New cities set tax targets

INFRASTRUCTURE   NEW  CITIES

Residents of Budondo sub-county, now part of Jinja City, largely rely on agriculture. The area does not have any tarmac road or a public toilet. In addition, most school-going children in the sub-county walk barefoot to school. 

However, despite grappling with such problems, the residents of this area have to brace for new responsibilities of being part of the city. They will have to pay both direct and indirect taxes to the new city authorities of Jinja. 

Similar measures will apply to all the new cities in the country, as they look for ways to increase revenue collection to improve service delivery.

Property owners and beneficiaries will have to pay taxes to new city authorities and the Uganda Revenue Authority (URA). 

All rented residential places will attract a rental income tax, provided for under section five of the income tax. 

According to URA, rental income is levied at a rate of 20% on the net rental income. 

A standard deduction of 20% of the gross income is given to account for income-generating expenses, such as repair and maintenance costs. 

The proprietors of buildings in the new cities will have to pay property tax, Local Service Tax and ground rent. Local Service Tax is governed by the Local Government (Amendment) Act 2008. 

The local service tax is levied on salaries, wages and incomes of all persons in gainful employment in both the informal and formal sectors. 

This, according to authorities, will raise additional revenues for better service delivery. 

According to the Local Government Act, all self-employed and practising professionals, such as medical and veterinary doctors, engineers, accountants, consultants, technicians, lawyers, dentists and pharmacists, must pay a Local Service Tax. 

In addition, the act says, informal sector workers, such as craftsmen, plumbers, builders, electricians, masons, carpenters, blacksmith, welders and painters, must pay Local Service Tax. 

Other levies to be imposed by new cities include charges for architectural plans, trade licence, operational licences, structural plans, boundary walls, condominiums, renovation permits, additions to existing buildings, planning approval for land subdivisions and/or Amalgamation. 

Raphael Magyezi, the Minister for Local Government, confirmed the development, saying his ministry will prepare the new cities to be more selfreliant, through revenue generation. 

However, he said, the new cities will first focus on improving service delivery and physical planning, but, in the long run, look at avenues through which to generate revenues for sustainability. 

"Yes, the new cities come with an obligation of taxes. For starters, we are prioritising physical planning, which will later lead us to revenue collection," he said. 

Magyezi noted that through physical planning, the new cities will be in position to address all challenges that could come along the way. 

"It is now two weeks (since they became cities) they are babies but growing. They normally fall down as babies, so we expect a few falls here and there, but we will take off," he said. 

He made the remarks in an interview with New Vision just after the inauguration of the National Physical Planning Board (NPPB), at the High Court in Kampala. 

In April, the Parliament approved creation of 15 cities which will be implemented in a phased manner. 

These include Arua, Gulu, Jinja, Mbarara, Fort Portal, Mbale and Masaka, cities, which became cities effective this month. 

Cities set targets 

The different city authorities are bracing to collect taxes from the untapped areas, which have been annexed to the city. 

The Arua city mayor, Ramadhan Faraj told New Vision that his city targets to collect about sh5b as local taxes through approval of buildings for construction, licenses for businesses, among others. 

"In the last financial year 2019/2020, we collected about sh3b as locally generated revenue. With the new cities, this is likely to increase," he said. 

The Rev. Willy Kintu, the Fort Portal city mayor, said: "We collected about sh1.5b in local revenues, with the city status and the extended boundaries, we target sh3b." 

George Labeja, the Gulu city mayor, said: "We are not introducing any new taxes, but will extend the old tax obligations to new areas placed under the city." 

According to Labeja, Gulu city collected about sh3b last financial year, and that they target as a city. 

Ambrose Ocen, the Jinja City Town clerk, said: "The burden is big for the new cities. For us to meet them, everyone has to contribute through taxes." 

They all agreed that there will be a challenge with revenue collection in places that were annexed to the urban authorities.