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Budget Reading: Government presents yet another tax-heavy budget

January 19, 2022      

Finance Minister Maria Kiwanuka yesterday obeyed predictions and delivered yet another “tax-heavy budget” she pigeon-holed as “special” but roundly criticised by policy makers as a “recipe for disaster” for balancing the books on the backs of the poor.

In order to be able to finance 81.8 per cent of Shs15.4 trillion in the 2014/15 Financial Year, the country’s biggest budget ever, Ms Kiwanuka in her fourth Budget announced a cocktail of taxes which the President said, will help in the modernisation of the country.

The minister increased taxes on petrol, diesel; paraffin, salt, sugar, processed milk, computers, new printing services for educational materials; tools for agriculture; seeds, fertilisers, pesticides and hoes.

If Parliament approves the proposed tax measures, Ugandans especially in the villages where there is no or limited power; to buy a litre of kerosene which is currently costing about Shs3,000; will be compelled to fork out an additional Shs200.
To buy a kilogramme of sugar, currently at about Shs2,500 in Kampala, consumers will be forced to pay an additional Shs25. This measure is intended to generate an additional Shs7billion.

The motorists in the country will also be forced to pay an additional Shs50 in Excise duty on each litre for petrol and diesel. However, lawmakers and analysts have warned the increase in fuel taxes is likely to surge the cost of transport and will further hike the cost of doing business in the country.

The minister also announced new taxes on sports betting and slapped a 10 per cent Excise duty on Mobile Money withdraw fees. She also proposed to introduce Excise duty of 10 per cent on bank charges and money transfer fees to generate an additional Shs22 billion.

Under the income tax, the minister terminated exemption on income derived from educational institutions, proposed to terminate initial allowance on eligible property in order to widen the tax base and increased the presumptive tax threshold from one per cent to three per cent to raise Shs8 billion.

The 2014/15 budget is believed to have been derived from tough decisions as President Museveni’s government seeks to convince Ugandans that there are no easy solutions to a deepening cash crisis worsened by an aid freeze resulting from corruption at the Office of the Prime Minister and the enactment of Anti-Homosexuality legislation, early this year.
Not getting easier
The minister admitted that although this is her fourth year budget, “every year, it’s not getting any easier”. For instance she said in the 2013/14 budget, URA has a provisional shortfall of Shs.475 billion against a target of Shs8.5 trillion.

In the 2014/15 budget, URA is expected to collect Shs9.5 trillion and the donors will finance 18.2 per cent of the budget. However, the minister said the public debt is projected to increase from $6.4 billion in 2013/14 financial year to $7 billion.

“Government will take corrective measures to improve revenue performance. This will include strengthening tax revenue administration, the vigorous collection of uncollected taxes, and new tax revenue enhancement measures,” the minister said.

However, Ms Kiwanuka’s 2014/15 budget was not all about gloom. The minister announced that teachers and other public servants will share Shs450 billion the NRM government earmarked for salaries enhancement in 2014/15 budget.
Under the education sector, the minister allocated Shs1.6trillion to the sector in the next financial year to enhance the quality of education. She assured the teachers who have been craving for a pay raise that priorities to be implemented include the enhancement of teachers’ salaries, with emphasis on primary school teachers. Shs215b has been allocated for this purpose.

In trying to fix the economy and create jobs especially for the unemployed youth in the country, the minister allocated Shs2.5billion to Works and Transport and an additional Shs75b to fix the urban and community access roads. More than Shs1.6trillion has been allocated to the energy sector and Shs1.5trillion to security sector.

Ms Kiwanuka said this year’s budget will focus on enhancing the business environment for already existing farms and SMEs in rural areas, and encourage productivity for existing key crops under the agriculture sector. More than Shs400 billion in addition will be injected in the sector.

Support for agriculture
The Finance minister said government will support interventions in the agriculture sector focusing on provision of inputs; minimising expenditure on administrative costs, seminars and workshops; place resources available for inputs under a single umbrella and leverage them by focusing on graduates; encourage small holders to produce surplus and support to enterprises that provide high returns to farmers. She said for medium and commercial scale farmers, government will support commercial ranching, large scale crop production and value addition.

Speaking after the minister’s budget speech, the President asked MPs to approve the new taxes and asked Ms Kiwanuka and URA chief to stop tax avoidance. The President also ordered the relevant government agencies to stop the ghosts on government payroll as Ms Kiwanuka appealed for concerted efforts saying: “Ghosts reside among us, they are our children, parents, brothers and sisters; we must join hands; it’s not a blame game, it’s a game of redress.”