Parliament has rejected the proposal to reduce taxes on fuels in a bid to reduce the skyrocketing prices of fuel, saying that the exemption would cost government revenue to a tune of Shs1.5Trn.
This followed a proposal moved by Muhammad Nsereko (Kampala Central) during the consideration of the Excise Duty Amendment Bill 2022, proposing to reduce taxes on petrol that current stand at Shs1450 and have it reduced by Shs750 per liter.
He also proposed to have excise duty on diesel that currently stands at Shs1530 and have it reduced by Shs600.
While defending his proposal, Nsereko argued that the increase of fuel prices have driven costs of living, with many government agencies in the 2022/2023 national budget asking for increase of wages because they can no longer meet their demands and disposable income has also become slimmer.
He said, “The increase in fuel prices have led to the increase of commodity prices. We have tasked this government to come up with a proposal for six months on how fuel prices will go down but to no avail. I appeal to you all to support this position in the interest of this country and I am certainly sure that this will be a good stop gap measure, it will reduce fuel led inflation and it will also automatically send disposable income higher.”
However, Dickson Kateshumbwa (Sheema Municipality) described Nsereko’s proposal as a good political statement but warned that if adopted, it will bear serious implications on Uganda’s economy because 25% of Uganda’s taxes
He said, “The implication on fuel proposal of reducing will result in Shs1.5Trn revenue lost. I had the benefit to look at the numbers from the industry, if you reduce that fuel by Shs700 you are going to have Shs1.5Trn deficit. Diesel and petrol account for 25% tax on average.”
Kateshumbwa added that one of the drivers of the current fuel prices is as a result of increase in the prices of a barrel of fuel and the challenges of transportation due to the war between Ukraine and Russia, but has nothing to do with taxes.
He thus warned MPs against making reckless tax proposals arguing, “Exercise some level of caution, when you are dealing with tax reductions because taxation you can’t deal with it in a short time. If you propose a measure that is going to draw down revenue by shs1.5Trn that means you must be able to reduce the budget that that amount.”
Paul Omara (Otuke County) also rejected the proposal arguing that the high fuel prices isn’t about tax because more volumes came into Uganda in the three months January to March 2022 more than we had in September to December 2021.
“So I am opposed to it, but what is important is we need to check on greed and we need to have the Ministry of Energy to exercise its mandate in terms of making control. We shouldn’t allow the proposal that is made,” said Omara.
Napak DWR’s Faith Nakut also rejected the proposal to reduce taxes on fuel arguing that there is no evidence that this will lead to reduction on pump prices, “There is no evidence that if we reduce taxes, the pump prices will go down,” remarked Nakut.
Although Godfrey Ekanya (Tororo North) backed the proposal to block the reduction on fuel taxes, he called for the enactment of the Competition law to curb the greed of oil dealers in making profits.
“We need to have the competition law in place. As we speak now, fuel operators and importers are making super abnormal profits, so even if we reduce the tax, they will not. As we speak now, this country doesn’t have competition law, there is a monopoly, there is hounding and the price will go up because they are used to making abnormal profits. I don’t want to legislate and my people don’t benefit and instead make the rich richer,” said Ekanya.
Following the back and forth argument, Speaker Among tasked both Minister of Finance Matia Kasaija and Minister of Energy Ruth Nankabirwa to analyse the issue of increase in fuel prices.
The Speaker said, “Considering the implication of this proposal, it has a lot of impact. I propose the Minister of Energy and Minister of Finance handle this matter and you can bring in an amendment to the Excise Duty any time.”