How proposed taxes will bite

Ugandans should brace for higher tax burdens and stiff penalties for breaches, starting July 1, if Parliament passes a raft of tax reform proposals in six newly-tabled Bills.

The proposals, among others, seek to impose tax on international telephone calls, except to four East African Community member states, and businesses conducted on digital platforms such as rental cars and accommodation.

The countries include Rwanda, Kenya, South Sudan and Tanzania.

The government wants a driver convicted of speeding to pay Shs2m in penalty, or go to jail for three years, if not both, while a fine of Shs10m or 10-year jail term awaits anyone who tampers with digital tax stamps.

It will also be honeymoon-over for bettors as the taxman eyes to pick 30 percent of every Shs100 each makes in winnings.

The only relief is for makers and consumers of opaque beer (a weak alcoholic beverage produced by the process of alcoholic fermentation from a starch source, water and yeast), any low-cost beverage made from local raw materials, whose excise duty will be slashed as will exemptions to manufacturers of hand sanitisers with 70 percent or higher alcoholic content.

The proposals deliver a heartbreak for savers with unit trusts such as Savings Credit and Cooperative Organisations (Saccos) by prescribing five percent withholding tax on interest/dividend if saving is under Shs100m, or 15 percent if the amount is higher.

Mr Amos Lugoloobi, the minister for Planning, tabled the various Bills for revision – an annual exercise - on March 30 as Uganda Revenue Authority (URA) ensnares new tax payers or adds the burden on existing ones in a bid to grow the country’s revenue amid tough economic times.

The Bills tabled included Income Tax Amendment, 2023; the Excise Duty Amendment Bill, 2023; Value Added Tax Amendment Bill, 2023; and the Tax Procedures Code Amendment Bill, 2023. Others are Traffic and Road Safety Act Amendment Bill, 2023 and Lotteries and Gaming Amendment Bill, 2023.

For instance the Tax Procedures Code Amendment Bill, 2023 has prescribed a 10-year jail term or Shs30m fine for a person who tampers with digital tax stamps.

“(6a) A person who makes an unauthorised interference to, or tampers with, a digital tax stamps machine commits an offence and is liable on conviction, to a fine not exceeding one thousand five hundred currency points or imprisonment not exceeding 10 years,” the Bill reads in part.

A currency point in Uganda is an equivalent of Shs20,000, meaning the 1,500 threshold set out in the proposal converts to Shs30m penalty.

A digital tax stamp, according to URA, is a “marking that is applied to goods or their packaging and contains security features and codes to prevent counterfeiting of goods and enable track and trace capabilities”.

The tax body introduced the changes in the 2019/2020 Financial Year to enhance tax compliance, reduce under-declaration of taxable base and guarantee genuine products on Uganda’s markets for consumers.

The same Bill contains a new insertion of Section 62H which prescribes Shs10m fine or three-year jail term on a person convicted for imposing wrong tax stamp on wrong goods.

The same Bill suggests that all persons, who decline to avail tax information as requested by URA, the tax collector, would not be given an audience or be allowed to avail the same information in defence during the mediation process once the government cracks the whip over non-adherence.

Through the Lotteries and Gaming Act Amendment Bill, 2023, the government is proposing to slap 30 percent tax on monies gained from a betting stake.

The National Lotteries and Gaming Board (NLGB) recently told Parliament’s Finance Committee members that its revenue collections had grown from Shs17b in 2015/2016 to Shs110.5b in 2021/2022.

The framers of the Value Added Tax (VAT) Amendment 2023, want imported services, among them music, films and games, self-education packages, web-hosting, to be liable to pay the tax.

The same draft suggests that tax returns will be done and filed reflecting in the form of the United States Dollar (USD) currency as opposed to the current form which allows business owners to do the same in local currency thus Uganda Shillings.

Under the Income Tax Amendment Bill 2023, the government proposes a five percent tax levy on digital services in the country.

“A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate of five percent,” the Bill reads in part.

The online services include online advertising services, data services, services delivered through an online market place or intermediation platform, including an accommodation online market place, a vehicle hire online market place and any other transport online market place.

Online services also include digital content services, such as accessing and downloading of digital content, online gaming services, cloud computing services and data ware housing.

Proposals touching on traffic and road safety seeks to increase penalty for convicted speeding drivers to Shs2m fine or three-year jail term, or both.

Some lawmakers, among them Bukoto West MP Muhammad Ssentayi, consider the suggested penalty inadequate, proposing instead that the government introduce a point-reduction method off a driver’s licence under which repeat traffic offenders could lose their licences and be forced to return to driving school.

“I would not have supported the idea of imposing Shs2m fine or years of imprisonment for drivers found to be speeding … [in] developed countries, … permit holders [who violate traffic rules] are subjected to reduction of points until it reaches a point of retraction of the driving permits,” he said, citing rising road carnage and lost lives.

The legislator called for an overhaul of safety measures, including improving the state of jagged roads, instead of resorting to what he called “harsh penalty” on drivers.

In the Excise Duty Amendment Bill, 2023, manufacturers of opaque beer are likely to enjoy a tax reduction on their products because there will be a 20 percent reduction to 15 percent reduction, translating from Shs230 to Shs150 on every litre of opaque beer.

The government proposes to exempt makers of Covid-19 preventive items such as hand sanitisers with alcoholic content of 70 percent or higher from paying excise duty.

If approved by Parliament, placing international calls will start attracting $0.09 (Shs336) per minute, except dials to regional neighbours; Rwanda, Kenya, South Sudan and Tanzania (the newer addition to the list).

Tax Procedures Code Act

Tampering with digital stamp:  10 years in jail or Shs30m fine

Refusal to avail tax information on time not defence at mediation or later stage.

Imposing wrong tax stamps on wrong goods: Shs10 million or three years in jail

Excise duty

Slash taxes on opaque beer from 20 percent or Shs230 on each litre of opaque beer to 15 percent or 150 per litre of opaque beer.

Makers of sanitisers, whose alcoholic content is more than 70 percent will be exempted from Excise duty tax.

Tax on all international call remain paying $0.09 (about Shs336) per minute except Tanzania, Rwanda, Kenya and South Sudan

Lotteries and Gaming Act:

Persons in betting will have to forego 30 percent of money gained from their wins.

VAT Act

Digital services: All imported services will have to pay VAT. These include music, films and games, self-education packages, web hosting, websites.

Filing tax returns should to be done in dollars.

Income Tax

Digital services to be subjected to a tax of 5 percent eg online advertising, cloud computing, online gaming, and downloading digital content

Road Safety Act

Shs2 million fine or three years jail for speeding

Traffic offences and their penalties

• Driving under the influence of alcohol Shs300,000 and Shs1.2m or imprisonment of between six months and two years.
• Using an unlicensed vehicle Shs200,000 and Shs600,000 or imprisonment of between one-and-two years.
• Driving beyond the prescribed speed limit attracts a penalty of Shs200,000
• Blocking zebra crossings attracts a charge of Shs100,000.
• Blocking or parking in spaces such as bicycle lanes attracts Shs100,000
• Driving without a valid licence attracts a penalty of Shs100,000

• Overlapping attracts a penalty of Shs100,000.

• Overlapping on the left or road shoulders also earns you a fine of Shs100,000