Monday, July 22, 2024
Home > Analysis & Opinions > REVEALED: Holes In Uganda’s New Tax Proposals
Analysis & OpinionsFeaturedNews

REVEALED: Holes In Uganda’s New Tax Proposals

Government’s new tax proposals in the 2018/19 budget have come under scrutiny, with tax experts wondering whether government was properly advised.

Some of the contentious tax proposals include the Shs200 daily tax on social media, reinstatement of corporation tax on SACCOs making profits and 1% tax on Mobile Money transactions and 15% on Money transfers.

The proposal to ban cars eight years and above old has also attracted criticism from some sections of the public.

Some are wondering how government will implement the car ban that is aimed at protecting the environment yet the polythene bag (kaveera) ban is still thriving.

Appearing before the Parliament Committee of Finance to present his views on the proposed tax amendments ahead of the 2018/19 budget, Francis Kamulegeya, a tax expert and Director of Accounting at Price Waterhouse Coopers (PwC), an audit firm, described the proposed taxes especially on Mobile money as discriminative, unfair and breaks all rules of taxation.

Government is projecting to collect Shs115bn from the 1% rate on Mobile Money transactions.

Kamulegeya says the Shs115bn is unrealistic because figures from Bank of Uganda indicate that Shs54trillion was transacted in 2017 via Mobile Money.

He said that if Government’s objective is to take 1% out of Shs54Trn, as value of transactions of mobile money transactions, then this puts the figure to be collected at potentially Shs540bn.

Price Water Coopers argued that perhaps Government appreciates that this proposed tax will impose a very heavy burden on Ugandans and that is why the projection of the amount to be collected is being understated as Shs115Bn yet in reality it will be over Shs500bn.

Kamulegeya criticized the move saying it is wrong for Government to simply impose a tax just because money is moving from one place to another noting that an economy is grown by encouraging economic activity and by encouraging people to transact.

He warned that this particular tax is destructive to the economy like Uganda’s where efforts are being made to encourage financial inclusion.

“You grow an economy by discouraging people from putting the money under the mattress, in pot or wherever, but to be in a feasible monetary economy and increased velocity. You want to money to move as fast and quickly, whenever it is moving, it is adding value, wealth and income,” Kamulegeya said.

He added: “It may sound like a windfall tax to collect, but it breaks all rules relating to taxation if we want to do tax policy is concerned.”

The audit giants explained that the tax to be levied on mobile money transactions has already been subjected to tax when it was earned as Pay As You Earn (PAYE) and corporation tax paid by businesses.

Kamulegeya warned Parliament against passing the tax proposal on Mobile money, saying it risks being challenged in courts of law.

“It is a wrong tax, discriminatory and without being prophet of doom, I think there will be potential possibility of challenging it constitutionally,” he said.

As such, they deemed the tax as wrong because it is a tax on movement of money as opposed to being a tax on income, or a tax on profits or a tax on revenue or tax on value addition.

Price Water Coopers revealed that the mobile money figures from the Telecom sector indicates that Uganda has 24Million users and out of these, 22Million have mobile money accounts and the new 1% tax on mobile money transactions will be suffered by the individuals who have mobile money accounts and not on the Telecom companies.

“The 1% tax violates all the principles of taxation in the sense that; it is not fair as it applies on the same money so many times. It isn’t equitable as it applies on every one regardless of their ability to pay. It is discriminative since it applies only on mobile money transactions and not on bank transactions,” Kamulegeya said.


Leave a Reply

Your email address will not be published. Required fields are marked *