MPs want graduated tax back

Jul 26, 2011

MPs on the public service and local government committee have supported the reinstatement of graduated tax which was abolished in 2002.

By Moses Walubiri

MPs on the public service and local government committee have supported the reinstatement of graduated tax which was abolished in 2002.

The MPs noted that the abolition of graduated tax had vastly constrained operations of local governments due to a revenue shortfall.

The Government used to collect over sh80b in graduated tax before it was abolished in 2005.

The tax was abolished because the methods of collection used were considered inhuman.

The Government replaced the tax with local service tax and an annual grant of sh45b graduated tax (GT) compensation to local governments.

Local government officials have, however, argue that the grant cannot meet their expenditure.

Graduated tax contributed 80% of local revenue to most local governments.

The legislators also asked the local government ministry to clarify on the status of the GT compensation since the Local Government Act 2008 stipulates that it ended in the previous financial year.

“The Government should come out and explain the fate of local governments and urban authorities in case the line ministry fails to disburse GT compensation” Mbarara Woman MP Emma Boona said.

Boona also argued that graduated tax compensation to local governments cannot match the high population and increasing cost of living.

She said scrapping graduated tax had bred laziness among people.

“Our people in the villages no longer want to work because they do not have any reason to” she said.

Lyantonde Woman MP Grace Namara called for a consensus between the local governments and the Central Government to consider reinstating graduated tax.

Raphael Magyezi, Igara West MP and vice chairman of the committee said the local government revenue system should be revised rather than reintroduce a tax that was unpopular .

In a related development, the legislators said the Government should not create new districts since the new districts are facing a challenge of lack of staff.

According to the ministry of Local Government financial policy statement for the Financial Year 2011/12, the staffing in new districts is 7.7%.

Most of the staff are acting in positions.

The central Government gives each new district about sh500m to take-off .

Districts are expected to recruit more staff after take-off.

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