As the parliamentary debate of the Tax Amendment bills for financial year 2013/14 draws closer, Uganda Revenue Authority (URA) has been actively educating specific sections of parliament on the nitty-gritty of the bills and how they will affect Ugandans.
The authority has initiated elaborate consultative engagements with legislators on the Finance, Budget and National Economy committees, plus members of the Uganda Women's Parliamentary Association (UWOPA) recently to explain the budgeting process and the justifications for the proposed tax measures as reflected in the bills.
One of the measures that attracted a lot of debate was the reintroduction of VAT on water. Statistics from National water and sewerage corporation (NWSC) indicate that a 20-litre jerry can costs UGX 38.24. VAT is 18% making the cost of this jerry can; 45.12/= VAT inclusive.
Information from NWSC also indicates that only 28 towns have received piped water coverage in the entire country. The projected 8bn collections from this initiative will enable the Government to expand water coverage to other areas in Uganda.
"I am excited about the justification that revenue that will be generated to cover areas that do not have water like the district I represent. However the projected 8bn collection is very little money," noted Grace Byaruhanga women representative in Isingiro district.
Youth MP Monica Amoding welcomed the move to reintroduce VAT on water for domestic use. "Your justification is viable. How can you keep the money safe? Can we have a forecast of how long it will take to have water flowing in all parts of Uganda?" she asked, and suggested that the projected Shs 8bn be hedge fenced.
The authority's justification for the hike of registration fees of boda boda cyclists is that it is a onetime payment. Boda boda cyclists earn income and as Ugandans are expected to contribute revenue to the national coffers.
The month of June is received with many reactions among the business community. The ordinary Ugandan also waits with bated breath on news of taxes they will have to pay. Any slight hike is received with apprehension. Any price hike after the budget speech is attributed to the new taxes like has happened recently.
It has for instance been feared that the introduction of VAT on Wheat flour is going to increase the cost of all wheat based foods. Other tax measures to be implemented by URA had already been misconstrued to be anti poor, however URA argues otherwise and illustrates as below;
A 2kg packet of wheat flour cost 3,835, from the 2kgs, 20 chapattis could be made
Implying cost of wheat in each chapatti is (3,835/20) =192
VAT on first price is (18%*192) =UGX 34.56
With introduction of VAT
2kg packet is now costing 4,585 implying cost of wheat in one chapatti is (4,585/20) UGX 229.
The increase is (229-192)37,
Therefore, the justifiable increase in the price of a chapatti should not exceed UGX 50.
On Exercise duty on mobile money transfer charges, Ugandans are not to absorb this cost since Mobile money charges were increased before tax proposals were announced. The tax component on the amount charged (800) to send 50,000 is 10 of 800, making the new charge that is tax-inclusive 880.
Appealing to the MPs, Allen Kagina, the URA Commissioner General, urged them to think of the women they represent: "If we do not collect this money, the woman is left vulnerable and exposed. When prices go by, taxes are always blamed which is not the case."
Elizabeth Karungi, the Kanungu district representative, commended URA for a job well done and urged the authority to find ways of regulating the prices on the matter especially those where the business community is blaming tax hikes.
"As we move to debate issues of the national budget we can now urge from an informed point of view. Sensitization is very critical and should go on. URA should engage us on the drawing board to avoid controversies when it comes to budget time," Rose Nyakyikongoro, the UWOPA chairperson, said.
While, Jessica Eriyo, Adjumani representative, asked for further engagements with the ministries of finance and energy to resolve the issue of fencing the money on VAT on water. One sure strategy that URA has to employ to mobilize tax revenue this year is to carry out massive sensitization on the tax measures.
The author works with the Media Management Section, Uganda Revenue Authority.