Legislators Reject Govt Plan To Tax Rent, Wealth

Kampala – Lawmakers and taxpayers have accused the new Uganda Revenue Authority commissioner-general, Mr. John Musinguzi Rujoki, of attempting to increase taxes on the back of a stressed economy.

The MPs said Mr. Rujoki was trying to impress the appointing authority and vowed to reject what they called “unfair taxes.”

On Monday, the URA commissioner general made a case for rejected taxes on rental income and having landlords account for income from commercial buildings, separately.

Ministry of Finance officials had proposed the same but Parliament rejected the move in May.

Mr. Rujoki proposed a direct tax on wealth and a one percent tax levy on middlemen involved in the agricultural supply chain.

The proposals have attracted criticism, especially after similar revenue measures were rejected by Parliament in April as MPs considered revenue measures both in 2018/19 and 2019/20 financial year under the reign of Ms. Doris Akol, Mr. Rujoki’s predecessor.

The legislators said the harsh revenue measures will kill the appetite for investment and stifle growth.

Ms. Syda Bbumba (Nakaseke North, NRM), the chairperson of the Committee on National Economy, said she will not deviate from the House position.

However, Mr. Rujoki argued that with the pandemic, the gap between the poor and rich will be spontaneously widened, and the stopgap measure is a direct tax on the rich.

“This will help mobilize revenue and reduce income inequality that is bound to increase as an impact of Covid-19,” he said. “Wealth taxation would be the possible response to this type of situation because it is least likely to be a drag on economic recovery, and will impose less or no burden on the poor. It would also serve to address the growing accumulation of wealth in a very small number of hands, which has been observed as we analyze our databases,” he added.

Mr. Lawrence Bategeka Nkooto (Hoima Municipality, NRM) told Daily Monitor that URA is stretching beyond its mandate.

“URA mandate does not propose a tax policy. URA is supposed to follow tax policy as proposed by the Ministry of Finance and approved by Parliament,” Mr. Bategeka said.

“The people of Uganda must accept how they should be taxed. URA can make the proposals but as an institution, it is not their mandate,” he added.

Like Mr. Bategeka, Mr. Anthony Akol argues that URA should focus on serving its mandate.

“URA must embark on tax administration, for now, other than thinking about Rental income or separate tax on wealth. During this COVID 19, many countries are looking for how they can help businesses to come out from economic lockdown which includes tax waivers,” Mr. Akol said.

The taxman has already painted a gloomy picture of the economy. Out of a targeted Shs20.3t, only shs16.8t has been realized.

Uganda currently has only 1.5m taxpayers registered in the tax base.

EXPERTS’ VIEW

Mr. Hamza Ssali, a tax partner with Ernest and Young: “Rental income creates a tax burden. For each property, you need to employ an administrator to run the property and gather details. In addition, there are costs that are feared such as borrowings and if it is within the same block, there are issues with water and electricity, how would they be apportioned and whether URA would agree to the level apportioned.”

Mr. Vincent Agaba, the managing director of Avarts Housing: “URA’s focus should lie mainly on whether the taxpayers have given it all requisite information as is currently done.”

Ms. Rashmi Pillai, the executive director, Financial Sector Deepening Uganda (FSDU): “Uganda already has thin capitalization rules for non-financial companies that dictate how and under what conditions loan interest is taxed. URA is right in its thinking that companies should find other sources of capital beyond debt in particular equity. However, that requires a well-developed investment climate not only for large corporates but for small and medium companies and we are not there yet.”

Mr. Gideon Badagawa, executive director, Private Sector Foundation Uganda: “Apart from the first floor, arcades are empty. Who will they tax when people aren’t making money? It is important to plan but they must be based on realistic assumptions. You have to support investment expansion and build the tax base.”

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