25 April 2019

Uganda: Proposal to Exempt Tax On Aircraft Insurance Upsets MPs

Kampala — A move by government to exempt the supply of aircraft insurance amid efforts to revive the National Airline has upset Members of Parliament.

The proposal to amend the Value Added Tax Act for this purpose was on Wednesday afternoon tabled before the Finance committee Chaired by Rubanda East MP Henry Musasizi by the State Minister for Finance in-charge of Planning David Bahati.

Bahati justified the move saying that it seeks to reduce the cost of insuring aircraft in Uganda and also support the development of the local airline industry. The exemption of supply of aircraft insurance will see Uganda lose 4 billion shillings in taxes.

However, the Kachumbala County MP Patrick Isiagi questioned the motive behind the exemption on aircraft insurance.

Budadiri West MP, Nathan Nandala Mafabi also queried the move to exempt insurance for aircraft and leave other means of transport.

Finance Ministry's Director Economic Affairs, Moses Kaggwa justified the new move saying that it is an extension of other zero-rated supplies already under the third schedule of the Value Added Tax Act citing supply of leased aircraft, aircraft engine, spare engine, spare parts for aircraft and aircraft maintenance equipment.

He further explained that Uganda has many companies which are leasing aircraft to provide tourist services and cargo handling services and that the new proposal is not about the new revived airline.

"The exemption that we are seeking is not just for the new entity but for the benefit of all. We all know that the cost of air travel in this country is very high and what we want to do is to reduce that cost," said Kaggwa.

Bahati also said that the new airline was considered saying that it is envisaged to support the economy by facilitating tourism.

Uganda's first two aircraft arrived in the country on Tuesday. The Bombardier CRJ900 planes are scheduled to start commercial flights around Africa in July.

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