Kampala — Economists and tax managers have cautioned Ugandans to tighten their belts in the next financial saying the recently read 2014/15 budget for Uganda is not friendly to them.
Describing Uganda's budget as the toughest of all years, the tax managers however advised Ugandans to be tax complaint.
"We're not saying you should evade taxes. We're interpreting what the budget means and urging you to tighten your belts," said Albert Baine, a Senior Tax Manager at PKF Uganda a tax consultancy and audit firm.
He was speaking during the National Budget Breakfast meeting in Kampala that was organized by the Institute of Certified Public Accountants a day after Uganda's Finance Minister had read a Ush15.054 trillion budget.
Baine said termination of VAT exemptions on all most everything in the economy including supply of poultry feeds and livestock, agriculture and dairy machinery, salt, insurance services, water, education, civil works and supply of printer services for the educational materials will hugely impact on the common Ugandan.
"When you put tax on seeds, fertilizers, mobile money withdraw fees, pesticides, hoes, increase excise duty on petrol, diesel and kerosene you're like milking a starving cow. Is Uganda milking a starving cow?" he asked.
Under the Budget Theme of "Maintaining the Momentum: Infrastructure Investment for Growth and Socio-Economic Transformation", the Finance Minister Maria Kiwanuka proposed the elimination of Initial Allowances on Eligible Property which she said, initial allowance on eligible property will be terminated.
This means that if a person who places an item of eligible property into service for the first time during a year of income will no longer be allowed a double tax deduction for that year of income of accelerated depreciation and ordinary depreciation.
She also proposed to increase the presumptive tax from 1% to 3%.
"Tax on Sports and Pool Betting winnings and Designation of Gambling Houses to withhold the tax 15% tax has been introduced on winnings derived from sports and pool betting.Gambling houses have been designated as withholding tax agents," Kiwanuka read in her budget.
Kiwanuka also proposed the elimination of exemption on Interest Income on Agricultural Loans, Capital Gains Tax on sale of Commercial Property, elimination of exemption on Income derived from Educational Institutions and thin Capitalization Rules Deductions for interest paid to non-associated persons will be limited to not more than 50 percent of earnings before interest and depreciation.Baine said this will likely diminish Uganda's competitive educational gains with in the EAC partner states.
"I want to thank the government for increasing the tax on gambling but taxing agriculture and instituting a corporation tax on schools may have negative implications on those sectors," added Baine.
Kiwanuka said Uganda's economy grew through Financial Year 2013/14 albeit more modestly than the 6.2% that was projected year ago. She predicted that the economy is projected to grow by at least 7% in 2014/15.
"Inflation remained low during the year and dropped to 5.4% by May 2014 and Annual core inflation declined to 3.3%," she said.
In the budget, Kiwanuka said key expenditure for the FY 2014/15 will go to national security giving it $402 million account to 7% of the total budget, Infrastructure $1,030milliom (17%), Energy and Mineral development $ 670 million (11%) and Education, Health and Water $1,420million (25%). The Agriculture Budget was not indicated by the Finance Minister.
In the total resource envelope, which is projected at Shs 15,054 billion (USD 6,021.6M), Kiwanuka said Domestic sources will contribute Shs 12,321 billion (USD 4,928.4M) while Uganda Revenue Authority will collect taxes of Shs 9,577 billion (USD 3,830.8M); and Non-Tax Revenues of Shs 206 billion (USD 82.4M).
She said other domestic funding will be sourced by issuing Government securities worth Shs 1,437 billion (USD 574.8M) on domestic markets; and net Government drawdown from savings of Shs 1,102 billion (USD 440.8 M).
Kiwanuks increased excise duty on petrol and diesel by 50 shillings, excise duty on kerosene at 200 shillings per litre was reinstated, excise duty on sugar was increased from 25 shillings to 50 shillings, 10% excise duty was introduced on mobile money withdrawal fees and 10 % excise duty was introduced on bank charges and money transfer fees.