if we can exempt VAT on those computers it could be very good for our learners even in those schools where government isn’t supplying.”
However, Speaker Anita Among wondered why MPs were plotting to allow in computers manufactured as far as five years instead of legislating to offer incentives to investors to establish assembling plants for computers in Uganda.
She said, “I wish you could legislate in a way that you bring in assembling plants in Uganda that can be exempted from paying taxes that will be able to attract a lot of money. If we can have Kiira Motors, can’t we have an assembly plant here? When you look at these computers of five years and above, the life span is limited.”
Her sentiments were shared by Fox Odoi (West Budama North East) who argued, “A five year old computer is only listing to dumping, due for destruction and the problem is, the cost of destroying computers is enormous, they are an environmental hazard and this country can’t afford to meet the cost of destroying those computers.”
Rose Obiga (Terego DWR) also weighed into the debate stating that the lifespan of a computer is two and half years if Uganda wants to avoid environmental degradation.
“If you allow five years computers to be brought here, we are going to cause a dumping ground to be brought here which Uganda isn’t ready for. Unless we are going to have an assembling plant, this country can’t allow to be a dumping ground,” said Obiga.
One of the lawmakers reminded Parliament that currently, computers are exempt from import duty of 25% and another exemption on VAT would affect revenue collections at the time Uganda is grappling with revenue to finance the budget and instead proposed to maintain the exemption on import duty and reject VAT further exemption.
Karim Masaba (Mbale Industrial Division) tried to clarify that although computers are enjoying the 25% import duty exemption, another package needs to be extended to new computers of five years and below to make them more affordable.
When Speaker put the question to vote, most of the MPs responded in affirmative, although she ruled them out, saying those against the exemption had won.
Her decision attracted protest from Nsereko and his gang, demanding to have the matter put through a physical vote by MPs raising their hands. However, Nsereko’s request was rejected by Among who proceeded to process other tax bills.
In the 2022/2023 Shs47Trn national budget, Uganda Revenue Authority is expected to collect revenue to a tune of Shs25Trn and the proposal on tax exemption comes at the time a study by Ministry of Finance revealed that Uganda lost Shs7.7Trn in tax exemption. This development has prompted the Opposition in Parliament to call for halt into dishing out anymore tax exemptions until a cost-benefit analysis of the current exemptions is undertaken by Government before new exemptions are dished out to any investors.