VAT on water rejected

By Henry Sekanjako

The Ministry of water and environment has opposed a proposal by ministry of finance to introduce value added tax (VAT) on the supply of water to domestic consumers saying it will increase the cost of water and ration use of safe water.

Appearing before the Natural resources committee to defend the ministry 2013/14 budget, Water and environment minister Ephraim Kamuntu said told the committee that the payment of VAT based on water bills as opposed to actual collections would negatively impair the cash flow of the National water and Sewerage Corporation and other operators especially where there is a high disparity between billing and collection.

"This ultimately constrains the national water and Sewerage Corporation, and other operators from raising resources to invest in network expansion and growth in service coverage," he said.

Kamuntu explained that the incidence of water related diseases will re-occur as more people will be forced to use un-safe water especially in slum areas adding that treatment of such cases would cost government money in a range of eight times the cost of providing safe water.

He however assured the committee that he would engage the ministry of finance on how to go about the introduction of VAT on water saying it impacts on the accessibility of safe water especially by the poor was high.

In July 2011, the government exempted Value added tax on the supply of water to domestic consumers with an aim of ensuring increased accessibility to clean water.

During the 2012/2013 financial year budget, Minister for finance Maria Kiwanuka, in her budget speech announced the introduction of VAT on water with an estimated tax of sh24billion.

The proposal to tax water was however widely opposed by both parliament and civil society, hence postponement of its implementation.

Meanwhile the committee chaired by Bungokho County South MP Michael Werikhe equally opposed the proposal for VAT on water saying it would impact on the accessibility of clean water by Ugandans.

Save us from taxing water, the poorest of the poor who cannot afford this, may not afford to pay for this water, don't be surprised if we demonstrate," said MP Jacob Oboth.

Hanifa Kawooya (Sembabule) district added; "who is going to manage this VAT, already the unit cost of water is too high government must be mindful, water is a basic human right". Ministry officials were tasked to go back and revise their budgetary estimates.