How tax changes could impact you

Parliament has passed a raft of tax legislations through which Uganda Revenue Authority (URA) hopes to contribute to Uganda’s Shs29.3 trillion domestic revenue target in the next financial year, effective July 1.

The tax laws, according to Vice Chairperson of the Finance Committee Jane Pacutho Avur (Pakwach Woman MP), are expected to broaden the catchment area for the government’s resource envelope.

Ms Avur said: “This means that for Financial Year 2023/2024, government aims to increase revenue from Shs25.5 trillion (or 13.4 percent of GDP) projected in FY 2022/2023 to Shs29.3 trillion (or 14.0 percent of GDP) in FY 2023/2024.”

Provisions in the four tax Bills are part of other amendments clustered in seven Bills introduced in late March.

During the two plenary sessions convened on Tuesday and Thursday, MPs voted to expand Uganda’s tax base and to ensure better discipline in management of the economy.

A Shs100 million fine or 10-year jail term was approved for individuals or companies who tamper with the digital stamps levy.

Prior to the new increment, the Tax Procedures Code Act, 2014 had prescribed a fine of Shs30 million and a 10-year jail term, or both for tampering with digital tax stamps.

In defence of the plan, the Finance Committee chairperson, Mr Keefa Kiwanuka said: “The justification is to increase the penalty of the offence of tampering with digital stamp machines and to recover any loss of tax that may have been occasioned as a result of the tampering.”

A 30 percent tax levy was imposed on all winnings registered in every betting stake within Uganda as per the Lotteries and Gaming Amendment Bill, 2023 passed last Thursday.

Foreign online digital service providers such as Uber and Amazon will, under the Income Tax Amendment Bill, 2023, be taxed for their services in Uganda. The online services, include accessing and downloading of digital content, online gaming, cloud computing and data warehousing.

A special provision was after a spirited fight from a section of MPs such as Muhammad Nsereko (Kampala Central), included to exempt online digital service providers dealing in academic material, a decision meant to promote literacy in Uganda.

But the government’s plans to expand the resource envelope took a hit after MPs approved a presidential proposal to exempt salaries of staff at the Directorate of Public Prosecutions from taxation. This, according to the Ministry of Finance, will result in a Shs7.5 billion revenue shortfall.

Director of Public Prosecutions Jane Frances Abodo had recently reported to the House finance committee that the exemption would deny URA Shs6.8 billion in revenue annually.

Members of Parliament sustained the Excise Duty tax imposed on opaque beer, but voted to slash taxes on alcoholic or native non-alcoholic beverages by 12 percent or Shs250 on every litre, or whichever is higher. This adjustment doesn’t, however, apply on a local drink known as kombucha.

Rejected taxes

Speaker Anita Among directed Ms Pacutho Avur to delete a 0.5 percent proposal to be levied on all bank transactions such as cash withdrawals.

“Can you give me more clarity on how it smuggled itself into the committee? Did you interact with the stakeholder and which stakeholders did you interact with? I am saying, did you interact with the regulator, with bankers association, and regulator meaning Bank of Uganda?” Ms Among inquired before ordering that: “Can you delete that, don’t smuggle in things anyhow.”

“It isn’t anything for debate. We are going to investigate anything that hasn’t gone through the Speaker’s office or Parliament, we shall investigate this,” she said.

Opposition MPs led by the Shadow minister of Finance, Mr Muhammad Muwanga Kivumbi, pushed for the dismissal of tax proposals which were advanced without adequate research on their effects.

Mr Kivumbi’s camp squeezed the government wing into dropping the 5 percent digital tax initially proposed for all foreign companies such as Netflix, Facebook providing digital services in the country.

Plenary sittings are next week scheduled to deliberate on the Traffic and Roads Safety Amendment Bill, 2023 after Parliament on Thursday postponed the debate.

MPs demanded that Gen Katumba Wamala—the Works and Transport minister—appear in person to defend specific proposals.

The Works minister is expected to convince MPs about a proposal to compel drivers have both a driving licence currently required of every motorist, and a professional badge.  The government has also proposed to increase the penalty for speeding to a Shs2 million or a three-year jail term, or both.

Key resolutions

Approved

Betting wins: 30 percent tax

All diapers: 18 percent tax

Bottled water: 10 percent tax on litre

DPP salaries tax exemption: Shs7.5b annual revenue loss

Tampering with digital stamps: Shs100m fine or 10 years in jail

Foreign digital companies: To be taxed

Dropped/rejected

Digital companies selling tax: 5 percent

Agent Banking: 15 percent withholding tax on all commission agents

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