Caption for the landscape image:

How new taxes will affect you

Scroll down to read the article

Fuel tanks queued in Butaleja District, Eastern Uganda on May 16, 2024. New taxes will see fuel prices increase in FY2024/25. PHOTO/MICHEAL KAKUMRIZI

Parliament yesterday passed the Excise Duty Amendment Bill, 2024, which if signed into law by the President, will effective July 1, force upwards by Shs100 the prices of both petrol and diesel.

This would mean, the average price of petrol +per litre will move from the current Shs5,400 to Shs5,500, depending on the importer. Relatedly, the price of diesel will also increase from the current Shs5,300 to Shs5,400.

The Bill was passed amid resistance from some legislators who said Ugandans would feel the pinch of the new tax increments.

The current tax on petrol is Shs1,450 and Shs1,130 on diesel.

Mr Ibrahim Ssemujju Nganda, the Kira Municipality MP, who is also the Shadow Finance minister, yesterday put up a robust resistance in the House, rallying fellow legislators to delete certain Clauses in the Bill with the ones on fuel inclusive. 

“We are going to discuss the budget and make appropriations of the budget. I propose that we delete all these clauses and reduce other unnecessary expenditures like special meals and drinks [for selected ministries, departments and agencies] so that we close that gap,” he contended.

But Parliament only partially agreed and scrapped the proposed Shs300 tax increment per litre of kerosene (paraffin) but passed the rest of the taxes.

As the House debated the taxes on fuel, Speaker Anita Among chipped in and said the tax on kerosene will not be passed.

“When you look at fuel, the increase is Shs100, but when you look at kerosene where there are so many people using it, you are increasing it by Shs300. What mathematics was that? What was the basis of that increment? Since we removed the Rural Electrification Agency, electricity has failed to reach the villages, we are [now] removing kerosene, which affects the local person who can’t afford to fuel a car,” she said.

But the proposal to increase the fuel levy was backed by Kampala Central MP Muhammad Nsereko, and his Usuk County counterpart Bosco Okiror. Both said the tax increments should come with government deliberate efforts to develop the country’s infrastructure.

“The impact that our voters want to feel is that we should be able to ring-fence and put this in our infrastructure. I would suggest the increment of this tax, but let it go towards having the deliverables. Let Ugandans feel that the tax has been increased but it is addressing the issue of their roads,” Mr Okiror said.

Efforts by Budadiri West MP Nathan Nandala Mafabi to cut the tax down by 50 percent from the proposed Shs100 also fell on deaf ears as the MPs chorused affirmation to the tax increments when the Speaker moved a motion to pass the Bill.

“It isn’t necessary that every now and then, we should raise taxes so that we generate more, spur the economy and have more taxes. Even if you talk about the villagers not coming to town, but the sugar they are going to drink is going to be transported, therefore, you will pay the Shs100, which is being added on fuel. I want to plead with the government, for the first time, say we aren’t increasing taxes on fuel and see what will happen. I can tell you, the country will not collapse and there will be more income to tax,” Mr Nandala said.

Industry players react

Just as Mr Ssemujju argued, industrial players yesterday held that the taxes would have a direct trickledown effect on the final consumers of transport services because the transporters will have to increase transport fares to meet their operational costs.

Mr Rashid Ssekindi, the chairperson of the Uganda Taxi Federation (UTOF), when contacted said Parliament was unfair in passing such tax increments well knowing that it’s the final service consumer that will be affected most by the tax increments.

“They don’t understand what we are going through in the transport sector. That is why they just sit in their offices and pass taxes inconsiderately. Of Course, it is the passengers who will be affected most, including those who will hire vehicles to transport their goods because we shall have to meet our operation costs,” he said.

Relatedly, Mr Dickson Mujuni, the Secretary General of Boda Boda Industry Uganda, an umbrella body binding more than 75-member associations across the country, said their fares would definitely go up depending on the distance.

“If you check on the profit per litre, you will realise that a transporter may work to cover only fuel costs,” he said.

Mr Anthony Ogalo, the chairperson of Sustainable Energies and Petroleum Association (Sepa), an umbrella body that brings together over 40-private oil marketing importers, said that the tax increments on petrol and diesel would negate the benefits that the government promised when they amended the Petroleum Supply Act, 2003, last year.

Under the new Petroleum Supply Amendment Act, 2023 that was enacted last year, the government intends to start sole importation of all petroleum products through its state-owned Uganda National Oil Company (Unoc) and sell to private importers.

The plan took a long time to commence after Kenya, where the products were destined to come through, delayed the plan but has since given the greenlight.

“The main promise was a reduction in the cost of fuel to the population, and yet this increase immediately reverses that promise,” Mr Ogalo argued.

Mr Nsereko during the debate yesterday asked the government to be realistic to Ugandans if the said plan won’t work as they had promised.

Mr Ssekindi said when the tax starts biting on July 1, they will first study the situation “and when we see that we are being affected, then we will sit down with the Ministry of Works and KCCA [Kampala Capital City Authority], and explain to them our problems before considerably increasing the fares.”  

Other taxes

Mr Ssemujju again asked the House to reject proposals on imposing a 0.5 percent levy on withdrawals from financial fin-techs and banks agents, Shs75 on a liter of bottled water, Shs500 per 50KG of lime, white cement, grout, and adhesives.

Parliament also passed the 0.5 percent levy on agents’ withdrawals but only limited them to firms like Chipper Cash, Sendwave, Online Applications and other financial fin-techs, excluding the banks’ agents.

The House also agreed with the Committee of Finance on certain taxes on juice, alcohol, international calls and expounding cement definition.

A levy on a litre of beer was reduced to 10 percent or Shs150, down from the current 20 percent or Shs230. The same was done for other locally produced alcoholic beverages.

However, any powder or dry substance, which upon being mixed with water or any non-alcoholic beverage ferments or becomes an alcoholic beverage, will attract a duty of Shs2500 per kilogram.

The House agreed with the Finance Committee and rejected a proposal to increase the tax on un-denatured spirits of alcoholic strength by volume of 80 percent or more made from locally produced raw materials from the current shs1500 to shs5,000.

A proposal to increase the tax on un-denatured spirits of alcoholic strength by volume of 80 percent or more imported to the same shs5,000 was also rejected and remained on the current Shs2500. Taxes on a bottle of wine will now be Shs10,000, from the current Shs8000.

Emmanuel Njuki, the head of Legal and Corporate Affairs at Nile Breweries appreciated the government for its consultative approach in formulating tax policy, adding that there will not because Parliament simply rejected the increase, leaving the current taxes in place.  

Relatedly, the tax on fruit and vegetable juice made from at least 30 percent pulp and locally grown vegetables and fruits was reduced by one percent or Shs250 per liter.

A 50 percent levy on every litre of bottled drinking water was passed as proposed by the Finance Committee. It will also attract the current standard 10 percent. 

Unlike previously where only cement was attracting a Shs500 per 50kg levy, effective July 1, adhesives, grout, white cement and lime will attract the same.