New taxes as financial year starts

 Uganda police Force  officers deployed following a 42-day lockdown  on June 19 in Kampala. Government in this new financial year earmarked Shs6.9 trillion to make several interventions aimed at creating a peaceful and secure environment for economic growth and development. PHOTO/ABUBAKER LUBOWA. 

What you need to know:

  • As the new fiscal year 2021/2022 starts today, seven new government tax policy interventions also come into force to boost the local revenue collection projected at Shs22.425 trillion,  Anthony Wesaka writes.


Airtime, data users to pay more.
While reading the 2021/2022 national budget, the State minister for Planning, Mr Amos Lugoloobi, said government would rationalise the excise duty regime on telecommunication services by scrapping the Over the Top Tax (OTT). 
Mr Lugoloobi said this would be replaced with a harmonised excise duty rate of 12.0 per cent on airtime, value-added services and internet data.
The minister clarified that the internet data in the new tax would exclude provision of medical services and education services.
The OTT was first introduced in 2018 causing a nationwide uproar and protests in Kampala led by then Kyadondo East MP, Mr Robert Kyagulanyi, aka Bobi Wine. 
Following the public uproar, the government proposed to drop the tax, saying Uganda Revenue Authority (URA) had failed to hit the tax collection target from it. 
This was after Ugandans resorted to Virtual Private Networks (VPNs) to bypass the government tax.  
In July 2019, URA said they had collected only Shs49.5 billion of the targeted Shs284b from OTT for Financial Year 2018/2019, a shortfall of 83 per cent.
 
Fish maw exportation
After government realised that fish maw was a lucrative business in Asian countries, especially China, in the new financial year, a 7 per cent export levy has been slapped on the same effective today. Fish maw is a white hard membrane found inside the body of the Nile Perch and fetches up to $1,000 (more than Shs3.6m) per kg when sold on the international market.
Drugs, aircraft parts and surgical threads are some of the products made out of fish maw.
Early last year, Uganda and China signed a memorandum of understanding that would see the former sell the fish maw directly to the latter.
President Museveni said fish maw would fetch the country $156b (about Shs550 trillion), about five times bigger than the country’s GDP.

Gold dealers 
Gold is one of Uganda’s leading exports but according to statistics from the central bank, the mineral is only contributing about 44 per cent of the total export earnings.
It’s upon this backdrop that minister Lugoloobi in his budget speech, imposed an export levy of 5 per cent and 10 per cent on processes and unprocessed gold and other minerals respectively.
Plastic manufactures, dealers
Plastic manufacturers, traders, and users/buyers, will starting today, spend more on the same as government in its 2021/2022 budget said it will broaden the scope of taxation on all plastics.  
 Landlords, tenants to pay 
With the introduction of the reform tax on rental income, landlords will have no way of evading remission of taxes to government as has been in the past.
 Property owners and tenants will pay  25 per cent rental income tax, effective today.
The introduced rental tax is aimed at removing the incentives for non-individual rental tax payers to claim unrestricted deductions which were significantly reducing tax contribution.
As it is with other taxes, it is usually the final tax consumer, who in this case is the tenant, who will mainly bear this tax burden.
The new tax aims at ensuring that landlords don’t offset expenses from the loss-making buildings or buildings under construction against income of already existing buildings thereby, paying little or no rental taxes to government as it has been in the past.
 Other new tax policy reforms include; Reduced rates of depreciation for some classes of assets, discontinuation of the concurrent deduction of initial allowances and depreciation in the first year of use of qualifying assets and review of the capital gains tax regime by allowing for the effect of inflation and providing tax relief for venture capital investments.

Water &sanitation
Under access to safe water and sanitation, government has provided Shs124.9b for improving rural water supply and Shs523.4b for improving urban water supply aimed at the wellbeing of dwellers.
This is part of government’s mission of 2025 of increasing supply of safe water coverage, targeting 81 per cent in rural areas and 100 per cent in urban areas.

Other policies  government intends to implement

Education sector
Being the second year of Covid-19 pandemic, government says transforming the education sector is of paramount importance. This will be through improving learning outcomes by adopting e-learning methods and digitising inspection and supervision.
Further, government plans to recruit 4,200 primary school teachers to raise the national staffing level to 70 per cent.
In addition, 1,055 secondary teachers will be recruited in local governments with staffing level below 50 per cent of the establishment. 

Likewise, to improve supervision, government plans to recruit 440 inspectors across all local governments.

Further, in this new financial year in order to address leaner, teacher and school management absenteeism, government will roll out an Integrated Inspection System (electronic inspection) throughout the country. 

They will also be the rehabilitation of 74 primary and 13 traditional secondary schools such as Nabisunsa Girls School. 
Government also intends to construct 36 partially completed schools and  seven skills development institutions like the Arua School of Nursing are expected to be completed.

Health
According to government, the immediate health need they are faced with is ensuring containment of the Covid-19 pandemic that has since entered the second wave.

To that effect, in this new fiscal year, government says it will prioritise widespread vaccination and the enforcement of Standard Operating Procedures (SOPs) as the only preventative measures that guarantee protection against Covid-19. 

Government says its initial target, is to vaccinate at least 6 million most vulnerable persons comprised of teachers, health workers, the elderly and persons with chronic ailments and it has since earmarked Shs560b for the procurement of the vaccines.

The other health priorities are upgrade of 43 health facilities and construction of new health centre IIIs in 60 sub-counties, to ensure functionality, the recruitment of additional staff for each of the upgraded health facility, construction and equipping of the Uganda Heart Institute at Mulago to be completed and the Regional Oncology and Diagnostic Centre in Gulu by the Uganda Cancer Institute to be established.

Access to Justice
To improve access to justice, the Judiciary and other law and order services will be deconcentrated to the regional and district level. To that effect, government has earmarked Shs9.4b to kick-start the construction of the Courts of Appeal in Gulu and Mbarara, High Court Circuits in Luwero and Soroti, Magistrate Courts in Budaka, Alebtong and Lyantonde, Grade 1 Magistrate Courts in Abim, Patongo, Karenga, and Kyazanga.

The Judiciary’s budget was also substantially enhanced from Shs199.1b to Shs376.9b, and of this, Shs146.6b has been provided for the recruitment and facilitation of judicial staff.

In addition, Shs18.2b has been provided to implement the Electronic Court Case Management Information System and the Prosecution Case Management Information System in courts.

Peace & Security
Government in this new financial year, earmarked Shs6.9 trillion to make several interventions aimed at creating a peaceful and secure environment for economic growth and development.

Such interventions include acquiring, refurbishing and maintaining military equipment, completing the construction of the military referral hospital in Mbuya, training military medical personnel and procuring medical equipment.

Also commencing construction of 30,000 housing units for the military, constructing the military museum, as well as military barracks and improving urban security with implementation of phase III of the Safe City CCTV project.


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