Government drops tax measures

Finance minister Matia Kasaija and MPs agreed to suspend taxes on rentals, petrol, and kerosene, among other items. Photo by Alex Esagala 

By Moses Kyeyune

Government has dropped the proposed new taxes on the various items following pressure from
Parliament and other affected players in the economy.

According to sources in Parliament’s Finance Committee, Finance minister Matia Kasaija met some MPs yesterday at the ministry headquarters in Kampala and agreed to drop the proposed taxes in the next financial year budget.

Mr Kasaija and the MPs agreed to suspend the proposed taxes on rentals, kerosene, petrol, beers but resolved to maintain the tax rates for 2019/2020 financial year in order to finance the pre-election year budget.

Lawmakers on the Finance committee held a follow-up meeting on the same day at Parliament and welcomed the minister’s decision as “a step in the right direction.”

The MPs, who attended the closed-door meeting requested not to be named because the minister promised to officially write to the committee before the chairperson presents the report on tax Bills to Parliament on Tuesday next week.

During their meeting yesterday, the legislators exposed details of an emergency closed-door deal in which the government through Ministry of Finance agreed to halt the proposed new tax measures in the pre-election year budget.

Though MPs say government accepted to drop the proposed taxes, by last evening, it was not yet clear whether this decision was reached after consulting Cabinet and the President.

The meeting at Finance ministry officials came after the lawmakers on the House finance committee cited the Covid-19 pain Ugandans are going through and rejected the proposed amendments to the tax laws.

In the Tuesday meeting with Mr Kasaija, the lawmakers accused government of being insensitive to distressed citizens.
Mr Kasaija’s disputed tax measures sought to at least Shs1.8b from Stamp Duty, Shs381.9 from Excise Duty and Shs67b from Value Added Tax.

The government also anticipated that Uganda Revenue Authority would collect Shs293.1b from Income taxes.

Mr Kasaija and selected Finance committee members struck a win-win deal in which government agreed to drop the proposed tax measures under Excise duty, Income tax and Value Added Tax (VAT) due to Covid-19 crisis.

The MPs, who attended the closed-door meeting at Ministry of Finance, briefed other committee members yesterday during a closed-door meeting.

One of the MPs, who attended the meeting at the Finance ministry but requested not to be quoted, told the committee that Mr Kasaija and his technical team “appreciated the circumstances and he is willing to cooperate with whatever decision we [MPs] take about the win-win we have arrived at.”

Government last week announced new tax measures, which it said will help in raising more funds to run the country in the next financial year.

The proposed increment in taxes however, came at a time when all businesses are struggling after the lockdown following Covid-19 pandemic.

Several stakeholders petitioned the President, Mr Kasaija, Speaker Rebecca Kadaga and the committee criticised the proposed tax measures as insensitive and alluded to a weakened economy due to the coronavirus pandemic.
In the proposed taxes, government had projected a Shs1.2 trillion increment in revenues compared to the current year projection.
During the closed-door meeting, the minister and the MPs agreed that once the economy returns to normal, the minister will come up with mid-term measures to support the country’s revenue targets.

Details next week
The agreed position will be officially communicated to Parliament on Tuesday when MPs convene to receive a report on the tax measures.

Mr Kenneth Mugambe, the director of budget at Ministry of Finance, however, said he could not comment on what transpired at Parliament and referred Daily Monitor to Mr Kasaija who said he attended the Finance committee meeting.

Mr Kasaija, however, refused to disclose the details of his closed-door meeting with Finance committee.
The minister was expected in the committee but for unknown reasons didn’t show up.

Mr Jim Mugunga, the Finance ministry spokesperson, later told Daily Monitor that he was not privy to any alleged agreement on taxes outside established processes.

“What I know is that the minister and the Secretary to Treasury [Keith Muhakanizi] have continued to meet stakeholders and other partners including relevant leaders, including the chairpersons of some committees of Parliament who have presented issues of impact to their sectors,” Mr Mugunga said.

“It is true the minister and PSST met the chair of the Committee of Finance. What I am aware of is that whatever was discussed and may necessitate making a fundamental policy decision of broader impact beyond the Ministry of Finance, such a decision would be subject to approval processes that include Cabinet. For now the correct position is that the current status quo prevails until formally advised otherwise.”

Budget queries

The Minister of State for Planning, Mr David Bahati, yesterday appeared before the Budget committee to defend government’s position on the 2020/21 budget which has risen to Shs45.5 trillion, up from Shs44 trillion. Mr Bahati said government is focusing on enhancing capacity for import substitution, to spur local industrial growth. “The import substitution strategy will focus on agro-industrialisation to turn Uganda from a net importer to a net export of processed agricultural products and others,” Mr Bahati said.

The minister said in order to nurse its ambition, the government has earmarked Shs2.8t to finance interventions, including improvement of yields and productivity through use of modern inputs, supporting area-based commodity value chains where they exist, speeding up titling process and strengthening physical planning for production land. Others are to expand the agricultural insurance, improving post-harvest handling and primary processing through provision of rural infrastructure, including storage infrastructure and increasing access to long-term finance.

mkyeyune@ug.nationmedia.com