What you need to know:
- However, the lawmakers provided a reprieve for hoteliers and lodge owners, whose businesses were badly battered by Covid-induced lockdowns, and maintained or reduced taxes on oxygen cylinders, sanitary towels and beer.
Parliament yesterday passed a raft of tax Bills, rejecting proposed charges on commercial land transactions and use, reductions and or waivers of levies on fuel, bread, and used computers.
However, the lawmakers provided a reprieve for hoteliers and lodge owners, whose businesses were badly battered by Covid-induced lockdowns, and maintained or reduced taxes on oxygen cylinders, sanitary towels and beer.
The House said no to a proposal to raise tax on polythene bags to 40 percent, and instead retained the current 2.5 percent levy.
MPs began processing the tax Bills on Tuesday.
Yesterday’s session, like that for Tuesday, was presided over by Speaker Anita Among and commenced at 10am, earlier than the regular 2pm House sittings, as members scrambled to expedite scheduled business ahead of recess starting later today.
The parliamentarians threw out a proposal under the Income Tax Amendment Bill, 2020 under which it was provided that any person selling land, house or any piece of property or equipment purchased exclusively or primarily for business pays tax.
“This tax is unacceptable and we have objected,” said MP Geoffrey Ekanya said.
Under the Excise Duty (Amendment) Bill, legislators cut the excise duty on opaque beer from 20 percent to 12 percent, or Shs150, per litre, slightly higher than the initially proposed 10 percent.
Parliament chopped the levy on imported spirits by 20 percentage points to 80 percent per litre, but increased the charge on locally-produced spirits, which hands a gain to importers and a strangle on domestic producers, contrasting the government’s hyped Buy Uganda, Build Uganda or Bubu policy.
During the proceedings, MPs tasked the State Minister for Finance (General Duties), Mr Henry Musasazi, and House Finance Committee Chair, Mr Keffa Kiwanuka, to justify the reduction of tax on beer --- now at 12 percent from 30 percent high in the 2020/2021 fiscal year --- while no consideration was made to lower levies on essential commodities whose prices have skyrocketed year start.
“Alcohol is an inelastic product, at whatever price, the [demand] of alcohol is the same. Even if we put beer at Shs100,000 [per bottle], the people who drink will still buy… this is an area where we can get reasonable tax,” said Solomon Silwanyi, Bukooli County Central MP.
Mr Mohammad Nsereko, the Kampala Central MP, said: “You refused to reduce tax on bread and you are removing tax on beer!”
On Tuesday, the House had rejected a proposal for an 18 percent VAT waiver on bread which MP Nsereko argued would make it affordable to citizens.
And yesterday, the lawmakers blocked a proposal in a minority report to cut the excise duty on petrol and diesel, whose prices are up by 10 to 20 percentage points from early this year, depending on place of purchase.
The rising fuel prices have increased transportation and manufacturing costs, further driving up the rates of already expensive groceries and spiraling month-on-month inflation.
Mr Nsereko yesterday described as “insensitive” legislators’ decision not to reduce fuel prices when aware the people they represent are suffering to put food on the table.
The proposal in the minority report to the Excise Duty Amendment Bill, 2022, enacted yesterday, sought to reduce excise duty on a litre of petrol from Shs1,450 to Shs700 and that on a litre of diesel from Shs600 to Shs530.
“It was observed that between January 2021 and February 2022, prices have increased by 70 per cent. The increase in fuel prices has had a ripple negative effect on other factors of production, especially transport costs and the overall value chain of raw materials to finished products,” the report states
It added: “Therefore, as a stop-gap measure, reduction on fuel is the only remedy available to reduce the cost of living through reduction of taxes on fuel which shall force the price to go down.”
However, Mr Dicksons Kateshubwa, the immediate past commissioner for domestic taxes at Uganda Revenue Authority (URA), and a first-time MP, warned that tax cuts on fuel would boomerang.
“That is a good political proposal, but technically untenable. I have looked at the numbers and that would be Sh1.5trillion lost [in revenue]. We need to exercise caution when dealing with tax reductions,” he said.
Napak Woman MP, Ms Faith Nakut, sought a guarantee that if fuel taxes were to cut, dealers would reduce the pump price.
“There is no evidence that if we reduce taxes, the pump price will go down,” she said
Speaker Among, who acknowledged that fuel price hikes were choking businesses and Ugandans, gave Finance ministry a month to study and appreciate what the impact of reducing tax on fuel would be.
Minister Musasazi, however, asked for three months to return to the House with a way forward.
Experts have attributed the spike in fuel prices to multiple local, regional and internationals factors: economic boom following lifting of global travel restrictions, oil producers’ failure to increase output, the Russia invasion of Ukraine and accompanying Western sanctions that have choked supplies, fuel hoarding and regional supply shocks.
In Kampala, the government has made clear it will not intervene by reducing fuel prices or providing subsidies, both of which the Executive has christened “bad economic”, insisting market forces of supply and demand will auto-correct the imperfections.
- Hotels and lodges grated waiver of 18 percent Value Added Tax Act (VAT) to boost service and tourism sectors.
- Oxygen cylinders and oxygen for medical use, assistive devices used by persons with disabilities exempted from VAT.
- Educational materials including those manufactured in any of the East African Community countries VAT-exempt.
- VAT scrapped on sanitary towels, menstrual cups, tampons and the inputs for the manufacture of sanitary wear.
- Bujagali Hydro Power granted a year’s tax exemption.
- Proposed tax on commercial land transactions and use rejected
- Landlords earn Shs2.5m and above to pay 2.5 percent rental tax.
- Imports used by businesses in exempt supplies to pay VAT.
- Used computers five years or older eligible for VAT charge.
- 20 percent tax on sugar confectionaries, sweets, chewing gum and chocolate.
- Proposal to zero-rate supply of electricity to consumers rejected.