MPs oppose water tax

By Henry Mukasa

MPs are opposed to a plan by the Government to re-impose Value Added Tax (VAT) on piped water and mobile toilets.

According to the new tax structure to take effect in the 2012/2013 budget, the Government wants to introduce VAT at 18% on piped water, a year after it had zero rated it.

The Commissioner General of the Uganda Revenue Authority (URA), Allen Kagina, told MPs on the finance committee that the removal of the tax did not bring the desired positive effect yet a lot of revenue was being lost as a result.

“The rationale to zero-rate water was to reduce the price but the price did not go down. So we realised that perhaps the tax was not the right tool to reduce the cost of water.

“Yet, last year we refunded sh17b to water suppliers because of the zero rate,” she said.

Kagina was part of the team led by finance minister, Maria Kiwanuka, her deputy Matia Kasaija and ministry offi cial, Moses Ogwapus.

However, MPs argued that the reason VAT was removed from water was for the benefi t of poor people in the slums and rural areas.

Geoffrey Ekanya (FDC), proposed that there should be classification of water usage so that the people are not denied a vital service.

“The tax should target the Commissioner General and the Ogwapus who water grass in their compound, have swimming pools, and use a drum of water to wash their cars,” Ekanya stated.

Ogwapus, the principal economist at the ministry of fi nance, responded that the consumers of piped water were in urban areas and hence can afford it.

Committee chairman, Frank Tumwebaze, said the cluster of the rich in urban areas is small compared to the urban poor.

A decision on the matter was postponed to today.

The MPs resolved to summon officials of National Water and Sewerage Corporation to explain why prices remained high even when they were handed a VAT zero rate last year.