Tax on fuel: Giving with one hand, taking with another

Government, in its latest raft of budget proposals, has introduced a Shs1,550 tax on a litre of petrol and diesel and at the same time is also looking to impose a Shs500 levy on each litre of kerosene – a product largely used by the poor and low income earners.

Should the government have its way, then the compounding effect will be far-reaching.

Tax experts and analysts alike have described this development as unnecessary, given its timing, thanks to the effects of the Covid-19 pandemic on the economy. Already, the pump price is exorbitant compared to pre-Covid-19 pandemic times. 

Therefore, the proposal contained in the Excise Duty amendment Bill introducing new taxes on fuel at best is looking to deepen rather than widen the tax base.

This is because the tax obligation continues to fall on the same narrow shoulders hence burdening already struggling taxpayers.

If the Parliament rubber stamps the government proposal, it follows that the cost of pump price will definitely rise by more than the Shs100 in the case of petrol, if not as transport fares follow suit. And so are the prices of household items, including basic commodities. This defeats the aim for the central bank to rein in inflation now at 3.3 percent to reduce the corrosion of the value of money.

Interestingly, this development is happening at a time when the Uganda National Oil Company (UNOC) is set to commence the importation of fuel into the country.

According to the Minister of Energy and Mineral Developments, Ms Ruth Nankabirwa, this move, which is already underway, should result in a drop in fuel prices.

Before UNOC took over this role, the government said the population wasn’t shielded from fuel cartels who tend to influence pricing, which dealers promptly transfer to the final consumer at the pump.

With this transition, backed by law - the Petroleum Supply (Amendment) Act, 2023, UNOC now holds the exclusive role of importing petroleum products, which will subsequently be distributed to oil marketing companies (OMCs).

The irony, which is akin to giving with one hand and taking with another, is glaring.

This is in a sense that the “population” that the government says it is protecting from the cartel and predatory “middlemen” who increase prices at will, now will have to suffer the same fate, only that this time in the hands of the government – by way of introducing new taxes on fuel.