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Tax incentives induced by COVID-19 may be futile -NGOs

Kampala, Uganda |  THE INDEPENDENT |  The business community might have to forget the tax incentives that the government offered them to mitigate the effects of the COVID-19 pandemic on their businesses, as there is no necessary legislation to enable their enforcement.   

The 2020/2021 budget was delivered under the theme: Stimulating the Economy to safeguard Livelihoods, Jobs, Businesses and Industrial Recovery and this was in line with the president’s State of the Nation Address, where he proposed tax relief measures for the private sector.  

The budget Speech confirmed the president’s directive and provided for initiatives like reducing tax rates for small businesses and deferring until September 2020, payment of Corporate Income Tax, and Presumptive tax for Small and Medium Enterprises.   

Under this, the directives deferred payment of Pay and You Earn tax (PAYE) for the period April to June, to September, waived interest or penalties that would accumulate on the tax that has been deferred. It also intended to waive interest and penalties on tax arrears accumulated before July 1, 2020, to lessen the tax liability of businesses who voluntarily comply with their tax obligations.   

These tax incentives were however supposed to be affected by tax amendment bills, that would give Uganda Revenue Authority the leeway to suspend the demand for these taxes.   

On its part, URA in the meantime, offered taxpayers its own incentives including voluntary disclosures, where a taxpayer is in distress or in arrears, which then URA uses to give amnesty to the taxpayer to avoid penalties on the arrears. The Commissioner for Domestic Taxes Patrick Mukiibi said the tax body’s hands are tied until they get communication from the ministry after the parliament has passed the amendments laws and the president assented to them.

When the tax measures were announced in June, business community organisations at the time argued that the government should have instead waived the taxes, because deferring them is only postponing the burden to a time when it will have accumulated. 

Among the Bills presented by the Ministry of Finance Planning and Economic Development were the Income Tax Amendment (2) Bill 2020, and the Tax Procedures Code (2) Bill which provides for the waiver of outstanding interest and penalties owed by taxpayers as of June 30, 2020. 

The Income Tax Amendment provides for the deferral of Corporation Tax till September 30th 2020, for the tourism, horticulture, floriculture, manufacturing and education sectors, which the government then said, were hardest hit by the pandemic.   

Unfortunately for the business community, of the six Bills sent to the president for assenting to, only the Excise Duty and the VAT Amendment bills were successful, while the other four were retuned and re-tabled by the Finance Ministry, in June.   

Since then, however, they have never been debated on the the flour of parliament.

Non-governmental Organisations uniting under the Tax Justice Alliance have called for the immediate expediting of the process if the incentives are to be meaningful to the economy.   

In the joint appeal read by ActionAid Uganda Country Manager Patrick Ejoyi, they call on the government to extend the incentive period to March next year for better preparation.   

Last week, Uganda Revenue Authority announced that they had made a surprise surplus on collections for the first quarter ended September 30, of 1 trillion shillings, against a target of 3 trillion. This target was reduced when the finance ministry revised downwards to the annual target by about 2 trillion Shillings. 

The NGOs condemned the MP’s on the budget committee for saying if money is needed to enforce the measures, they will go back and approve supplementary budgets.

The Budget Policy Specialist at the Civil Society Budget Advocacy Group, Patrick Lubangakene says the parliament’s actions are making the government and Uganda Revenue Authority act on wrong data and this will make the budget implementation process to falter.   

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