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KAMPALA - Uganda's Minister of State for Finance, Planning, and Economic Development (General Duties), Henry Musasizi, has presented a series of tax proposals for the 2024 financial year.

The proposals, outlined in five separate bills, aim to raise additional revenue for the government worth sh200.92 billion while minimizing the burden on taxpayers.

The presented bills include amendments to income tax, stamp duty, excise duty, tax procedures, and value-added tax (VAT). 

Minister of State for Finance, Planning, and Economic Development (General Duties), Henry Musasizi, has presented a series of tax proposals for the 2024 financial year. (All Photos by Miriam Namutebi))

The focus, according to Musasizi, is on making strategic adjustments to the current tax framework without creating undue hardship for businesses and individuals. Additionally, he said the proposals aim to streamline tax expenditures, leading to increased revenue generation.

Fuel excise duty increase

A key point addressed by Musasizi is the proposed increase in excise duty on fuel products.  

Previously, an agreement existed in Parliament to raise fuel excise duty by sh100 per litre every two years, with an exception made during the COVID-19 pandemic. 

Speaker of Parliament Anita Annet Among shared the plenary.

With the economy now recovering, Musasizi argues that it's time to resume these adjustments. However, concerns were raised regarding the impact on consumers already facing rising fuel prices due to a depreciating Ugandan shilling.

Musasizi defended the proposal, emphasizing that the increase translates to a 1.9% on average pump prices.

"These adjustments are part of a well-considered, medium-term Domestic Revenue Mobilization Strategy (DRMS)," stated Musasizi. "The strategy aims to strike a balance between generating additional revenue and minimizing the impact on consumers and businesses."

MPs raise taxpayer concerns

Members of Parliament (MPs) on the committee expressed a desire for a more long-term approach. 

Dickson Kateshumbwa (Sheema Municipality, NRM), requested the ministry develop policies to identify and incentivize sectors with high revenue potential. 

The MPs expressed skepticism regarding the long-term effectiveness of increased taxes as a solution to national fiscal challenges. 

He said the focus on short-term adjustments without clear long-term goals with not solve the country’s fiscal challenges.

Further concerns addressed the Electronic Fiscal Receipting and Invoicing System (EFRIS) implemented by the Uganda Revenue Authority (URA).

Patrick Ocan (Apac Municipality, UPC) said that they received complaints from traders regarding the system's bureaucratic nature and inconsistencies in tax calculations. 

“The traders have concerns on the alleged double taxation and the demanding nature of URA tax enforcers regarding E-Receipts.  We need to know about steps the ministry is taking to address these issues and if URA offers any educational programs for traders to navigate the tax system effectively,” he said.

Margaret Muhanga Mugisa, Minister of State for Health in Charge of Primary Health Care.

Tax exemptions

The proposed taxation of kerosene, a fuel source for many living in areas without electricity, sparked concern among MPs. 

Paul Omara (Otuke County, INDP) argued that taxing this basic necessity would disproportionately burden the most vulnerable populations who lack access to alternative energy sources.

The gold trade also came under scrutiny.  Reports of suspended gold traders prompted MPs to request a comprehensive report on all companies currently enjoying tax exemptions.

Higher education state minister John Chrysostom Muyingo.

The committee chaired by Amos Kankunda (Rwampara County, NRM), questioned the sustainability of such a large number of tax exemptions and their impact on government revenue.

Omara also reiterated that there is need for a report on all the companies that have been exempted from paying taxes because the tax exemptions are huge and that it is not sustainable to continue giving these exemptions.

Need for sustainable solutions beyond tax hikes

The MPs expressed skepticism regarding the long-term effectiveness of increased taxes as a solution to national fiscal challenges. 

Trade state minister Gen Wilson Mbadi (L) during plenary.

Kateshumbwa emphasized the need to explore alternative strategies for sustainable economic growth and revenue generation.

The Ugandan government's proposed tax adjustments aim to address the need for additional revenue while minimizing the burden on taxpayers. However, MPs also question the Bujagali issue. They said the minister smuggled into the proposed Bill yet it doesn’t exist in the original one.

“You have imported the Bujagali issue, yet it does not exist in the Bill. Also let’s embrace public dialogue on these issues. We should instead be first tracking the rationalisation process on government expenditure instead of increasing taxes. We all know that increasing taxes has never been a sustainable solution to fiscal problems,” Ocan said.

