Parliament to vote on new taxes today

A proposal to increase the tax levied on a litre of kerosene (paraffin) from Shs200 to Shs500 is among the issues that will be discussed as Parliament reconvenes to pass the Excise Duty (Amendment) Bill, 2024.

On May 6, Speaker Anita Among was forced to adjourn the House Sine Die after lawmakers failed to agree on certain proposed tax amendments. Two Bills, including the Stamp Duty Amendment Bill, 2024, and Value Added Tax Amendment Bill, 2024, were passed that day.
Mr Adolf Mwesige, the Clerk to Parliament, informed all lawmakers in a May 14 letter that the House will resume today at exactly 10 am. An order paper shared with the lawmakers has been populated with eight items.

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According to the Order Paper, the Excise Duty (Amendment Bill 2024), which stalled in the previous sitting will come for the last two readings and discussion. If passed, it will await the President’s signature to become law.

Inside the Bill
The proposal to increase the taxes on a litre of kerosene by Shs300 last week split opinion in the House. Mr Ibrahim Ssemujju Nganda, the Kira Municipality lawmaker, who doubles as shadow Finance minister, labelled the government “greedy” during the May 6 plenary. 

He reasoned that the government has turned the petroleum products sector into “a soft target” for tax increment.
Mr Ssemujju’s no-holds-barred remarks followed the tabling of the report by the House Committee on Finance, Planning and Economic Development report.

 The committee’s chairperson and Rwampara County lawmaker, Amos Kibwika Kakunda, rejected the proposal to slap a Shs300 tax on kerosene outright. As did 34 members on his committee.
In the same Bill, the government has also proposed to increase the taxes on diesel and petrol from the current Shs1,450 to Shs1,550 per litre and as well increase the one on gas oil (automotive, light, and amber for high-speed engine) by Shs100 from Shs1130. Mr Ssemujju wondered why a minister whose fuel is bought by the taxpayer is increasing the taxes on fuel unnecessarily.

“Maybe we should stop fuelling all government vehicles for the leaders to understand the pain that citizens go through,” he said.
He added: “We continue to warn this government that the consequences are dire: as fuel prices soar, production becomes more costly, hindering economic growth and potentially leading to job losses…Moreover, the average Ugandan faces a significant reduction in disposable income, as higher fuel costs trickle down into increased prices for goods and services across the board.”

Dire impact
Industry players also said the increment will negatively impact on the lives of the local Ugandans who depend on kerosene as their main grade fuel.
“The gap is still too wide between the main grades and kerosene. The intended benefit is, therefore, not effectively addressed by this meagre increase,” Mr Anthony Ogalo, the chairperson of Sustainable Energies and Petroleum Association (Sepa)—an umbrella body that brings together more than 40 private oil marketing importers, said.

“For the case of petrol and diesel increase, it only goes to negate the benefits that the government promised when they amended the Petroleum Supply Act of 2003. The main promise was a reduction in the cost of fuel to the population, and yet this increase immediately reverses that promise,” he added.

Away from petroleum products, tax experts and economists warned the government against using over taxation as the means of collecting much taxes. Mr Julius Mukunda, the executive director of the Civil Society Budget Advocacy (CSBAG), said the government should expand the tax base rather than deepen it.
“Even when you increase these taxes, it is the same small group of people who will pay. So the government should increase taxpayers,” he said.
However, Mr Robert Ssuuna, an independent tax and trade expert, argued that a tax burden is shared by a large number of people.

Justification
When tabling five sets of tax Bills, including the Excise Duty Amendment Bill, 2024; Stamp Duty Amendment Bill, 2024; Income Tax Amendment Bill, 2024; Value Added Tax Amendment Bill, 2024; and Tax Procedures Code Amendment Bill, 2024, Mr Henry Musasizi, the junior Finance minister (general duties), said Shs1.9 trillion will be collected. 
This, he added, will facilitate the provision of services to the population. 

Mr Amos Lugoloobi, another junior Finance minister (planning), on April 2, told lawmakers sitting on the Finance Committee, that the Ugandans have to be prepared to do the heavy lifting of financing their budget.
“…it is the natives of a country that build their own country. They are not going to expect us to go to America [and borrow] and come here and finance the development of this country. It has to come from us,” he said.

The tax Bills are meant to boost the revenue sources from which the Uganda Revenue Authority (URA) will tap to feed into the national resource envelope to bankroll activities of the Financial Year (FY) 2024/2025.
The ministry tabled a Shs58.3 trillion Budget for FY2024/2025, reflecting a Shs5.64 trillion increase from the Shs52.7 trillion of the ongoing FY 2023/2024, which the House will equally scrutinise today.

Agent withdrawals, alcohol
Another tax that was a topic of discussion last week was the proposed 0.5 per cent on agent withdrawals. These include agent banking, chipper cash, and wave, among other services, being offered by financial institutions that are not governed under the current telecommunication law where mobile money tax is levied. The proposal, according to farmers, seeks to eliminate unequal tax treatment by including these in the realm of taxation.

Lawmakers on the Finance Committee unanimously agreed to enhance equity and fairness by including all major electronic wallet platforms as the tax burden on Ugandans-current tax burden.
This, they added, would be distributed evenly creating a level playing field and providing an expanded tax base. If the tax is okayed, says its proponents, it will increase the government’s revenue.

If passed as cleared by the Finance Committee, a litre of opaque beer will attract an excise duty of 10 percent or Shs150, down from the current 20 percent or Shs230. Relatedly, other locally-produced alcoholic beverages will attract a duty of 10 percent.
Any powder or dry substance, which upon being mixed with water or any non-alcoholic beverage ferments or becomes an alcoholic beverage, will attract an excise duty of Shs2,500 per kilogramme.
The Finance Committee rejected a proposal by the government to increase the tax on un-denatured spirits of alcoholic strength by a volume of 80 percent or more made from locally-produced raw materials from the current Shs1500 to Shs5,000.

Mr Kakunda told Parliament that hiking this tax to Shs5,000 yet the final product costs Shs1,700 is unreasonably high.
“The Committee recommends an excise duty rate of 60 per cent or Shs1,500 per litre to be imposed on un-denatured spirits of an alcoholic strength by volume of 80 per cent or more made from locally produced raw materials,” he said.

The government had also proposed to increase the tax on un-denatured spirits of alcoholic strength by a volume of 80 per cent or more imported to the same Shs5,000, but legislators said it must be maintained on the current Shs2,500.
Taxes on a bottle of wine will now be Shs10,000, from the current Shs8,000 should the House agree with the Committee.

Relatedly, the tax on fruit and vegetable juice made from at least 30 per cent pulp and locally-grown vegetables and fruits will be reduced by one per cent or Shs250 per litre.
Legislators want the tax on a litre of bottled drinking water reduced from the proposed Shs75 to Shs50 to attract more investment in the industry. The current standard 10 percent will, however, remain.
  
The government in this Bill is also seeking to expound the categorisation of cement to include adhesives, grout, white cement or lime, and maintain the excise duty rate of cement at Shs500 per 50 kg, which MPs agreed with.
MPs also agreed with an amendment to remove the duty of $0.09 per minute, on all incoming calls from Burundi and Tanzania which they said will ease communication and make it affordable.