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In the coming financial year (2018/19), which is just two months away, Uganda Revenue Authority (URA) will be required to domestically raise Shs16.2 trillion. Out of that, about Shs418b is expected to be raised from non-tax revenue.

This amounts to about 53 per cent of the total resource envelope, which is estimated at nearly Shs30 trillion. The theme of the budget as it stands: “Industrialisation for job creation and shared prosperity,” is a key slogan that rhymes well. The question now is; will the implementation follow the rhythm? However, given past trends there has been a variance between revenue projections and actual collections. In the financial year 2016/17 net collections stood at Shs12.7 trillion, registering a shortfall of about Shs500b.

The deficit was about the size of the current budget allocated to the ministry of Agriculture and slightly more than four times the current budget of the ministry of Trade. To cover up the deficit, government was compelled to rely on external and domestic debt, which currently stands at 27 per cent of GDP, according to the 2017/18 Budget Speech.

So far the second biggest expenditure of the budget will go towards servicing interests on debts secured by government. According to a report by the Parliament’s Committee on National Economy for the 2016/17 financial year, the rate at which Uganda is paying off its debt, will take approximately 94 years or more to repay the existing stock of debt. Uganda Debt Network Research indicates that the total public debt by June 2017 was in excess of $13b (about 47.5 trillion) while Bank of Uganda has put the “provisional total public debt stock (at nominal value) as at end of December 2017 at Shs37.9 trillion.

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Nelly Busingye Mugisha from Tax Justice Alliance presenting the CSO position on Tax Revenue Measures for FY 2018/19. On the right is the committee chairperson Hon Henry Musasizi.

At the 8th sitting of the 3rd meeting of the 2nd Session on the 10th Parliament of Uganda held on the 3rd April 2018, the Minister of Finance, Planning and Economic Development tabled the following Tax and Revenue Bills:

  1. The Income Tax (Amendment) Bill, 2018
  2. The Lotteries and Gaming (Amendment) Bill, 2018
  3. The Traffic and Road Safety Act (Amendment) Bill, 2018
  4. The Excise Duty (Amendment) Bill, 2018
  5. The Value Added Tax, (Amendment) Bill, 2018
  6. The Tax procedure Code (Amendment) Bill, 2018
  7. The Tax Appeals Tribunal (Amendment) Bill, 2018
  8. The Stamp Duty (Amendment) Bill, 2018

As concerned citizens, today Tuesday 24th April 2018, the Civil Society Organizations under the Tax Justice Alliance, presented their position on Tax Revenue Measures for FY2018/19 to the Parliament Sectrol Committee on Finance, Planning and Economic Development.

The Alliance welcomes the following tax proposals to improve revenue collection and facilitate investment in the FY 2018/19 and beyond including:

  1. The proposal to CAP the period over which a tax payer can carry forward losses. This will curb perpetual declaration of losses.
  2. The proposal to allow a deduction for Interest on a mortgage from a financial institution as expenditure incurred by an individual to acquire or construct premises that generate rental income; this will enhance proper accounting principles of rental businesses and therefore may improve tax compliance of the said rental businesses.
  3. The Introduction of VAT on passenger automobile, their repair and maintenance and entertainment for contractors in mining and petroleum operations and aid funded projects will increase the tax revenue and is therefore commendable.
  4. The insertion of the fourth schedule in the Traffic and Road Safety Act 1998 which seeks to increase the fees for registration of cars besides station wagons by 300,000. This will contribute to an increase in the collection of Non-Tax Revenues

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On the right; Hon David Bahati the State Minister Ministry of Finance, Planning & Economic Development during the session

However there are a number of concerns that the CSO members wish to be considered before passing the Bills into Law.

Hon Henry Musasizi the Chairperson of the Parliament Sectrol Committee on Finance, Planning and Economic development wondered why the Ministry of Finance was proposing to re-introduce tax on SACCO’s which had been given a 10 year exemption just last year. In his response, Hon David Bahati explained that government wishes parliament to reconsider that decision since some SACCOs make quite a considerable amount of profit and therefore need to pay tax on it.

