Traders seated outside their shops in Downtown, Kampala City in April 2024 . They were striking against the Electronic Fiscal Receipting and Invoicing Solutions (EFRIS), a tax remittance system introduced by the government. PHOTO/ABUBAKER LUBOWA
President Museveni last week told traders in Kampala that it is not true that his government is levying excessive taxes on the business community.
Mr Museveni, who met the traders last Tuesday, said even the Value Added Tax (Vat) that the traders were “shouting about,” is paid by the final consumers.
“If customers are buying it means the tax is manageable,” Mr Museveni told the traders who had assembled over the tax complaints at Kololo Independence Grounds, in Kampala.
But are Ugandans not feeling the burden of the taxation system?
The URA Financial Year 2022/2023 Annual Data Book shows that about 1,000 taxpayers contribute about 80 percent of the country’s local revenue, thus carrying the biggest tax burden. But the 3.5 million taxpayers in Uganda are obliged to pay 10 different taxes.
Mr Ibrahim Bbosa, the spokesperson of URA, the national tax collector, yesterday listed the 10 different taxes as Corporation Tax, Individual Income Tax, Presumptive/ Small Business Income Tax, Rental Tax, Pay As You Earn (PAYE), Value Added Tax (VAT), Local Excise Duty (LED), Withholding Tax (WHT), Advance Income Tax for motor vehicles, and Customs taxes.
URA, which is established under the Uganda Revenue Act, 1991, is mandated to assess and collect specified revenue, which has been passed by Parliament, which is in turn, mandated by the 1995 Constitution to give legislative sanctions on all taxes that are levied in Uganda.
Traders, economists, and tax experts who spoke to Monitor said the unfair distribution of these taxes to a few individuals is making the taxation system a burden. Experts define a tax burden as the total amount of tax every individual living in a country is supposed to pay.
“All the taxes, including the new ones, are being paid by the same people,” said Mr Julius Mukunda, the executive director of the Civil Society Budget Advocacy Group (Csbag).
Mr Robert Ssuuna, an independent consultant on Tax, Trade and Investment, said: “You have an economy that is still highly dependent on agriculture, and where over 70 percent of that agriculture is actually non-monetised, it’s not commercial, it’s subsistence in nature. How do we ensure that the people who are engaged in such practice are brought into the money economy for it to be able to be taxed?”
“Whenever you increase the number of economic activities from which you collect taxes, you will have to distribute the burden among as many economic entities, so that each of them will not feel the burden. So there is a need to invest in that,” he added.
But Finance ministry Permanent Secretary Mr Ramathan Ggoobi told reporters at the Finance Ministry headquarters on April 14 that Uganda has the lowest tax burden in the East African region.
He said the 2022 findings of the Heritage Foundation placed Uganda in the second position among the lowest tax burden countries in the East African region at 11.8 percent after Tanzania with 11.7 percent. Nevertheless, with the current taxes being placed on few people, the experts say there is a serious problem that must be addressed urgently.
Mr Xavier Ejoyi, the ActionAid International country director, said the unfair tax exemptions and leakages such as corruption and high cost of administration makes the tax burden bigger on the few Ugandans paying.
“As traders in downtown [Kampala] are crying of unfair taxes, there are investors whom the government is giving tax holidays and waivers. This is very unfair because even the so-called big taxpayers are awarded because of VAT, which is paid by the final consumers,” he said.
Mr Mark Oscord Otile, a research officer with Advocates Coalition for Development and Environment (ACODE), said Uganda’s tax policy makes it not favourable for investment, especially when her neighbours, including Rwanda, is lowering their taxes, including Corporation Tax from 30 to 28 percent.
Otile said everybody is lamped up in the same basket when computing tax to GDP, yet only a few Ugandans are contributing to tax revenue collection.
“In consideration of the tax to GDP parameters, one would assume that the tax impact is distributed across all eligible taxpayers,” he said.
The taxes you pay
1. VAT
URA says Vat is an indirect tax on consumption that is borne by the final consumer, the one who will not resell the good or service. URA says Vat rates range from 0 to 18 percent and are withheld by Vat registered taxpayers who pay in on every 15th day of the next month after filing returns.
