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2013/14 budget

By Ivan Rugambwa

New taxes to make Ugandans poorer, increase cost of doing business

When the Finance Minister, Maria Kiwanuka reads the budget, she will announce a tax increment on fuel that experts fear will hike transport fees and prices for commodities.

The increment was first announced on April 10, in the National Budget Framework Paper (BFP) that Ministry of Finance officials presented and had the Parliamentary Budget Committee discuss. After discussing the BFP and presenting their report in parliament, the committee sent it to Cabinet for modifications.

The increment, an extra Shs 50 additional tax on fuel is part of the new revenue measures proposed by the government in the 2013/2014 national budget. The tax is expected to generate Shs72.2 billion, a tangible contribution to Uganda Revenue Authorities expected annual revenue for the coming financial year.

As Prof. Bruno Yawe, a research associate at The Makerere Institute of Social Research and a senior lecturer at The Department of Economic theory and analysis, explains, these new tax measures are likely to undermining Government’s Poverty Alleviation programmes.

“Such taxes will translate into high transport fares, which will eat more into people’s disposable income,” he says.

The statistics seem to back Prof. Yawe.  In 2008, in the aftermath of the Kenyan election violence, scarcity of commodities led to a soaring in the prices of consumer commodities, including fuel and sugar.

As a result, inflation swung to 14%. In 2011, when fuel prices increased as a result of URA stringent taxation measures, the price of petrol and diesel increased to Shs 3,250 and 2,850 respectively. Of this, Shs 850 or 26% of the price was a tax component. This was partly blamed for the inflation rate rising to 18.7% and was the basis of some of the political unrest that came to be called “Walk-to-Work” protests.

The new tax on fuel is among a string of other proposed taxes by the government as it tries to increase internal budget financing after donors indicated they are likely to drastically reduce funding to the government because of alleged lack of accountability.

Other proposed taxes include a shs.200000 increment in vehicle registration fees expected to generate Shs7.2 billion, a 1% tax increment on income from telecom companies expected to yield Shs 8.4 billion, and Value Added Tax on water supply for domestic use that is expected to fetch the tax body Shs 8 billion. VAT on water was proposed last financial and dropped after a loud outcry against it.

According to The Budget Frame work Paper, donor funding in the next financial year is likely to be cut by 93% totaling to a loss of about Shs 749 billion. The move is in reaction to alleged massive funds misappropriated in The Office of the Prime Minister.

With the Uganda Budget likely to hit Shs 12 trillion, internal revenue is expected to contribute  Shs 8.8 trillion if the government work plan for the next year is be effected.

Although the government argues that the new measures are aimed at generating enough local revenue to fund its massive infrastructure projects to encourage and attract investment, motorists say more taxes will have the opposite effect as they will increase the cost of doing business.

Emmanuel Tibaijuka, the mobilization and planning Secretary of The Uganda Taxi Operators and Drivers Association (UTODA) says: “Our work has always remained difficult because the government never considers us in their planning, now it will even be more difficult if fuel prices are increased because we shall have to increase the transport fares too, if we are to remain in business, which will strain and possibly scare away customers.”

This frustration is shared by the motorists who accuse the government of insensitivity.

John Byekwaso, a taxi operator along the Ntinda-Kampala route says, “The government does not mind about our plight and it’s as if they want to see us out of business.”

The plight of Kampala motorists is on the heels of a Kampala Capital City Authority directive to resume collection of a Shs 120, 000 monthly fee from taxi operators.  The directive from the Minister in charge of Kampala, Frank Tumwebaze, comes a month after court had stopped it. Taxi operators had challenged the legitimacy of KCCA in collecting the fee.

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