Parliament Considering Moratorium on Ministerial Tax Waivers, Exemptions

Members of Parliament have proposed a moratorium on the powers of Ministers to grant tax waivers and tax exemptions to individuals and companies operating businesses in the country.

The legislators are concerned over the persistent requests from the government for additional funds from Parliament to finance unfunded priorities while significant revenue is lost through tax waivers and exemptions granted by Ministers.

During a debate on the supplementary request of Shillings 4.4 trillion from the Ministry of Finance, Planning, and Economic Development for the Financial Year 2021/2022, Jonathan Odur, the Erute South Member of Parliament, pointed out that Ministers are abusing their powers.

He cited a loss of Shillings 2.478 trillion, approximately 5% of the national budget, due to tax waivers in the same financial year.

Some of the tax waivers include the capital gains tax waiver of Shillings 13.942 billion to businessman Behakanira Gudra, Shillings 33.942 billion to UgaCof Uganda Limited (a coffee processing and exporting company), and Shillings 2.4 billion to Fresh Cuts Uganda Limited (a meat processing firm).

Speaker Anita Among faulted Henry Musasizi, the State Minister of State in charge of General Duties in the Ministry of Finance, Planning, and Economic Development, for failing to provide the list of tax-exempted companies for scrutiny, despite her directive in April.

In response, Musasizi stated that the Ministry of Finance has consistently provided the Tax Expenditure report to the House, except for Quarter Three of the current Financial Year, during which no tax waivers or exemptions were granted.

He disagreed with the proposal to impose restrictions on the Minister’s powers, noting that the Ministry is developing a Tax Governance Expenditure Framework to assess the viability of tax waivers and exemptions.

The Leader of Opposition in Parliament, Mathias Mpuuga, moved a motion on April 25, 2023, seeking a House resolution to inquire into the circumstances surrounding the Minister of Energy and Mineral Development, Ruth Nankabirwa, waiving taxes worth Shillings 616 billion on gold exports. The summary of tax exemptions for the Financial Year 2021/2022 reveals that 1,810 entities received tax exemptions.

Among these, 1,289 were Savings Credit and Cooperative Societies (SACCOS), 33 were religious institutions, 188 were charitable organizations, 188 were deemed under Value Added Tax (VAT), and 25 were classified as strategic projects, among others.

In January, the Commissioner General of the Uganda Revenue Authority (URA) addressed concerns about potential revenue losses. He stated that URA may lose up to 2.8 trillion Shillings to tax exemptions, credits, and deferrals for the financial year 2022/2023, as outlined in the entity’s Budget Framework Paper for the Financial Year 2023/2024.

In a research study conducted by the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) in April 2019, it was estimated that Uganda lost 1.420 trillion Shillings due to tax exemptions in FY 2017/18. The report highlighted that the societal costs of tax exemptions are high, while the benefits in terms of additional investments are low.

The exemptions with the most significant impact were related to international trade tax and VAT. Harmful exemptions identified included Deemed VAT, Government undertakings, MPs’ allowances, interest income of SACCOs, restrictions on URA enforcement, Environment levy, and exempt VAT supplies, among others.

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