New Taxes Commence as Financial Year Starts

  • by Rodney Mponye
  • July 1, 2021

Airtime, data users to pay more.

While reading the 2021/2022 national budget, the State minister for Planning, Mr Amos Lugoloobi, said government would rationalise the excise duty regime on telecommunication services by scrapping the Over the Top Tax (OTT).

Mr Lugoloobi said this would be replaced with a harmonised excise duty rate of 12.0 per cent on airtime, value-added services and internet data.

The minister clarified that the internet data in the new tax would exclude provision of medical services and education services.
The OTT was first introduced in 2018 causing a nationwide uproar and protests in Kampala led by then Kyadondo East MP, Mr Robert Kyagulanyi, aka Bobi Wine.

Following the public uproar, the government proposed to drop the tax, saying Uganda Revenue Authority (URA) had failed to hit the tax collection target from it.

This was after Ugandans resorted to Virtual Private Networks (VPNs) to bypass the government tax. In July 2019, URA said they had collected only Shs49.5 billion of the targeted Shs284b from OTT for Financial Year 2018/2019, a shortfall of 83%.

Fish maw exportation
After government realised that fish maw was a lucrative business in Asian countries, especially China, in the new financial year, a 7 per cent export levy has been slapped on the same effective today. Fish maw is a white hard membrane found inside the body of the Nile Perch and fetches up to $1,000 (more than Shs3.6m) per kg when sold on the international market. Drugs, aircraft parts and surgical threads are some of the products made out of fish maw.

Early last year, Uganda and China signed a memorandum of understanding that would see the former sell the fish maw directly to the latter.

President Museveni said fish maw would fetch the country $156b (about Shs550 trillion), about five times bigger than the country’s GDP.

Gold dealers 
Gold is one of Uganda’s leading exports but according to statistics from the central bank, the mineral is only contributing about 44 per cent of the total export earnings.

It’s upon this backdrop that minister Lugoloobi in his budget speech, imposed an export levy of 5 per cent and 10 per cent on processes and unprocessed gold and other minerals respectively.
Plastic manufactures, dealers.

Plastic manufacturers, traders, and users/buyers, will starting today, spend more on the same as government in its 2021/2022 budget said it will broaden the scope of taxation on all plastics.
Landlords, tenants to pay.

With the introduction of the reform tax on rental income, landlords will have no way of evading remission of taxes to government as has been in the past. Property owners and tenants will pay  25 per cent rental income tax, effective today.

The introduced rental tax is aimed at removing the incentives for non-individual rental tax payers to claim unrestricted deductions which were significantly reducing tax contribution.

As it is with other taxes, it is usually the final tax consumer, who in this case is the tenant, who will mainly bear this tax burden.
The new tax aims at ensuring that landlords don’t offset expenses from the loss-making buildings or buildings under construction against income of already existing buildings thereby, paying little or no rental taxes to government as it has been in the past.

Other new tax policy reforms include; Reduced rates of depreciation for some classes of assets, discontinuation of the concurrent deduction of initial allowances and depreciation in the first year of use of qualifying assets and review of the capital gains tax regime by allowing for the effect of inflation and providing tax relief for venture capital investments.

Water &sanitation
Under access to safe water and sanitation, government has provided Shs124.9b for improving rural water supply and Shs523.4b for improving urban water supply aimed at the wellbeing of dwellers.
This is part of government’s mission of 2025 of increasing supply of safe water coverage, targeting 81 per cent in rural areas and 100 per cent in urban areas.

Other policies  government intends to implement

Education sector
Being the second year of Covid-19 pandemic, government says transforming the education sector is of paramount importance. This will be through improving learning outcomes by adopting e-learning methods and digitising inspection and supervision.
Further, government plans to recruit 4,200 primary school teachers to raise the national staffing level to 70 per cent.
In addition, 1,055 secondary teachers will be recruited in local governments with staffing level below 50 per cent of the establishment.

Likewise, to improve supervision, government plans to recruit 440 inspectors across all local governments.