Government does not intend to introduce new taxes in the next Financial Year 2022/2023, the Minister of state for Finance (General Duties) Henry Musasizi has said.
The Minister was on Friday presenting nine tax bills before the parliamentary committee on finance for the first time since the bills were laid on the floor of parliament last week.
“Therefore, the proposed amendments on the various tax laws mainly provide clarifications of ambiguous provisions, close loopholes in the tax laws and simplify the tax laws with a view of supporting tax administration and promoting voluntary tax payer compliance, which will ultimately enhance revenue mobilization and collection,” Musasizi said.
Ministry of Finance is proposing adjustments to the Income Tax Act, Stamp Duty Act, Tax Appeals Tribunal Act, Excise Duty Act, Value Added Tax, Tax Procedures Code Act, Tax Appeals Tribunal Act, Traffic and Road Safety Act and Uganda Revenue Act. Among the contentious issues that raised dust during the committee meeting chaired by Hon Keefa Kiwanuka is the proposal to amend the Income Tax Act to extend the income tax exemption for Bujagali Power Generation Company from 1st July 2022 to 30th June 2027.
Bujagali Power Generation Company, which owns and operates the Bujagali Power Station was first given a 10 year tax exemption in 2007 and later given another 5year exemption in 2017 which expires this year. According to Musasizi, another 5 year income tax exemption would reduce the average electricity tariff of Bujagali hydro power project by 4.7 per cent from the current US cents 10.62 per kWh to about US cents 7.0 per kWh.
“Our economy is much better when the cost of doing business is low in terms of power, transport, money etc. So the Bujagali power project is aimed at reducing the cost of doing business for Ugandans. Bujagali has not yet recouped and if we deny them this exemption then the cost of power is likely to increase,” Musasizi said.
However, MPs rejected the proposal saying that the 15years tax exemption that Bujagali has benefitted is sufficient for the project to find its economic muscle and operate optimally without such incentives.
“In 2017 this committee was persuaded to renew this exemption for the last time with the view that tariffs would come down to US cents 7 per kWh, but it is still at 10 cents. I am not among those who will again exempt Bujagali. An ordinary Ugandan pays for land, pays all taxes, but Bujagali is exempted and walks away with all the profits,” Muhammed Nsereko (Kampala Central) said.
Moroto County MP Samuel Okwir said that giving Bujagali another tax exemption would shift the burden on ordinary Ugandans to cover the gap with no assurance of economic benefits from the project. Hon Paul Omara (Otuke County) said government should stop ‘babysitting’ Bujagali while Hon Nandala Mafabi (Budadiri West) said that it is high time Bujagali started contributing to the national treasury in terms of tax collections.
The MPs also disagreed on government’s proposal that intends to streamline the rental income tax regime by imposing a flat rate of 12 per cent on the gross rental income of individuals for a year of income with no deductions for any expenditure incurred. However, in the case of non-individual rental tax payers, the new reform seeks to limit the deductible expenses to a maximum of 50 per cent of the gross rental income.
MPs were opposed to this new tax regime saying it favours companies that own rentals at the expense of individuals and that it would in return shift the burden on tenants. The Income Tax (Amendment) Bill, 2022 also seeks to amend the principal act to provide an income tax exemption for a period of 10 years to a foreign manufacturing investor and Ugandan citizen who invest at least US$35 million and at least US$5 million respectively.
The new tax bill also intends to provide an income tax exemption for a period of 10 years to a hospital facility developer who invests at least US$ 5 million. (Source: Parliament)