More taxes, no pay raise in new Budget

Minister for Finance Maria Kiwanuka displays the 2012/13 National Budget at Parliament
FILE PHOTO.

What you need to know:

With donor cash expected to drop by 90%, government struggles to find money to raise wages.

The government is expected to announce a raft of new taxes in the new Budget expected in less than two months as Finance minister Maria Kiwanuka tries to balance the books on the backs of the poor and the working class.
The ruling party has pieced together a record Shs12 trillion spending proposal for what independent-minded lawmakers and economists called a “nail-biting” financial year in store and asked Ugandans to tighten their belts before it’s too late.
On account of lack of funds, the government has failed to find the Shs365 billion needed to increase salaries for teachers, health workers, UPDF and other lower cadre civil servants. The Parliamentary Commission and Judiciary were also demanding an additional Shs73 billion but the Presidential Advisory Committee on Budget cannot get this money.

Due to theft allegations in the Prime Minister’s office, the minister said in a leaked blueprint for the 2013/14 budget, that the donors withdrew foreign aid to Uganda and that external support to the budget is expected to decline by 93 per cent— from Shs749 billion in 2012/13 to about Shs50 billion in 2013/14.

In a bid to survive the continuing financial noose placed around its spending by a number of donors because of the OPM scam, Saturday Monitor reported that the government had issued a withdrawal ceiling on all ministry and government departments down to Shs20 million per month from the Shs300 million limit.

In choosing new taxes against increased borrowing, the minister said: “Further borrowing from the domestic market will lead to un-sustainability of our debt and may destabilise our macro-economy.” She said during 2013/14 financial year, the government will only borrow Shs525 billion to finance key infrastructure projects.

The minister is expected to announce fresh taxes on water, fuel, telecoms, boda-bodas, motor vehicles, mobile money transactions, international calls, cosmetics and hair products among others.

Daily Monitor understands that the new taxes were proposed by the Presidential Committee which drafted the 2013/14 Budget, discussed in Cabinet on April 5 and endorsed by the President on April 7.

In order to close a black hole in a belt-tightening budget, blamed on “crooked” government officials who abuse foreign aid in Prime Minister’s office, Ms Kiwanuka will announce an additional Shs50 excise duty on fuel. This tax measure will generate an additional Shs72.7 billion.

Levy on UCC
An additional 1 per cent levy will be imposed by Uganda Communications Committee (UCC) on gross income of telecom operators in an attempt to raise an additional Shs8.4 billion.

A new tax on international calls will generate Shs40 billion and with effect from next financial year, a new levy will be imposed on Mobile Money transactions. This tax measure is expected to generate Shs48.2 billion.

The government has also agreed to increase boda-boda registration fees by Shs70,000 to generate an additional Shs5 billion. Motor Vehicle Registration fees have also been increased by Shs200,000 in order to raise Shs7.2 billion.
The government is also proposing to reinstate VAT on water for domestic use in order to generate an additional Shs8 billion.

More than Shs383.4 billion will come from additional revenue measures.
The Leader of Opposition in Parliament, Mr Nandala Mafabi, said new taxes would add to the financial squeeze on Ugandans who already feel the pinch of widespread corruption, poverty and increased cost of doing business in the country.

“It’s unfortunate to hear that poor Ugandans are going to pay the price for the sins committed by the people in government who have deliberately refused to fight corruption,” Mr Mafabi said.
Mr Mafabi criticised the government move to reinstate taxes on water used for domestic consumption, saying more Ugandans are going to die due to lack of access to clean water.

“They have the numbers but Ugandans will never forgive them if they impose taxes on water,” he said, adding that Parliament will not accept “unnecessary” burden on the taxpayers.

Clean water
Two years ago, the lawmakers unanimously agreed to amend the Value Added Tax (Amendments) Bill 2011 to scrap the proposed 18 per cent tax on basic water for domestic use, as a radical measure to increase access to clean water in the country.

The lawmakers, led by Mr Mafabi, also put Ms Kiwanuka on notice over an impending motion to scrap VAT on electricity, as another radical measure to ease the cost of power in the country. The new taxes are subject to parliamentary approval.

Even with a seemingly bleak future of the economy, Ms Kiwanuka in a leaked Budget document, containing final proposals from Presidential Budget Advisory Committee is optimistic and sets an ambitious target for Uganda Revenue Authority (Shs8.8 trillion up from Shs7 trillion in 2012/13) and a robust economic growth of 7 per cent.

According to Ms Kiwanuka, whereas the government had earlier projected real GDP at market prices to grow by 4.1 per cent, recent statistics from Uganda Bureau of Statistics (UBOs) during the first half of the financial year indicate that the economy is likely to grow at a higher level of close to 6 per cent on account of growth in service and construction sectors.

The ruling party’s Shs12 trillion budget, with a mix of deficit reduction through spending cuts and tax increases and new spending to spur the economy, projects a Shs1.6 trillion shortfall for the 2013/14 financial year, which begins in July this year.

Shs12 trillion spending proposal

Shs4.7 billion :Amount Independent Electoral Commission gets in additional income to carry out its functions

Shs365 billion: Amount of money the government has failed to find,to increase salaries for teachers, health workers, UPDF and other lower cadre civil servants.

Shs525billion: Amount of money the government will only borrow to finance key infrastructure projects.

REDUCTIONS

Foreign aid to Uganda by donors : From Shs 749b to 5Ob in 2013/14

Ceiling on all ministry and government departments: From Shs300m limit to Shs20m per month

Boda boda Shs200,000 to raise Shs7.2b
Excise duty on fuel Shs50 to raise Shs72.7billion.
1% levy imposed by UCC to raise Shs8.4billion.

And the new taxes...

The minister is expected to announce fresh taxes on water, fuel, telecoms, boda-bodas, motor vehicles mobile money transactions, international calls, cosmetics and hair products among others.

SOURCE/SUPPLEMENTARY SCHEDULE No.1, MINISTRY OF FINANCE 2012/2013