29 April 2016

Uganda: MPs - We Struck Tax Deal With Museveni

Photo: The Observer
President Museveni addressing MPs at Kyankwanzi. (file photo)

Under fire for approving legislation that would exempt them from paying taxes on their consolidated emoluments, MPs now claim that President Museveni had earlier okayed that position.

Since the MPs passed the tax exemption law earlier this month, Finance and Uganda Revenue Authority officials have insisted that MPs must pay their taxes on the lump sum of salary and allowances.

The critics included Finance permanent secretary Keith Muhakanizi - who came under particular attack by MPs at a press conference on Tuesday. They say they struck the tax exemption deal with President Museveni in March, during a retreat for new MPs in Kyankwanzi.

"The president asked us not to increase our salaries and allowances while in Kyankwanzi mid last month [March] and we agreed," said Rubanda East MP Henry Musasizi. "We said 'yes but we shall not pay taxes'... The president knows it and we believe by the end of this week he will have signed the bill. We want this status quo to be maintained."

The MPs also warned that if the president does not assent to the Income Tax (Amendments) bill, 2016, they may block passage of the 2016/17 budget. The MPs want only their basic salary, about Shs 2.6m, to be taxed, but not most of their allowances.

It all started in March when the Parliamentary Commission decided to consolidate the MPs' pay to help them get a huge pension and gratuity after retirement. Before then, MPs were paying tax on their monthly basic salary of Shs 2.6m and not allowances. But when the commission consolidated the MPs' pay to about Shs 20m a month, URA said it would levy a tax on the lump sum. This angered the MPs who then decided to amend the law on income tax to get round URA.

Critics have argued that the MPs are trying to eat their cake and have it - enjoy gratuity that comes with a big consolidated sum but only pay tax on a segment of the whole.

MP Musasizi, a member of the parliamentary committee on finance, which scrutinized the bill before its passage, said: "I am deeply disappointed by the utterances of the PS [Muhakanizi]. He is not supposed to communicate the position of government; somebody else is. If it were not the position of government, the minister of finance would not have presented that bill."

Tuesday's news conference at parliament was addressed jointly with Eastern Youth MP Peter Ogwang. The MPs said that NGOs collecting signatures to petition Museveni against assenting to the bill were wasting their time.

"Our argument is [that] money paid in allowances does not constitute employment income. What does not constitute employment income should not be taxed," Musasizi said.

MP Ogwang, the vice chairperson of the NRM caucus, said: "For the ministry of finance PS [Muhakanizi] to mix his views with those of the ministry is unfortunate. How can the PS come out and lambast a bill presented by his minister? The PS should know he is a technical person, and not head of the ministry of finance.

"I pay my driver, researchers, campaigners and others. The PS does not; he has a lot of workers under him paid by government. We buy cement to support activities in our constituencies. Isn't this tax enough?"

The two MPs contend that the principle of equity means every person must pay taxes - adding that some taxes are direct and others indirect. And since direct taxes are paid by every Ugandan, the MPs argue that their salaries are taxed and therefore there is no need for them to have their allowances taxed too because that would be subjecting them to multiple taxation.

With the MPs having done their bit in passing the bill, all eyes will now be on the president's pen.

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