KAMPALA –Members of Parliament – MPs on the alternative government have recommended the constituting of a select committee to inquire into tax exemptions and expenditures before the approval of the annual national budget for the financial year 2023-24.
Th e recommendation is contained in a minority report, which the Shadow Ministers – Finance, Muhammad Muwanga Kivumbi; Science Innovations and Technology, Gorreth Namugga and Buikwe South legislator, Dr Micheal Lulume Bayiga co-authorised on the proposed budget framework paper for next financial year.
According to their minority report – the Opposition wants the select committee to have a mandate of three months to inquire into the matter – reporting back in April.
“Tax exemptions and related expenditures are a big cost to the government,” reasons the Butambala County MP- Muwanga Kivumbi.
“The government loses over Ugx8trn annually in tax exemptions and related expenditures, a sample of a handful of tax exemption beneficiaries demonstrate the extent of the haemorrhage where the country loses over half a trillion.”
The minority report reveals some of the companies that are exempted from paying taxes including, Oil Palm Uganda Limited (Value Added Tax) amounting to Ugx55.28b and Corporation tax of Ugx189.7b; Roofings Rolling Mills Limited (Corporation tax) of Ugx15.71b; Uganda Post Limited (Value Added Tax) Ugx5.2b and Pay as You Earn (PAYE) of Ugx6.21b;, Fine Spinners Uganda Limited (Stamp Duty) Ugx239.5m; the Commission of inquiry into the effectiveness of law policies and processes of land acquisition administration management and registration 2017 (PAYE) Ugx13.65b in addition to Withholding Tax of Ugx212.7m.
Others are University of Kisubi (PAYE) Ugx172.9m; Finasi-lshu Construction Spv Limited (PAYE) Ugx1.85b and Withholding Tax Ugx47.9b; International Specialised Hospital of Uganda Limited (PAYE) Ugx1.78b and Withholding Tax Ugx523.3m.
The opposition suspects that the award of such exemptions might be conduits for corruption.
“The big companies are exempted from taxes yet the small taxpayers are made to pay,” added Kivumbi.
“The small taxpayers desire a favourable tax regime and affordable credit. Unfortunately – these are less prioritised by the government.”
He tabled the minority report before Parliament on Wednesday as the Deputy Speaker Thomas Tayebwa deferred the debate to Tuesday next week.
In the report, the Opposition also demanded that quarterly tax exemption reports are presented to the House as per Section 77 of the Public Finance Management Act, 2015.
Section 77 states that a person or an authority granted the power to exempt the payment or to vary any tax under an Act of Parliament, shall in each financial year, on or before the September 30, December 31, March 30 and June 10, make a report on tax exemptions to Parliament.
The law requires that a report made shall indicate the person exempted from the payment of tax, the reasons for the exemption, the amount of tax foregone by the government and the benefits to the government from the exemption.
Recently, John Rujoki – the Uganda Revenue Authority -URA Commissioner General revealed that Ugx2.88trn in form of tax exemptions will be lost in the current financial year 2022/2023.
Documents before the Finance Committee indicate Agro-processing, charitable organizations, commerce and industry, farming association, SACCOs, tourism associations, trade unions, exporters of 80 per cent of products, education and public character as some of the categories benefiting from tax exemptions.
Some of the taxpayers that have in the past been recommended for tax waivers by the government are Brookside Limited, St. Mary’s Hospital Lacor, UGACOF Limited, FINASI-ISHU Construction SPV Limited, Kuka (U) Limited, Uganda Broadcasting Corporation, Kams Contractors.
According to the government tax expenditure report released in October 2021, a total of 5 trillion in taxable revenue was forgone for exemptions and other incentives.
When asked by Finance Committee Chairperson, Keffa Kiwanuka about the government’s tax expenditure plan given the money lost, the acting Commissioner of Tax Policy in the Ministry of Finance, John Byaruhanga early this month said they have already adopted a Tax Expenditure Governance Framework and a Rationalization plan.
Tax expenditure means the lost revenue as a result of preferences extended by the government to a particular group of taxpayers.
“Consultations with His Excellence the President were concluded and we were given a green light to go ahead and do the analytical work that is going to inform the exact expenditures that are going to be adjusted,” said Byaruhanga, then.
He added that whereas they have already identified areas that the Ministry wants to touch, they are carrying out an analysis to determine the execution of the adjustments of the tax exemptions that they already have on the radar.
The national budget for the next financial year 2023/2024 is projected at Ugx49.98trn, compared to Ugx48.13trn for the current financial year 2022/2023.
The proposed budget will be partly financed through gross domestic revenue projected at Ugx29.78trn, of which tax revenue is Ugx27.77trn and Non-Tax revenue of Ugx2.009trn. This represents a growth in revenue estimates of Ugx4.23trn up from the Ugx25.5trn projected revenues for the current financial year.