Other 11 proposed measures

Minister Musasizi highlighted on other proposed tax measures including expanding the scope of money withdraw services subject to excise duty at a rate of 0.5 percent beyond mobile money transactions to include other similar payments and solutions and agent bank withdraws.

The minister said that this proposal is aimed at equalizing the tax treatment of similar services.

The Government Chief Whip Denis Hamson Obua on the floor of Parliament.

He said that is important to note that the current tax mainly applies to the poor, who largely use mobile money services to conduct their transactions, which is not applicable to other payment and withdrawal services that are used by the poor, hence the need to expand the scope of the services.

Lime, adhesive, and grout to be taxed

According to the minister, the government is also expanding the scope of the duty applicable to cement to apply to products that are similar in nature and in use.

Musasizi said that this is not a new tax because the government already imposes excise duty of sh500 per kg bag of cement and that URA has been collecting this tax.

Youth and children affairs state minister Balaam Barugahara.

“Thus, the intention of this proposal is to create fairness in the tax regime by imposing a tax on similar products like adhesive, etc, we are replacing the definition of cement to mean or include white cement, lime and adhesive, and grout. These items have been attracting nothing but will now also attract sh500 per kg,” he said.

Land and rental property tax

In the proposed Bill, the government aims to impose Capital Gains Tax of 5% on non-business assets such as land and rental properties.

The current scope of Capital Gains taxation is limited. Therefore, this measure is aimed at widening the tax base, improving the progressivity of the tax system, and generating additional revenue according to the Minister.

Other tax adjustments

Excludes shares in a private company from the definition of non-business asset under Section 5A and removes the exclusion of sale through auction and mortgage.

The defence is that the sale of shares in a private company is already adequately provided for under section 21(1) (k) of the Income Tax Act.

Amend section 21(1) (ac) of the Income Tax Act to provide for a one-year tax exemption for income of the Bujagali Hydro Power Project up to June 30, 2025.

This proposal is intended to try reduce the electricity tariff pending the conclusion of the Auditor General's review of the project.

Expand the scope of money withdrawal services subject to excise duty at a rate of 0.5% beyond mobile money transactions to include other similar payment solutions and agent bank withdraws.

The proposal is to amend Item 13A to read, 'Payment of withdrawals of cash provided through a payment system including withdrawal services provided by agency banking - 0.5% ref the value of the transaction.'

Again, the proposal here is to amend all the tax bills to remove references to hospitals and maintain specialized medical facilities.

Proposal to amend Section 92A of the Income Tax Act to provide for a penalty for a person who fails to furnish a return, by inserting subsection (8) to read as follows;
"(8) A person who fails to furnish a return, is liable to pay a penal tax equal to 50 currency points per month or 5% of the tax due for the period the return is outstanding."

Proposal to amend Section 15A of the Excise Duty Act to provide for a penalty for a person who fails to furnish a return by inserting subsection (2a) immediately after Section 15A(2)(b) to read as follows;

"(2a) A person who fails to furnish a return, is liable to pay a penal to equal to 50 currency points per month or 5% of the tax due for the period the return is outstanding."

The state minister for Transport, Fred Byamukama.

Proposal to amend clause 13 of the Income Tax (Amendmen0 8W 2024 to refer to Part XIV instead of Part XVI under Section I )81 of the Income Tax Act.

Proposal to amend clause 2, item 18(a), item 18(e), and item 62(1) of [the Stamp Duty (Amendment) Bill 2024 to provide for Nil stamp duty on securities by investors in regulated private equity or venture capital funds, as well as securities held by the private equity or venture capital funds.

Proposal to impose penalties on taxpayers who fail to file their tax returns in all the tax laws.

Proposal to repeal clause 3(c) (a) of the Excise Duty (Amendment) Bill 2024 to maintain the current tax treatment of locally manufactured under-tuned spirits of alcohol strength of 80% or more.

Waiver of Interest and penalties: Proposal to amend Section 40D of the Tax Procedures Code Act to extend the waiver of interest and penalties to 31st December 2024 as follows;

"Section 40D (1) An interest and penalty outstanding as of 30th June 2023, shall be waived where the taxpayer pays the principal tax by 3Ist December 2024. Where the taxpayer pays part of the principal tax outstanding as of 30th June 2023, by 31st December 2024, the payment of interest and penalties shall be waived on a pro-rata basis."

Musasizi said that approving the proposed tax amendments will pave the way for stronger revenue mobilization and a more prosperous future for Uganda.

“We are strengthening the administrative system in order to reach as many people as possible in business as possible,” he said.