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Government introduces duty to replace graduated tax

By Vision Reporter

Added 13th June 2007 03:00 AM

AS the 2007/2008 budget is read today, the Government is to introduce a new levy to replace graduated tax that was abolished in 2005. The local service tax takes effect this financial year beginning next month.

AS the 2007/2008 budget is read today, the Government is to introduce a new levy to replace graduated tax that was abolished in 2005. The local service tax takes effect this financial year beginning next month.

By Ali Mambule

AS the 2007/2008 budget is read today, the Government is to introduce a new levy to replace graduated tax that was abolished in 2005. The local service tax takes effect this financial year beginning next month.

The chairperson of the Local Government Finance Commission, Johnson Bitarabeho, said once the bill introducing the local service tax is passed by parliament, over sh86b would be collected to run local governments.

Details of the tax are in the bill that is yet to be presented to Parliament. “The bill has left cabinet and is waiting to be debated by Parliament. The funds collected from this tax will help to reduce complaints raised by the districts for the irregular disbursement of graduated tax compensation by the central government,” Bitarabeho said.

He added that it would reduce the gap of the required total local government revenue of sh150b per annum.

The tax will be paid by all salary and wage earners in government and private institutions, regardless of how much one is paid at the end of every month.

The funds will, however, be collected from the workers by their employers and taken to the district authorities countrywide, according to the new plan that will reduce the possibility of arresting defaulters.

“This will give an opportunity to the citizens to contribute towards its development,” Bitarabeho said.

Other new taxes that would directly help the local governments run smoothly include the municipal hotel tax to be levied on every client sleeping in urban-based hotels and the livestock tax on sustainable herds.

Bitarabeho condemned the rampant corruption in local governments, which he said has led to poor service delivery.

“Over misuse of funds in these governments remains a big challenge,” he said. Bitarabeho urged heads of departments in local governments to be more transparent when using funds and to declare accountability to the political leaders, especially heir chairpersons and the executive committees.

Rakai chairman Vincent Semakula requested that revenue collection in rural areas be left to the local governments and that Uganda Revenue Authority (URA) concentrates on that in urban areas.

“Sub-county councils no longer sit, which has tempted many of them to forge minutes to please the
donors,” Semakula added.

He expressed worry over the misallocation of over sh119m that was transferred to the newly-created Lyantonde district. “We requested Bitarabeho to help us get this money back to run our duties properly because we do not know whether it was done intentionally or not.”

He advised the Local Government Finance Commission to change the name of the municipal hotel tax to hotel tax such that it would include all hotels even if they were not in municipalities.

Semakula commended the initiative of a new tax saying it would help local government workers to resume work since many were planning to look for other jobs. He also requested the Government to refrain MPs from increasing their salaries and allowances, saying their act is intended to shift the burden to local governments.

Rakai acting deputy chief administrative officer Fred Kalyesubula said the district was facing more problems since the major donor agencies that helped it including Danida and Unicef had wound up their programmes. The district chief finance officer, Erasmus Lubuye, urged the Government to speed up the formalisation of the new tax since the local revenue sources were reducing every time.

Lubuye said policy makers in local governments first discussed their emoluments whenever they are elected and hike it when they realise that the local revenue is high.

“But they do not accept to reduce these emoluments even if they learn that the local revenue collection dropped,” Lubuye added.

The District Community Service coordinator, Alex Bagarukayo, said the tax had even delayed to be introduced.

He said it was strange for Uganda to depend on donor funds that were realised from taxpayers in the donor countries, when no contribution was being made by the recipients.

He, however, called for a transition period of about six months on the tax before collection begun so that the public is sensitised about it.

“Let the compensation of graduated tax continue for another year as we sensitise people on how it will be collected and its importance,” Bagarukayo said. He added that collection of taxes in the initial period should not be relied on so much because it would definitely be low.

The district wetland officer, Jamil Kiyingi, advised the commission to set aside funds that would help in sensitising the masses before implementing whole programme.

Government introduces duty to replace graduated tax

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