URA to re-introduce tax on vehicle owners

Cars parked in a bond. The 18 per cent VAT on cars is aimed at eliminating those who have been profiting from the business while dodging taxes. FILE PHOTO

What you need to know:

Problem. The car import business has attracted a number of tax evaders, something which hurts tax collections.


Individuals purchasing vehicles for personal use will be required to pay 18 per cent Value Added Tax on cars in addition to Customs taxes and other levies to weed out tax evaders, Daily Monitor reveals.

The car import business has attracted a number of tax evaders, something which hurts tax collections.

Uganda Revenue Authority is expected to raise Shs9.5 trillion this financial year. Although they have surpassed their half year target by nearly Shs25 billion, the pressure to maintain the tempo is high.

Presently, this tax only applies to people dealing in motor vehicle businesses.
However, the tax body says individuals buying vehicles for personal use are abusing the exemptions.

“Domestic VAT is not a new tax. It applies to general merchandise and now we want to apply it to vehicles as well due to revenue risks involved,” URA assistant commissioner in charge of compliance in the domestic tax department, Mr Silajji Kanyesigye, said in an interview on Wednesday.

Logistic and procurement manager of CMC, Mr Michael Opolot, said because it is difficult to monitor those defaulting on this tax, URA thinks a blanket tax on vehicle owners will make it easy to control the problem.

Asked about the impact of this tax on a consumer who wants to own a vehicle, he said the effect is minimal especially if you purchase from a registered supplier rather than importing it yourself.

URA supervisor tax education, Mr Patrick Opolot said: “Casual importers are now taking over this business yet they do not pay taxes. They import as if it is for individual (personal) use and then sell it at lower rate.”

Mr Abraham Opio, the bond/reconciliation officer with the Ballore Africa logistics, said this is a bad news for consumers who want to import their own vehicles as they will be subjected to taxes that previously targeted importers doing this for commercial purposes.

Revenue breakdown
Uganda Revenue Authority is trying to widen its tax base and as such the tax collector is desperate to have everybody who earns taxable income into the tax bracket.

Domestic Financing - Shs 12.5trillion, of which URA is supposed to collect Shs9.5trillion.
External Financing - Shs 2.7 trillion
Appropriation in Aid - Shs 568.8 billion
Total – Shs 15.8trillion