URA to lose UGX 2 trillion to tax exemptions

Kampala, Uganda | THE INDEPENDENT |  Uganda Revenue Authority – URA is concerned that it will forego up to Sh2 trillion in tax expenditures in the next financial year.

The URA Commissioner General, John Musinguzi, revealed this on Thursday while appearing before Members of Parliament on Parliament’s Committee of Finance to present the tax body’s ministerial policy statement for Financial Year 2023/2024.

He explained that URA will waive the two tax expenditures in form of exemptions, allowances rate reliefs, credits, and deferrals.

Bothered by the amount, Kiwanuka Keefa, the Finance Committee Chairperson told the Commissioner who appeared alongside the Minister of State for Finance, Planning and Economic Development (General Duties), Henry Musasizi that Parliament will discuss the impact of tax exemptions.

According to Kiwanuka, the impact of tax exemptions in the country is not yet known, thus requiring Parliament to debate it. In the interim, he asked the Ministry of Finance to furnish the Committee with a performance report of companies that are tax exempted.

Industrial Division Member of Parliament in Mbale City, Karim Masaba expressed shock that the Government is seeking one trillion Shillings to fund the Parish Development Model – PDM yet up to two trillion is being waived in tax exemptions.

The PDM is a Government strategy or approach for organizing and delivering public and private sector interventions for wealth creation and employment generation at the parish level as the lowest economic planning unit. It has seven pillars: Agricultural (production, Storage, Processing, and marketing); Infrastructure and Economic Services; Financial Inclusion; Social services; Mindset Change, and community mobilization.

Kashari North County Representative in Mbarara District, Basil Bataringaya wondered why to date the Ministry of Finance has not yet done an analysis of the performance of companies to inform this financial year’s budgeting process.

However, Musasizi pledged to provide the recommendations, adding that the Ministry of Finance has already developed a tax review expenditure framework where some tax exemptions are terminated while others are maintained upon the satisfactory performance of a given beneficiary company.

Otuke County Member of Parliament, Paul Omara, asked URA to recover 43 billion Shillings in tax arrears from gold exporters noting that the Mining and Minerals law, passed in 2021 imposes a tax of US $ 200 (approximately 750,000 Shillings) levied on each kilogram of gold.

Mining and Minerals law is being implemented retrospectively and therefore makes it mandatory for all gold exporters in the country to pay the tax arrears.

In April 2019, the Southern and Eastern Africa Trade Information and Negotiations Institute – SEATINI conducted research on the impact of harmful tax incentives and exemptions in Uganda revealing an estimated 1.420 trillion were lost due to tax exemptions in the FY 2017/18.

The report revealed all evidence suggests that the societal costs of tax exemptions are high and that the benefits, in terms of additional investments are low. The biggest shares result from international trade tax and VAT-related exemptions.

Further, the report indicated that the most harmful exemptions included; Deemed VAT, Government undertakings, MPs’ allowances, interest income of SACCOs and restrictions of URA enforcement, Environment levy, and exempt VAT supplies among others.

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URN