Eight entities receive Shs18b in tax waivers

Between July 2022 and June 2023, the government granted Shs18b in tax waivers to eight companies and individuals, according to a House report seen by Saturday Monitor.

The waivers listed in the “Tax Expenditure Report for the period July 2022 to June 2023” were approved by Finance minister Matia Kasaija on the recommendation of the Commissioner General of the Uganda Revenue Authority (URA),  Mr John Musinguzi Rujoki.

The amount is a tiny fraction of the at least Shs2.8 trillion in tax exemptions and deferrals extended to private businesses and organisations in the 2022/2023 financial year.

In May, Parliament’s Budget Committee called for the rationalisation of tax incentives and exemptions, urging authorities to use them “judiciously” by targeting productive sectors of the economy.

Parliament also proposed that the government develops clear criteria for the selection of beneficiaries of tax waivers, exemptions, and deferrals.

Still in May, Shadow Finance minister Muhammad Muwanga Kivumbi told Parliament that the revenue losses to exemptions were actually much higher. He projected them to be more than Shs8 trillion. Mr Kivumbi argued that things like corporation tax holidays and other incentives like free land granted to investors have to be factored in.

Beneficiaries

The biggest beneficiary is Ms Goodra Tumusiime Behakanira, whose Shs4.2b accumulated VAT interest and the penalty was waived by Mr Kasaija in a July 4, 2022 letter to Mr Rujoki.

Ms Tumusiime is the wife of deceased businessman Joseph Behakanira, who passed away in February 2010. At the time of his passing, he was under investigation by the House over funds that he received from the government to provide accommodation to the Commonwealth Heads of Government Meeting guests in 2007.

On July 18, 2022, Mr Kasaija also waived the Shs9.9b tax bill for Sugar and Allied Industries Limited. The company is a subsidiary of the Alam Group owned by businessman Abid Alam.

On August 3, 2022, the Finance ministry waived Mandela National Stadium’s Shs1.5b tax arrears. This includes Shs1b in VAT, Shs393m as PAYE, and Shs81m for “IT rental.”

The following day, on August 4, the minister further waived the Shs282m tax bill for St Mary Hospital Lacor.

Arch Designs Limited received a Shs1.1b VAT interest waiver on August 9, 2022, while New Uganda Securiko Limited was granted a waiver of Shs2b. Kaluva Hospital was granted Shs36m waiver in accumulated PAYE interest and penalty.

The law

Under Article 152(2) of the Constitution, the Finance minister is required to periodically report to Parliament on the exercise of their powers to waive or vary a tax imposed by the law.

Tax waivers can have both positive and negative effects on an economy such as Uganda’s.  Proponents of the waivers argue that they are important tools to attract domestic and foreign investment, promoting specific sectors or industries such as agriculture and manufacturing.

The drawbacks come in terms of revenue loss, which strains public finances. Since countries like Uganda heavily rely on tax revenue for essential services like healthcare, education, and infrastructure development, the loss of revenue can hinder their ability to address social and developmental challenges.