2. Corporation Tax
This is a 30 percent tax levied on profits made by corporate entities and companies in Uganda. URA the taxpayers always file the provisional return within six months from the start of the year of Income and pay the first installment within those six months and the second one by the 12th month.
3. Individual Income Tax
Individuals in businesses who earn up to Shs120m per year are charged an Individual Income Tax, ranging from 10, 20 and 30 percent depending on one’s earnings.
URA says individuals who earn beyond the Shs120m are charged an additional 10 percent, levied on the additional income. Here, the mode of payment is that the taxpayer files a provisional return within three months from the start of the year of income and pays four times in the year.
4. PAYE
All individuals employed and earning a monthly salary of Shs235,000 and above pay as you earn. The rates are; 10, 20 and 30 percent.
Earners of between Shs235,000 and Shs335,000 pay 10 percent, their counterparts earning up to Shs410,000 pay 20 percent, those who get up to Shs10m pay 30 percent while those above Shs10m pay the 30 percent but also add 10 percent deducted on the additional income.
5. Rental Tax
Rental tax in Uganda is charged under two categories, including from corporate entities or companies and individuals. For companies, its rate is 30 percent and is taxed on gross rental income derived by a person for the year of income from the lease of immovable property (land and or buildings) in Uganda with the deduction of expenditures and losses capped at 50 percent of the annual gross rental income.
For individuals, the Rental Tax is 12 percent rate and charged on gross rental income derived by a person for the year of income from the lease of immovable property (land and or buildings) in Uganda with the deduction of the threshold of Shs2.8m
6. Local Excise Duty (LED)
URA says LED is a tax imposed on specified imported or locally manufactured goods, and services and is charged on local manufacturers and importers of excisable goods and services.
7. Withholding Tax (WHT)
This is income tax withheld at source by one person (WHT agent) upon making payment to another person (payee). The rates in Uganda are; six, 10, 15 and 20 percent and are remitted to URA by the WHT agents.
8. Presumptive/ Small Business Income Tax
URA says his tax is levied on business income less than Shs150m per year. The rates are presumptive based on the taxpayer’s annual turnover and the tax ranges from Shs80,000 to Shs900,000. Taxpayers who are in business and their annual turnover/sales are less than Shs150m. It is payable once a year by the 12th month from the start of the year of Income.
9. Advance Income Tax for Motor Vehicles
URA says Advance Income Tax is paid by commercial vehicles depending on the number of passengers or tonnage. Shs20,000 and Shs50,000 are charged per passenger or per tonne respectively, and charged from commercial vehicle owners.
10 Customs Taxes
These are omnibus taxes including Import Duty, VAT at importation, Withholding Tax at importation, Excise Duty, Infrastructural levy and environmental levy that is charged during importation and exportation of certain products. URA says these taxes are payable at the point of customs clearance and paid according to the rates applicable to them.
Tax payment versus social services
Mr Richard Ssempala, an economist and lecturer at Makerere University School of Economics says that Ugandans would not be worried about the taxes they pay but how it is being used.
“Currently, there is no commensurate return that is attached to the taxes Ugandans are paying. When they hear about money being swindled in names of corruption then they shy away from paying taxes,” he said.
“We are collecting the taxes but not putting them to good use. The IG Office estimates that Uganda loses Shs10 trillion annually to corruption. This alone we have a very big political administration to sustain all this is on the taxpayers,” he added.
Mr David Walakira, the executive director of the Centre for Budget and Tax Policy (CBTP), said there is need for tax education to ensure the biggest sector which is informal, joins the tax register to contribute their tax share.
The making of taxes
The Cabinet, chaired by the President, makes tax proposals which are then tabled before Parliament by the Minister of Finance, Planning and Economic Development in line with Section 8 of the Public Finance Management Act, 2015. The taxes are then debated before being passed, and later signed by the President to lawfully be collected by URA.
“MPs we are sick and tired of seeing you [MPs} representing your own interests. We shall stand against you or facilitate your competitors to remove you from Parliament,” the chairperson of Kampala Capital Traders Association (Kacita), told MPs during the meeting.