Hon Nandala Mafabi a committee member raised the issue of double taxation on the proposal to levy a Shs 200 per user per day of access on over the top services. This he said was unjust since the consumer.

SEATINI-Uganda has called on Parliament to ensure that funding to the Ministry of Trade, Industry and Cooperatives (MTIC) for the FY2018/19 is in line with the National Development Plan (NDP) II in order to realize the Budget theme and vision 20140.

Presenting their position paper on MTIC ministerial policy statement for the financial year 2018/19, to the Parliamentary committee on Tourism, Trade and Industry, SEATINI noted that MTIC is important in establishing backward and forward linkages between manufacturing and agriculture, creating employment and wealth, tackling the ever increasing Trade deficit (currently at USD 238.80 Million), addressing the ever increasing indebtedness (projected at US$ 10.74 Billion for the FY 2018/19), advancing technology, stimulating agricultural production and productivity, and export competitiveness and ultimately improving people’s livelihoods. In order to address these challenges, to 0.5% of the 29.274 Trillion UGX Budget for the FY 2018/19 which has been allocated to the ministry is inadequate.

In order to develop appropriate and enabling trade and trade related policies and regulatory frameworks while ensuring their effective implementation, in order to increase on her exports bill and address standards while supporting domestic industrialization, and local economic development through District Commercial Officers, SEATINI made the following recommendations to the Parliamentary Committee:

  • Budgetary allocation to the Ministry of Trade, Industry and Cooperatives should be made a priority sector given its role in the economic development of the country.   The sector should therefore be allocated with more resources in line with the proposals in the NDPII. This is more so given the fact that the ministry houses key agencies like UEPB, UDC; UIRI; UDC which at the moment are underfunded.  
  • There is need to increase budgetary allocations to the sector to finance trade and investment related negotiations to protect and promote our interests/positions, policy space and in order to be able to negotiate a conducive policy for industrialization and Trade. In order to facilitate more comprehensive ongoing trade and investment negotiations…and undertake more inclusive policy processes, there is need to budget for the Inter Institutional Trade Committee (IITC) (which is a Multi-Stakeholder consultation committee).
  • UNBS should be allocated with enough resources to raise awareness of the business community, farmers, manufacturers and consumers about standards compliance; and also train value chain actors within specific products. UNBS also has a critical role to harmonize national standards with regional ones to facilitate access of Ugandan products in regional markets. In order to increase its coverage, the UNBs should establish and furnish structures   in at least 10 key districts to ensure that testing, standardization and certification services are brought closer to the value chain actors.
  • It is critical that funding for MSMEs be prioritized in order to: Train MSMEs in boosting value addition, for increased trade and competitiveness; enhance the capacity of MSMEs to benefit from the opportunities therein policies like Buy Uganda Build Uganda (BUBU) and Local Content; and engage MSMEs in policy processes pertaining to national, regional and global markets to ensure that their interests are taken into account.
  • With the EU funded District Commercial Services Support (DICOSS) Project ending, there need to be allocation of funding to continue this important work done by the DCOs.
  • The MTIC needs more budgetary allocation to strengthen the cooperative movement especially in enabling farmers come together to produce in bulk, add value and be able to effectively market their goods.
  • In order to ensure coherence in our trade negotiating positions and policies, the MTIC should take lead in trade and trade related policies and negotiations at all levels and also be in charge of all Trade related Agencies.

Members of Parliament Respond:

Led by Hon. Alex Ruhunda, the Chairperson of the Committee, SEATINI-Uganda was commended for the continued good work of building the capacity of Members of Parliament on understanding the dynamics and implications of Trade Policies and Negotiations on development, through research and advocacy. They also reiterated on the need to ensure adequate funding to the Ministry of Trade in order to ensure that increased intra-regional trade and markets being negotiated at regional, sub-regional, continental and global levels are fully put to use through increased value added exports and services.

The committee assured SEATINI that like it was done for the Budget Framework Paper for FY2018/19 where majority of the proposals were taken onboard, efforts will be undertaken to consider that the positions in the Ministerial Policy Statement for the MTIC are considered.