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High taxes encouraging tax evasion?

By Mubatsi Asinja Habati

Nasser Husain imports used Japanese cars from Japan for his small depot in Bugolobi opposite the defunct Tri Star fabrics factory. Husain says used cars would be affordable if it were not for the high taxes.

He says a car that would cost Shs 8 million has its price shoot upwards because a tax of at least Shs 4 million is charged on it.

Uganda Revenue Authority charges an environmental tax of 20% on cars that are over eight years old after manufacture.

This is in addition to the usual taxes of 20% excise duty tax, 6% withholding tax and 18% in Value Add Tax. All these taxes are levied depending on the car’s cost, insurance and freight charges.

For example, a used 1997 model Toyota RAV4 from Japan bought for US$ 5,263 (approximately Shs 10.5 million) will see its value swell after taxation to Shs16.7 million. This price is without the dealer’s profit margin.

Husain says the ongoing global economic recession has worsened the already high tax regime because his turn-over has declined due to reduced demand for cars.

‘Of course when one pays over Shs 4 million in taxes, do you think the taxation policy is fair?’ he asks.

At the end of it all, a car that would have cost Shs 10.5 million gets its price put at about Shs 20 million because of the high taxes.

In many instances, these taxes accumulate to almost double the original cost of buying and shipping the vehicle.

Observers are blaming the current Motor vehicle scam in URA to high taxes which people tend to avoid through smuggling and collusion with corrupt URA officials.


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