By Mary Karugaba

DOCTOR William Muhairwe, the National Water and Sewerages Corporation (NWSC) managing director, wants the Government to revise the 18% Value Added Tax (VAT) on water and sewerage services, saying it is a burden to customers.

“We do not benefit from VAT but it’s the consumers who suffer with it.

“I propose that it’s removed so that water costs are reduced. Water is a public utility and we do not sell it but we only sell the services,” Muhairwe told MPs on natural resources committee on Thursday during the 2006/7 sector budget discussions.

The NWSC’s planning and capital development department manager, Alex Gisagara, noted that as an indirect tax, VAT increases the cost of water to consumers.

He said this limits service access especially to domestic consumers and the poor.

Gisagara said VAT payment based on billings as opposed to actual collections, impairs the cash flow of the corporation particularly where there are high levels of arrears. He said out of the sh30.9b arrears, the corporation had prepaid VAT amounting to sh4.3b.

Gisagara said accumulated arrears had undermined the corporation’s ability to expand and improve services.

He said the Government arrears accounted for 36% of sh30.9b or sh10.5b since 2002.

Muhairwe said the corporation was due to write-off the debt because it had become a bad debt.

But the MPs rejected his proposal, saying the Government should clear its debts. “If the Government has used the water, it should pay. Why should it wait until it reaches a point of writing it off? Let us find ways of forcing them to pay,” Hanifah Kawalya, said.

The committee chairperson, Emanuel Dombo, said there was need to control high water losses in the city.