Tax on private schools starts

By Francis Kagolo, Clare Muhindo and J. Nambooze

Efforts by educationists to block the recently restored income tax on private schools have hit a snag.

The Uganda Revenue Authority (URA) has insisted that it will implement the tax. In a stormy meeting yesterday, URA’s commissioner general, Doris Akol, bluntly told school owners that they have to start remitting 30% of their annual profit, plus a monthly 6% withholding tax to the revenue body.

The Government scrapped the 30% income tax on private schools temporarily in 2007, but re-introduced it this financial year.

Under the new tax regime, schools also have to withhold 6% of monthly payments exceeding sh1m to suppliers of things like fuel, chalk, firewood and food, and remit it to URA.

Akol warned school directors and headteachers against tinkering with their accounts in order to evade taxes, saying the tax body will not hesitate to impose penalties provided for in the law.

“Five percent of Uganda’s GDP is from the education sector, but the sector contributes only 1% to tax revenue. There is a mismatch,” Akol said.

“This is what informed the Ministry of Finance to get the education sector to step up a little bit. For us to widen the tax base, we must look at private schools as well,” she pointed out.

She was responding to arguments that private schools are highly taxed and that reintroducing income tax would force some schools to close, thus hampering the citizens’ access to education.

The ministries of finance and education and the proprietors of private schools were meeting in Kampala yesterday. The Government officials sought to listen to the grievances of the school proprietors.

According to Asad Kirabira, the private schools’ association research officer, schools in Kampala already pay Kampala Capital City Authority (KCCA) property rent, ground rent, local service tax and trade licence fees and other fees for sign posts.

Kirabira said some charges, like the trade licence charge, contradict the Education Act and asked the Government to harmonise the laws relating to education to avert the likely negative long-term consequences arising out of high taxes on schools.

He argued that it was a blunder for the Government to tax private schools and exempt government-aided ones.

The school directors said KCCA charges property rates on each building at school campuses, including classroom blocks, libraries, laboratories and staff houses.

However, KCCA’s deputy director for tax compliance, Fred Andama, said the issue was beyond their mandate and advised the school directors to petition the trade minister responsible for setting property rates.

The meeting at Mandela National Stadium in Namboole, near Kampala turned stormy when the school directors sensed that URA and KCCA were not ready to negotiate.

“If you choose to tax a sector, you must tax the whole of it and if you want to tax education, even public schools should be taxed. I am also an economist.
You are distorting the entire economy,” said Lawrence Bategeka, the director of Mandela SS, Hoima. Juliet Nabakooza from Makindye accused KCCA and URA of making owners of private schools suffer in order to support what she called abnormal salaries.
“However much you lecture us about taxes, we shall not accept. What you should do is go back and start cutting these taxes,” Nabakooza charged.
 
But the URA chief retorted:
“This is our country. No one is going to build it for us. I suggest that we open our minds as we discuss issues of taxes.”

Hajjat Zaujja Ndifuna, the proprietor Mbogo schools, argued that there should be a general tax for schools, in order to avoid suffocation.

Dr. Julius Mugisa, the proprietor of New Style SS, however, disagreed with his colleagues, saying private schools and institutions are businesses and, therefore, should pay income tax like other businesses.

Lawrence Mukiibi, the proprietor of St. Lawrence schools, also argued that one of the primary duties of a citizen is to pay tax in order to assist the Government to run its affairs. “As private schools, we have to support security and hospitals, among other sectors, through taxes, “ he said.

Juma Bakil Cucu, the education secretary of the Uganda Muslim Supreme Council, said the Government should understand that some schools do not make a lot of profit and cannot afford the multiplicity of taxes levied on them.

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