Parliament should fast-track Covid-19 tax relief laws

The implementation of the tax relief measures proposed by the government to address the adverse economic impact of the coronavirus pandemic (Covid-19) remains in suspense following the delay by Parliament to enact the relevant enabling laws. Eligible taxpayers with outstanding tax dues are at the mercy of the Uganda Revenue Authority (URA) which in the absence of the supporting laws must enforce the collection of outstanding taxes. Though this is a political campaign season, Parliament is encouraged to fastrack the enactment of the covid tax relief laws to safeguard vulnerable businesses.  

Tax amendments

Government gazetted the first set of tax amendments at the end of March 2020 as part of the budget cycle for the financial year 2020/2021. These proposals did not however consider the impact of Covid-19 because they were finalised before the situation degenerated. To alleviate the arising economic severity, government prepared a second set of amendments the bulk of which were published in June 2020. These pandemic specific fiscal interventions contained in the Income Tax (Amendment) (No.2) Bill, 2020, the Value Added Tax (Amendment) (No 2) 2020, the Tax Procedures Code (Amendment) Bill, 2020 and the Excise Duty (Amendment) (No.2) Bill, 2020 are not yet in force awaiting parliamentary approval.

To encourage taxpayers to contribute to its response fund, the government allowed the deduction for tax purposes of all expenses that businesses incurred on gifts and donations that were made to the government to help in the prevention, treatment and containment of the covid-19 pandemic. This measure was intended to come into force effective 1st July 2020. The test for donations to be tax deductible is stringent and the support extended by the private sector to the government during this period would most likely not be deductible in the absence of this amendment.        

Relieve the applicable VAT

To lower the cost of medical supplies used in the prevention, treatment and containment of the Covid-19 pandemic, the government proposed to relieve the applicable VAT. Some of the items that were considered for the VAT exemption included though not limited to medical boots, motorised fumigation pumps, disposable medical face masks, infrared thermometers, disinfectants, body bags, and oxygen cylinders. In the absence of the enabling law, VAT at the rate of 18 per cent on these items still stands.    

Waive excise duty on sanitisers for disinfection

The government had also proposed to waive excise duty on sanitisers for disinfection effective 1st July 2020 to make them more affordable. The excise duty chargeable on undenatured spirits from locally produced raw materials is currently at Shs2,000 or 60 per cent per litre whichever is higher. Considering that this proposal is not yet in force, excise duty is currently chargeable. 

PAYE

Cognisant of the fact that the period between 1st April 2020 t0 30th June 2020 was under lockdown, government proposed to defer the timing of payment of income tax liabilities that arose during the period. 

Taxpayers in the manufacturing, tourism and floriculture sectors whose turnover was less than Shs500 million had up to 30th September 2020 to clear their tax payments. The deferral similarly applied to the liability for Pay as You Earn that arose during the period.  Whether this relief was enough to relieve the economic hardships experienced by businesses during the period is another matter.   

Waive interest on all tax arrears

More significantly, the government proposed to waive interest on all tax arrears unpaid by 30th June 2020 by taxpayers who voluntarily complied with their tax obligations. This measure introduces a tax amnesty programme that would enables taxpayers to voluntarily disclose their past tax liabilities without reprimand by the URA. 

It is, therefore, a matter of urgency for Parliament to pass the Covid-19 tax relief laws to provide some fiscal stimulus to taxpayers hit by the pandemic. If these laws are enacted, they must apply retrospectively for businesses to benefit as was intended by government. It would be a positive step if Parliament could additionally review the tax proposals extending further the duration of their application. It is without a doubt that until a vaccine is found, we must learn to cope and live with the virus.

The author is managing partner, Cristal Advocates.