MPs divided over new VAT proposals

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MPs have disagreed with the Government over the Value Added Tax (Amendment) Bill 2024. The House was adjourned following disagreements over the status of the Bill.

The majority and minority reports on the bill noted that the Financial Implications Certificate issued for the bill was inadequate in detailing revenue estimates for each of the next two financial years. Furthermore, the certificate did not indicate the impact of the bill on the economy. This is inconsistent with Article 76 (3) of the Public Finance Management Law.

Amos Kankunda (Rwampara County), Chairman of Parliament’s Finance, Planning and Economic Development Committee, presented the committee’s report on the bill on Friday, May 3, 2024.

Kankunda said in the Annual Monitoring Plan of Domestic Revenue Mobilization Strategy for Fiscal Year 2022/23 that most of the amendments to the tax law are not based on tax-related analytical reports.

He said there are weak partnerships between the fiscal policy department of the Ministry of Finance and the Uganda Revenue Authority. This undermines evidence-based tax development mechanisms.

“The frequent changes in tax laws have caused challenges for the taxpayer. This is due to the absence of a comprehensive fiscal policy,” Kankunda said.

Minority reports on the bill were presented by Ibrahim Ssemujju (FDC, Kira Municipality) and Nandala Mafabi (FDC, Budadiri West).

Ssemujju (Kira Municipality) said that there is a lack of tax policy, there is no research, there is no study of new tax proposals and the law is not followed.

He said that any bill that requires a certificate of financial implication does not meet the requirements set out in the PFMA. He said that a comprehensive fiscal policy was lacking and that was why the government was adopting fiscal measures in a piecemeal manner.

He alluded to the concerns expressed by traders about the Electronic Tax Receipt Solution saying that additional taxes create resistance to overburdened taxpayers.

Mafabi said the tax proposals focused on taxing income and not addressing rising expenses that create demand for additional tax revenue each year.

He noted that trying to change the tax schedule for hoes, fertilizers and seeds from zero-rated items to tax-exempt items could create confusion and lead to an increase in their prices. Zero-rated supplies: These are supplies with VAT at the 0% rate. These deliveries are listed in the third schedule of the VAT Law. They include, among other things, all exports and supply of medicines manufactured in Uganda and the supply of cereals when such cereals are grown and milled in Uganda, among others.

Exempt supplies are supplies of goods and services that are not subject to VAT. These are specified in the second annex of the VAT Law. Examples of exempt supplies include; health insurance and life insurance services, petroleum fuels, social welfare services, educational services, financial services, passenger transportation services. A person dealing solely with exempt supplies is not expected to register for VAT, while a person dealing with zero-rated supplies is expected to register if they meet the registration requirements.

Henry Musasizi, the state’s finance minister, argued that the bill met all the requirements of the law.

Speaker Anita Among, who was presiding over the House, suspended it for 30 minutes to allow selected MPs, including the Finance Minister, Shadow Finance Minister, Finance Committee Chairman, Attorney-General and The party leaders will harmonize the tax bill. On resumption, Among asked Musasizi to submit an addendum to the certificate of financial implication of the bill and other tax bills in the coming days and adjourned the House session until Monday, May 6, 2024.