Parliament quizzes URA on tax holidays

Legislators on the Finance committee on Friday grilled officials from the Ministry of Finance and the Uganda Revenue Authority (URA) over tax exemptions, claiming that some business moguls are exempted even when they are meant to remit taxes.

The query was raised by the Butambala County MP, Mr Muhammad Muwanga Kivumbi, as the URA officials presented their 2022/2023 budget framework paper.

A section MPs on the Finance committee demanded that the tax body avails a detailed list of all companies and businesses exempted from remitting taxes to national coffers.

“You also have exemptions worth Shs7 trillion. We want to hear from you because we want to campaign against this thing of tax exemptions. We have a debt refinancing in the budget where we are paying an interest of Shs7 trillion, but we exempt Shs7 trillion in a financial year yet we can wipe it out. You even exempted people on Value Added Tax worth Shs2 trillion,” Mr Kivumbi said.

The lawmakers argue that if ably implemented and all persons meant to remit tax, meet their obligations, government would struggle less to locate funds for the national budget and settle debt demands.

In response, the State minister for Finance in-charge of General Duties, Mr Henry Musasizi, acknowledged that there were glitches in some exemptions.

 However, he was quick to add that government has since undertaken an assessment of the policy before a final decision is made.

“We are doing an analysis on the performance of the exemptions we have given, with a view of maintaining those which have done well and terminating those we feel are no longer necessary. The objective here is to create a levelled play field in the business environment and at the same time raise the necessary revenue to finance the ever growing demands of the country,” Mr Musasizi said.

The minister, however, didn’t share a list of exemptions that failed to work and or those that were cancelled.

Simply put, tax exemption may be applied to refer to a situation where state authorities with defined circumstances excuse or exclude a given item or good from remitting taxes.

Government provides for tax exemptions for items or goods in the areas that include but not limited to construction, warehousing, manufacturing, technology and agriculture purposely to encourage people to invest in those areas.

According to the fifth edition of URA’s Guide on Tax Incentives/Exemptions published in January 2021, there are 13 beneficiary categories for tax incentives and exemptions.

These include developers of industrial parks, agro processors, exporters of finished consumer/capital goods, mining and petroleum operators as well as aircraft operators. Private employers of people with disabilities also enjoy tax breaks.

In October 2020, URA embarked on a research that was purposed to assess the effect of tax exemptions on the country and later serve as basis to inform some policy decisions in the next financial year.

Following the adverse effects of the Covid-19 pandemic,  the 10th Parliament steered by former Speaker Rebecca Kadaga endorsed a government proposal to tax exempt supplies used by the medical fraternity to treat and manage patients.

The list of items exempted from taxes is likely to be revised as indicated by URA officials led by the commissioner general,  Mr John Musinguzi.

If implemented, the decision will add on the catalogue of decisions taken by the government to realise optimum resource utilisation amidst economic constraints.

During an interface with the Parliament’s Budget committe on Thursday, government revealed at least 17 projects worth Shs4 trillion will be cancelled in the next financial year as a move to scale down its expenditure and ease pressure off the national budget.

Mr Kivumbi also questioned URA officials for failing to collect tax arrears of Shs4 trillion as the tax body only  reclaimed Shs700b.

“You have given us a nice story but you have arrears of Shs4trillion.  You have been able to collect Shs700b. Shs4 trillion is able to wipe away all our interest payment but we have it with URA,” Mr Kivumbi said.

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