MPs' proposal to shelter taxable allowances selfish

By Joseph Kasibante

Uganda's Members of Parliament (MPs) should know that the act of cushioning their allowances from taxation is an illegal and in the tax jargon it is tax evasion.

Tax evasion is an illegal activity in which a taxpayer seeks to hide taxable income from tax deductions. So, when our MPs saw that they had no way to hide their taxable allowances from taxation they passed a legislation to legalise their illegal activity of tax evasion.

After being criticised, then they promised to change the law to also cushion from tax, allowances of all the people in the employment sector. By doing this, they wanted to build a formidable force to help them promote their illegal activity of tax evasion.

The MPs deliberate attempts to recruit a bigger force to make their demand legal makes the whole idea selfish to the prejudice of other citizens.

There are, however, better ways the MPs could use to escape the taxes on allowances through such means in tax jargon known as tax avoidance. Tax avoidance is in fact not illegal as tax evasion is.

Tax avoidance occurs when people change their behaviour to reduce the amount of taxes they legally owe. When individuals relocate their business to a state with lower taxes or choose to do business activities like export or take advantage of loopholes in tax laws. By doing so they are practicing tax avoidance and there is nothing illegal about tax avoidance.

It is my advice to our MPs who do not want to pay tax on their employment allowance to relinquish their seats in Parliament and take on either of the options I have given above.

Let  me remind the MPs  that the income on employment which PAYE  in Uganda is paid  includes; wages, salary, leave pay, payment in lieu of leave, overtime pay, fees commission, gratuity, bonus, travelling allowance, entertainment, utilities, cost of living, housing, medical and any allowance.

Other taxable forms of  income where  PAYE  kicks in are; compensation for termination of any contract of employment, any gains derived by an employee on disposal of a right or option to acquire shares under an employment share acquisition scheme and any other value of any benefit granted to the employee including housing, official car, domestic assistance and insurance cover.

The above income tax base is narrow and not enough for government to cater for the public good besides catering for the growing number of MPs at every term of a new parliament and the councillors.

The wise idea the MPs should have come up with, is to help the low income earner also be happy by increasing the PAYE threshold from sh230.000 to sh500.000. This measure would help to distribute the national wealth in the national economy

Other helpful proposals the MPs should have come with would include reducing VAT on essential commodities like water, electricity, children necessities such as tinned food, milk and clothing.

More robust tax initiatives to improve on the general welfare should be the proposal for flat income tax percentage like the tithe of the church easy for self assessment. Already 44 countries among them 17 from Europe by 2015 had resorted to flat income tax.  

The answer would be to move away from a tight fiscal policy to an expansionary fiscal policy to overcome the budget deficit. Benefits of expansionary fiscal policy are that government increases its spending.

Also by cutting taxes, the government leaves to the individuals and businesses more money to purchase goods or invest in new economic ventures. When individuals or firms increase their purchases they raise demand, which requires additional production and job creation.

The cumulative effect stimulates total spending in the aggregate demand. Such measures should be the 2016/17 budget outlook.

According to how Uganda MPs handle tax issues, it is my proposal URA facilitates tax education for them to appreciate the importance of paying taxes.  


The writer is the president of the National Taxpayers Protection organisation