Analysts guardedly optimistic

By Paul Busharizi

Business leaders expressed guarded optimism about this year’s budget, commending the progressively reducing donor dependence and the Government’s commitment to tackling the power crisis.

However, the otherwise popular scrapping of the road licence it was feared could fuel inflation while the business leaders thought that the new local tax would increase the burden on an already narrow tax base.

Yesterday finance minister Ezra Suruma read a budget in which he announced a reduction on donor dependency as a percentage of the budget, replaced road licenses fees with higher taxes on fuel and new taxes to be administered by local governments.

“It was a budget that brings out some positive changes especially in the areas of donor dependency, down to 38.7% from more than 50% a few years ago,” said David Jamwa, the managing director of the National Social Security Fund, during a budget lunch organised by The New Vision at the company offices.

While also pointing out that the scrapping of licences was a populist move, questions were raised about the effect of raising fuel levies to bridge the gap of lost licence revenues.

“The price of fuel will rise to reflect the tax increase, this of course will have a multiplier effect across the economy on the costs of transportation while prices of manufactured goods and services will go up in response,” said Shell Uganda chairman and managing Director Ivan Kyayonka.

“I am also concerned that there is no increase in the price of kerosene because we have known unscrupulous types to adulterate other fuels in order to make bigger margins.”

Suruma announced that road licenses will be abolished and he would bridge the revenue gap by raising the fuel levy on diesel by sh80 and on petrol by sh150.

Celtel’s Ceasar Mloka was noncommittal on the effects of this budget on telecommunication fees.

“We will have to see the finance bill to the details of the taxes but increases in fuel taxes will have some effect given that we are powering generators in the absence of sufficient power and in transport to service our network,” she said.

The inflationary concerns were mirrored by Kampala City Traders Association (KACITA) spokesman Issa Sekitto.

“By consensus, consumers are already crying down there...an increase in fuel will lead to an automatic increase in prices whether it is justified or not,” he said.

Sekitto was not excited by the surplus made by the Uganda Revenue Authority in tax collections.

“It is good the URA made a surplus but this was at the expense of businesses,” he said.

He said, however, that KACITA would welcome news of the abolition of transit parking areas and the amnesty on tax defaulters which will be in effect until the end of the year.

Transit parking yards were privately owned parking space that trucks ferrying goods in transit would park as they await tax clearance.

Sekitto was also pleased that the environmental levy on used spare parts was being expressed as a percentage of the item to be taxed not as a fixed figure.

“However, whereas we are happy with the minister’s reduction on the import levy on buses that are beyond 25-seaters we have been lobbying that he reduces this tariff on all other commercial vehicles like trucks for instance,” Sekitto said.

There was heated discussion over the minister’s determination to be cautious in social security reform.

“The minister’s vision to create a stable, dependable and reliable system that will be able to function in a private sector environment, to do that we need a regulatory framework and a regulator and this is not going to be achieved even in a year,” Jamwa said.

However, ActionAid’s Amanda Serumaga though the whole pension debate was elitist.

“When you talk about saving who are you talking about? There are people whose income is not enough to save,” she said.

“And I don’t hear about what the workers whose money is in NSSF speaking. What is their view? What do they want to see happen with these funds?”

On other social services Serumaga accused the Government of being “long on rhetoric and short on putting money where there rhetoric is”

“I heard the that the Government is committing sh2b to setting up cooperative societies and sh19b for rehabilitation of health units. That cannot be enough.”

Kyayonka said as did Anne Aliker, Stanbic Bank’s director of Commercial and Investment Banking, that he was not for a retrieval of NSSF’s funds to invest in other pension providers.

“But as a businessman I worry whether If I left my money there I will get an adequate return compared to that I would get from other players,” he said.

The finance ministry is considering proposals to liberalise social security which will see NSSf losing its monopoly on mandatory savings.

Nile Breweries spokesman Onapito Ekomoloit read the minister’s silence on beer levy’s as an indication that the Government would not raise the levies on the brewers.

“But Government should support the beer production using local materials with some tax relief if only so that we can have more regulated brewing and less of the informal brewing whose quality as has been shown with the recent deaths as questionable,” he said.

Aliker said account holders in the banking system may not derive direct benefit from the budget proposals.

“But making bad loans to agriculture tax deductible is a useful thing and we will definitely be taking advantage of it,” she said.

The Uganda Investment Authority (UIA) welcomed the reinstatement of tax relief for investors.

“Because this puts us on the same footing as our neighbours it has been a disadvantage and we recently lost some flower farms to neighbouring countries because they had better incentives,” UIA official Lawrence Byensi said.

He was, however, disappointed on the removal of VAT from hotel inputs.

“This largely benefited hotels in the central region yet we had been lobbying that the facility be extended upcountry as our tourism numbers are growing.”