1 August 2012

Uganda: Kagina Defends Vat On Water

Fielding questions from Parliament's finance committee recently, Uganda Revenue Authority officials maintained that the reinstatement of the 18% Value Added Tax on water was good for the country, and is another way of taxing the rich.

"It's not that the removal wasn't being paid for. The suppliers were paid using other people's VAT on other areas," said Allen Kagina, the Commissioner General URA, while answering the legislators. "Last year, we refunded Shs 17bn to water suppliers (NWSC) because of the zero rate [VAT on piped water]."

The reinstatement of VAT on water became a topic of debate as wide sections of the public questioned government's move to tax an item that is at the core of humanity. The debate shows the difficulty of instituting tax measures against the rich since more than 80% of Ugandans do not have access to piped water.

Moses Kajubi, the URA commissioner domestic taxes, believes the issue is not about water being expensive; rather, the distribution. "The rationale [for removing VAT] wasn't to subsidize the urban dwellers. That is why we are saying let's charge this VAT and invest the proceeds in the distribution systems to reach the deserving people," he said.

Some tax experts beg to differ. PKF Uganda senior tax manager Albert Baine said: "While it aims to increase revenue, the government should have looked at people's health and more onto their access to water."

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