Friday June 14 2013

Kiwanuka reads tax-filled budget

President Museveni greets officials after the

President Museveni greets officials before the budget reading at Serena Hotel in Kampala yesterday. PHOTO BY JOSEPH KIGGUNDU 

By Yasiin Mugerwa

The Maria Kiwanuka yesterday inked her name in the country’s history books as the first Finance Minister to unveil a record budget of Shs13.1 trillion, almost entirely funded by Ugandans but full of tax hikes meant to plug the funding gap left by donors.

Ms Kiwanuka increased tax on kerosene by Shs200, petrol and diesel by Shs50, introduced 18 per cent Value Added Tax (VAT) on water for domestic consumption, VAT on wheat and flour and imposed an excise tax of 10 per cent on fees charged on transfer of money by mobile network operators and other money transfer operators.

A litre of kerosene in Kampala costs Shs2, 900 but with an additional Shs200 in excise duty with effect from July, it will jump to Shs3,100. In the country side, because of the transport costs, a litre of kerosene varies from Shs3,000 to Shs4,000.

The implementation of these taxes is subject to Parliamentary approval.
In order to meet the funding gap in public finances, the minister increased Motorcycle (Boda-Boda) registration fees from Shs130,000 to Shs200,000 and increased Motor Vehicle registration fee by Shs200,000. The minister has also imposed an extra Shs30,000 on stamp duty on Third Party insurance policies for motor vehicles.

In a historical budget that will be funded by 81.1 per cent of domestic revenue and only 18.9 per cent from the donors, Ms Kiwanuka also increased excise duty on cigarettes from Shs22,000, Shs25,000 and Shs55,000 for Soft cup (whose local content is more than 70 per cent of its constituents), other soft cup and Hinge lid respectively to Shs32,000, Shs35,000 and Shs69,000 to collect more revenues.
Ms Kiwanuka’s budget seeks to rise above the country’s short-term economic needs and focuses on the big picture — allocating the bigger part of the available resources to the key sectors that seek to defuse the bottlenecks to socio-economic transformation.
The hugest chunk of the budget goes to the works and transport sector, which received Shs2.3 trillion up from Shs1.6 trillion, perhaps in response to increasing public outrage on the decayed state of the road network and the mounting carnage.

Shs1.8trillion has been allocated to the education sector and an additional Shs5b allocated to the students’ loan scheme. The minister also allocated another Shs5b to support teacher SACCOs across the country.

“The challenge of service delivery in Uganda is not lack of sufficient financial resources, but the achievement of maximum efficiency and effectiveness in the utilisation of limited resources,” Ms Kiwanuka said.

Ms Kiwanuka prioritises the continued creation of an enabling environment for growth, development and socio-economic transformation. The budget will focus on investing in infrastructure development particularly in transport and energy; support increased agricultural production and enhancing productivity.

Focus will also be on industrializing through scientific innovation and private sector competitiveness. The budget also seeks to improve the quality and access in social service provision in health, water and education while enhancing transparency and accountability to improve value for money and fight corruption.

Development plans
Ms Kiwanuka’s budget is meant to support the National Development Plan that seeks to turn Uganda into a middle income country by 2017 and a first world nation within the next 50 years.
For this dream to be achieved, focus will be on transport infrastructure, energy, education, health and agriculture.
As a result of a 93 per cent reduction in budget support from the foreign donors due to corruption concerns, Ms Kiwanuka delivered the ‘bad news’ to the teachers, health workers, UPDF and other lower-cadre civil servants that she was unable to raise the Shs365 billion needed to increase their salaries in the next financial year.
The withdrawal of budget support according to the minister implies that to create the spending room to finance new investments, “we will require drastic measures to boost our domestic revenue mobilisation.”

Ms Kiwanuka reported that last year, the economy grew at 5.1 per cent up from 4.1 per cent in the previous year. Inflation subsided and was recorded at 3.6 per cent as at end-May 2013, a marked reduction from double digits at the start of the financial year. The volatility of the Uganda exchange rate subsided and currently averages around Shs2575.

However, the minister failed to explain why some of the promises she made last year, especially on transport infrastructure and energy, have hardly been met. The roads are still in shambles, 600MW Karuma project has stalled due to corruption allegations and even with additional 250MW from Bujagali Hydro Dam power outages are still the order of the day in some parts of the country.