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How the new tax proposals will affect you

Patrick Luwagga by Patrick Luwagga
April 12, 2023
in National News
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How the new tax proposals will affect you

Members of Parliament during a session in 2022. The tax burdens and stiff penalties will start on July 1, if Parliament passes the tax proposals. PHOTO | file

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Ugandans should prepare for increased tax burdens and severe penalties for violations, If Parliament approves a slew of tax reform measures contained in six recently-introduced Bills.

The propositions, among other things, call for taxing international phone calls, with the exception of those to four East African Community members, and online transactions like those for travel and lodging. Tanzania, Kenya, South Sudan, and Rwanda are among the nations.

If a driver is caught speeding, the government wants them to pay Sh2 million in fines or serve three years in prison, if not both. Anyone caught tampering with digital tax stamps would have to pay Sh10 million in fines or serve ten years in prison.

The honeymoon period for gamblers would also be ended because the government wants to take 30% of every Sh100 in wins.

A reduction in excise taxes and exemptions for producers of hand sanitizers with alcohol contents of 70% or more will be the only relief for opaque beer producers and consumers (a weak alcoholic beverage made by the process of alcoholic fermentation from a starch source, water, and yeast).

The ideas are devastating for investors who use unit trusts like Savings Credit and Cooperative Organizations (Saccos), as they call for a five percent withholding tax on interest and dividends for savings under Sh100 million and a fifteen percent withholding tax for larger sums.

“(6a) A person who makes an unauthorised interference to, or tampers with, a digital tax stamps machine commits an offence and is liable on conviction, to a fine not exceeding one thousand five hundred currency points or imprisonment not exceeding 10 years,” the Bill reads in part.

Since one Ugandan currency point is equal to 20,000 Shs, the proposal’s 1,500 threshold translates to a Shs30m fine.

A digital tax stamp, according to URA, is a “marking that is applied to goods or their packaging and contains security features and codes to prevent counterfeiting of goods and enable track and trace capabilities”.

In order to improve tax compliance, lower under-declaration of the taxable base, and ensure authentic items are available on Uganda’s marketplaces for consumers, the tax authority implemented the modifications in the 2019–2020 Financial Year.

The same bill has a newly added Section 62H that mandates a Sh10 million fine or a three-year prison sentence for anyone found guilty of applying the incorrect tax stamp to the incorrect items.

According to the same Bill, whenever the government cracks down on non-compliance, anyone who refuses to provide tax information as asked by URA, the tax collector, will not be granted a hearing or be permitted to provide the same information in defense during the mediation process.

The government wants to impose a 30% tax on winnings from bets through the Lotteries and Gaming Act Amendment Bill, 2023.

According to the National Lotteries and Gaming Board (NLGB), income collections increased from Sh17 billion in 2015–2016 to Sh110.5 billion in 2021–2022.

The Value Added Tax (VAT) Amendment 2023’s authors want imported services, such as music, movies, and video games, self-education programs, and web hosting, to be subject to taxation.

In contrast to the present format, which permits business owners to do the same in local money, such as Uganda Shillings, the same draft proposes that tax returns be completed and filed reflecting in the form of the United States Dollar (USD) currency.

The government wants to impose a five percent tax on all digital services in the nation under the Income Tax Amendment Bill 2023.

“A tax is imposed on every non-resident person deriving income from providing digital services in Uganda to a customer in Uganda at the rate of five percent,” the Bill reads in part.

The online services include data services, online advertising services, and services offered through online marketplaces or platforms for third parties, such as online marketplaces for lodging, car rentals, and other forms of transportation.

Online services also include cloud computing, data storage, online gaming, and digital content services such as accessing and downloading digital information.

Traffic and road safety proposals call for increasing the punishment or sentence for convicted speeders to Sh2 million, three years in prison, or both.

Some lawmakers, including Bukoto West MP Muhammad Ssentayi, feel that the suggested punishment is insufficient and have instead suggested that the government implement a method of reducing driving points that would result in repeat offenders losing their licenses and being required to attend driving school.

“I would not have supported the idea of imposing Shs2m fine or years of imprisonment for drivers found to be speeding … [in] developed countries, … permit holders [who violate traffic rules] are subjected to reduction of points until it reaches a point of retraction of the driving permits,” he said, citing rising road carnage and lost lives.

Instead of imposing what he called a “harsh penalty” on drivers, the legislator advocated overhauling safety regulations and repairing potholed roads.

The Excise Duty Amendment Bill, 2023, will reduce taxes from 20 percent to 15 percent, or from Sh230 to Sh150 per litre of opaque beer, therefore manufacturers of this beverage are likely to see a tax break on their goods.

The government wants to exclude producers of Covid-19 preventative goods from paying excise duty. Examples include hand sanitizers with an alcohol level of 70% or more.

If Parliament approves, calling abroad will cost $0.09 (Shs336) a minute, with the exception of calls to regional neighbors Rwanda, Kenya, South Sudan, and Tanzania.

Tags: budget 2023Uganda parliamentURA
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Patrick Luwagga

Patrick Luwagga

Patrick Luwagga is the editorial director of cross-platform content for UGANDANZ. He works across the newsroom and with business partners to drive and develop ambitious editorial projects that include digital journalism, video, data research, polling, live events, and thought-leadership series that are supported by outside underwriting. As executive director, he is responsible for the creation of Political news section, prior to joining UGANDANZ, Patrick was the chief editor for the national weekly news magazine of Kasese Times. In that role, he covered several presidential elections, wrote and produced two television documentaries, and was a regular commentator on television and radio news programs. Patrick was born in Masaka and grew up in Kasese. He earned a bachelor’s degree in Journalism from Makerere University where he was a Knight Foundation journalism fellow.

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