Uganda: COVID-19 - Urgent Tax Breaks Needed to Save Economy


As Covid-19 crisis wreaks havoc on the global economy, governments are looking for ways to protect businesses through economic stimulus arrangements and deliberate tax breaks needed to protect their economies from the fallout of the deadly coronavirus.

While taking a massive pay cut and unveiling tax breaks to ease the economic impact of the crisis on citizens, Kenyan president Uhuru Kenyatta moved quickly to safeguard the soft parts of the economy. But Finance minister Matia Kasaija's tax gamble in the 2020/21 Budget ignores the fact that the country is at war with coronavirus.

In a Budget devoid of Covid-19 pain Ugandans are going through, Mr Kasaija has proposed distressing taxes on rent, kerosene, petrol, boda-bodas and other soft parts of a struggling economy. He is trying to keep faith in the symbolism of Budget, promising to broaden the tax base yet in reality, he is deepening the tax base and widening pain.

The proposed amendments to The Income Tax (Amendment) Bill, The Value Added Tax (Amendment) Bill, The Excise Duty (Amendment) Bill, and Stamps Duty (Amendment) Bill disregard the suffering Ugandans are going through.

The minister's tax measures reincarnate the pre-coronavirus abyss and pretence that the economy is going to boom yet, what he does now is to kill prospects of recovery and the much-needed impetus for job creation.

Why force Ugandans who have companies and earn rental income from more than one building to account for the income and expenses of the buildings separately and pay rental tax for each of the buildings separately? The proposal to stop investors from claiming tax credits for incomplete buildings is a recipe for unbearable rent charges.

The minister unfairly limits expenses incurred for rental income to 50 per cent yet other businesses can claim all expenses incurred and introduces withholding tax on purchase of land. Why should a Ugandan who buys land, other than land which is a business asset be forced to withhold 0.5 per cent of the purchase price?

We think the proposed amendment is uncalled for since it implies that practically, every purchaser of land will become a withholding agent. But if it's not a business asset, then why tax it? This is going to limit investments and deny Ugandans opportunity to own land at a time when the country is facing a housing deficit of 2.1m.

Our view is that the new Budget should not spread pain at a time when the economy is on its knees. All efforts must be done by Parliament to protect jobs and support struggling businesses through tax breaks.

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