Ministry, districts clash over money

Mar 24, 2008

LOCAL governments and the finance ministry are locked in a dispute over demands for billions of shillings in compensation for the abolished graduated tax.

By Henry Mukasa

LOCAL governments and the finance ministry are locked in a dispute over demands for billions of shillings in compensation for the abolished graduated tax.

The districts, under their umbrella, the Uganda Local Governments Association, have petitioned the Prime Minister, Prof. Apolo Nsibambi, to prevail over finance minister Dr. Ezra Suruma to pay them sh45b for revenue lost when graduated tax was abolished.

Vice-chairman Richard Andama Ferua on January 11 wrote to Nsibambi complaining that Suruma had stopped the compensation during the 2007/08 financial year.

Ferua also indicated that the association had rejected the sh12b Suruma proposed to pay the local governments as deposit.
Nsibambi on January 23 asked Suruma to give another response by February 23, since the association had rejected the sh12b offer.

Suruma on February 25 explained that sh33b had been provided for the local governments in the 2007/2008 budget.

He said his ministry had requested for Cabinet approval of supplementary funding of sh12b “which will bring the total provision for graduated tax compensation for the financial year 2007/2008 to sh45b.”

“Given the increasing funding pressures on the budget and the need to maintain the legal level of supplementary expenditure at 3% of the approved budget, we are not in position to provide sh25b over and above the budgeted level.”

Suruma said there were only a few months left to the start of a new financial year, where another sh45b had been earmarked for the local governments.
That would be the case, he said, until new tax measures for local governments take effect.

In the meantime, Suruma noted, the finance and local government ministries were consulting the local government finance commission for guidance on the distribution of the additional sh12b.

However, the association president, Wycliffe Karazarwe, in a March 5 letter to Nsibambi, said Suruma was mixing money meant for salary enhancement (sh33b) with the graduated tax compensation.

Suruma, while reading the 2007 budget in Parliament, indicated that sh33b was lined up for salary enhancement for local governments.

Karazarwe, who is also the Ntungamo district chairman, pointed out that service delivery was being thwarted by lack of finances.

He said the local governments feared that Suruma could be postponing their demands to the next financial year since none of the sh12b had been remitted.

“We call on you once more to use the might of your office and compel the finance minister to give the local governments the amount due as graduated tax compensation,” Karazarwe wrote.

“Local governments are the roots, face and mirror of the Government. But, it is difficult for us to implement government programmes and the NRM manifesto when we are paralysed and demoralised.”

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