Finance Minister Matia Kasaija
The tax measures for 2021/2022 Financial Year took effect on 1st July 2021.
It should be recalled that on 1st April 2021, former Minister of State for Planning, David Bahati introduced before Parliament’s Finance Committee eleven (11) tax bills proposing a cocktail of tax measures to raise over Shs600bn out of the Shs22.425Trn revenue that’s meant to be collected by Uganda Revenue Authority (URA) to finance the Shs44.778Trn 2021/22 national budget.
These included; Excise Duty Amendment Bill 2021; External Trade Amendment Bill 2021; Fish Amendment Bill 2021; Income Tax Amendment Bill 2021; Mining Amendment Bill 2021; Stamp Duty Amendment Bill 2021 and Tax Appeals Tribunal Amendment Bill 2021.
The other Tax bill for amendment included; Tax Procedures Code Amendment Bill 2021; Tobacco Control Amendment Bill 2021, Traffic and Road Safety Amendment Bill 2021 and Value Added Tax Amendment Bill 2021.
However, one of the proposed measures is the proposal approved by Parliament in the Excise Duty(Amendment)bill, 2021 imposing a 12% duty on internet data.
The new measures is replacing the unpopular Over the Top Taxes (OTT) that say Ugandans pay a daily of Shs200 to access social media including Facebook, Twitter but a section of Ugandans protested the tax voting double taxation and opted for Virtual Private Network (VPN) that helped them evade VPN.
Government had projected to collect Shs284Bn annually in revenue from OTT. In January 2020, while appearing before Parliament Finance Committee, Doris Akol, former Commissioner General – Uganda Revenue Authority proposed to have the OTT tax abolished, citing poor performance.
In her submission, Akol said that in August 2019, URA only collected Shs49.5 billion out of the projected Shs284 billion of OTT levy in the 2018/2019 financial year.
With the introduction of the 12% on Mobile data, for an Airtel customer who has been purchasing the monthly 20GB at Shs50,000, the customer will now pay Shs56,000, which is equivalent to Shs. 200 per day for 30 days that had been paid in OTT.
In other words, OTT has just been baptised another name and those who had avoided it using VPN and Wireless Internet have been brought back into the tax net.
Regina Navuga, Program Coordinator, Financing for Development at Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) Uganda, a Civil Society Organization while appearing before Parliament’s Finance Committee to submit on proposed tax measures welcomed the decision to abolish OTT, but the activists also warned against the 12% hike on internet saying it would hinder rather than promote E-Commerce.
Rather, activists proposed the excise duty on internet be reduced to 5% and instead, cautioned Government to consider taxing digital companies to contribute to the tax base.
The proposal by Ministry of Finance to impose Shs200,000 on car license by amending the Traffic And Road Safety (Amendment) Bill, 2021 died a premature death at Committee level and didn’t make it to full debate by the whole Parliament. In the proposal, car owners were to pay Shs200,000 as annual license fees, while motor cycle owners were to part with Shs150,000.
Instead, Parliament approved the Shs100 on fuel, replacing it with vehicles and motor cycles license after Government admitted it would be hard to enforce compliance on vehicle license fee and instead opted for the common tax on fuel so as to compensate for the revenue gap created with walking away from the tax on vehicle license.
In the proposed amendment, Shs100 will be charged on each liter of diesel and petrol. Government had projected 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.
In this proposed measure, Navuga blasted Government on the Shs6M monthly fine that was to be imposed on motorists that refuse to pay the annual license fees, describing the proposal as irrational.
Government had proposed a daily fine of 10 currency points (each currency point is worth Shs20,000).
She said in March 2021, “Introducing an additional tax makes possession, ownership and maintenance of motor vehicles extremely difficult. This in effect will reduce importation of vehicles and the resultant tax revenue. The provisions are irrational in a way that ten currency points chargeable per day is extremely too high. For instance a period of 30 days the penalty would amount to Shs6Million.” The measure on Shs100 on each liter of fuel will generate Shs198Bn in revenue.
Parliament also approved the 2.5% tax on plastic products to curtail importation of plastic products, although, this tax will be exempted on manufacturers of plastic products with recycling plants and this would generate Shs20Bn in revenue.
Law makers however rejected the Shs100 on each kilo of wheat, saying it would drive cost of wheat flour high yet Uganda produces little wheat.
Parliament also approved amendments to the Fish (Amendment) Bill,2021 and imposed an 8% on export tax on fish maw. Government had earlier proposed the Shs70,000 on each kilo of fish maw, but midway processing of the bill, it shifted to 10%.
However, there was a standoff between MPs and Government on this tax rate after it was revealed that only one individual of Chinese origin is licensed to export fish maw to Asia.
This prompted Speaker Kadaga to task Parliament’s Agriculture Committee to investigate the monopoly behind export of fish maw after reports that fish maw is being confiscated from fishermen to feed the export business.
Parliament also passed the Income Tax Amendment Bill 2021 approving a proposal to amend section 5 of the Act to provide that a person who earns rental income from more than one rental building shall account for the income and expenses of the buildings and shall pay tax for each of the buildings separately.
If signed into law, owners of rental premises will see 25% of their rental income tax and left to retain 75%. The Finance Committee had proposed a 60% retention and 40% tax, however authors of minority report led by Robert Migade (Buvuma Island), Syda Bbumba (Nakaseke North) rejected the rate saying it would hike renting charges.
Manufactures of chemicals for agricultural and industrial use, textiles, glassware, leather products, industrial machinery and electrical equipment, sanitary pads and diapers will have smiles on their faces for 10years after Parliament exempted them from paying the income tax for ten solid years. Government also proposed a ten-year income tax exemption for a manufacturer whose investment capital is at least USD50%.
Law makers also approved amendments to the Value Added Tax (Amendment) Bill, 2021 that will provide for the refund of tax for use of electronic receipt or invoice and impose strict liability for violation under penal tax and to provide tax incentives to investors by exempting certain supplies from Value Added Tax and for related matters.
The proposal by Government to give the Commissioner of Uganda Revenue Authority to arrest and close owners of businesses under investigation was rejected by Parliament, arguing such legislation would usurp powers of Police.
The Ministry of Finance had proposed an amendment to the Tax Code Procedures Amendment Bill 2021 and give the Commissioner during the investigation to effect an arrest with an arrest warrant; the power to issue an order for interim closure of premises; the power to record charge and caution statement.
However, Henry Musasizi, former Chairperson Finance Committee asked Parliament to reject the proposal arguing that these powers are bound to be misused bearing in mind that the law of natural justice states that a person is innocent until proven guilty hence putting one under arrest or closure of their businesses while still under investigation may lead to various litigations which should be avoided at all costs in order to save Government unwarranted expenditures.
If signed into law, the Supreme Court will have one month to settle tax distribute while Court of Appeals has been given 2 months to dispose of a dispute in The Tax Appeals Tribunal (Amendment) Bill, 2021.
Parliament also approved the Tobacco Control (Amendment) Bill, 2021 and gave clear definition of processed leaf “(3) For purposes of this section “unprocessed leaf tobacco” includes tobacco plant or leaves in the natural state, cured, stemmed, stripped, trimmed, untrimmed, blended, cased or fermented.”
Government argued the tax measures will go a long way towards promoting local value addition on locally grown tobacco before export. This measure is expected to generate revenue of Shs20Bn.
Parliament also passed divisively the Stamp Duty (Amendment) Bill, 2021 gifting more incentives to a manufacturer, other than a manufacturer referred to in item 60A (b), whose investment capital is, at least USD50M.
Parliament approved the move by Government to tap into the lucrative gold export industry by approving a proposal in The Mining (Amendment) Bill, 2021 by imposing 5% on processed gold and 10% on unprocessed minerals.
Earlier on, Ministry of Finance had proposed USD200 on each kilo of gold export, however, the Committee recommended for 5% on processed and 2.5% for unprocessed gold saying the proposal would be hard to administer.
Richard Othieno former (West Budama North) rejected the proposal saying at the international market, a kilogram of gold goes for Shs205M while locally, a kilogram goes for Shs203M and rather asked to have the rate increased to 20% arguing that after all, it doesn’t affect the ordinary Ugandan.
Othieno argued at the time, “At 5% this would mean 10m which is very little money compared to what other Ugandans are paying. The principle of taxation is spread the heart. We need to be fair to Ugandans to ensure that this pain is spread equally. I am at pain accepting 10% it should be 20%. This person earns 8times what MP earns. They earn Shs205m on every kilogram of gold on international market.”
His counterpart in West Budama South, Markson Oboth now, Minister of State for Defence warned him on his justification saying this tax on gold exports will be imposed on a monopoly who would resultantly lower gold prices for the ordinary Ugandan.
Jane Pacuto, former Vice Chairperson Finance Committee warned against imposing the 20% rate on gold exports saying it would encourage smuggling and the rate chosen by Parliament should give the Revenue Authority avenues to collect tax.
She said, “I do agree with an increase but when you impose a tax at the end of it, you expect tax collector to collect. Jumping to 20% we indirectly encourage people in this business to avoid this tax.”
Former Finance Minister, Syda Bbumba backed Pacuto saying Uganda is part of the community and all the borders are porous there will be smuggling if we put a high tax, “When we are suggesting the rate we must know we have competitors. Let us be mindful, I support measures to improve revenue but anything above 10% will be unreasonable.”
Former Minister of State for Planning, Bahati rejected the 20% arguing it hasn’t been studied and MPs need to think about the effect of gold and asked MPs to be conscious propose reasonable rates.
Parliament rejected the proposal to impose an export levy on wheat bran, cotton cake, maize bran or other by-products of the milling industry in The External Trade (Amendment) Bill, 2021 saying it would cripple the agricultural sector by driving prices of animal feeds high.
Government had argued the measure would encourage the value addition to such primary agricultural inputs for Animal feeds and reduce the volumes of expensive imported animal feeds and generate Shs20Bn.
