MPs go home after striking matchstick on proposed fuel tax

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MPs go home after striking matchstick on proposed fuel tax
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While the committee report recommended rejection of the Shs300, legislators struck the matchstick on the Shs100, too, terming it as "unjustified".

Parliament has been adjourned sine die without conclusion on the excise duty tax that involves fuel increments.

When a legislature adjourns sine die, it has concluded its meeting without setting a day or time to reconvene. For lawmakers, it is "time to go home."

Parliament had considered the value added tax that saw donations subjected to taxes, arguing that if exempted would be abused by employers who donate.

Parliament was engaged in a heated debate on the provisions to increase the taxes of fuel with a Shs300 on kerosene and Shs100 on diesel and petrol.

While the committee report recommended rejection of the Shs300, legislators struck the matchstick on the Shs100, too, terming it as "unjustified".

“Government should not be greedy; you are already overtaxing fuel. Why do you turn it into a soft target for tax increment?" said Ibrahim Ssemuju Nganda (Kira Municipality-FDC).

"A minister whose fuel is bought by the taxpayer must not increase taxes on fuel unnecessarily. May be we should stop fueling all government vehicles for the leaders to understand the pain that citizens go through."

Mr Ssemujju also expressed dismay that despite being fully aware of the adverse effects of escalating oil prices on both production costs and individuals' disposable income, the government continues to burden its citizens with exorbitant taxes on fuel.

“We continue to warn this government that, the consequences are dire: as fuel prices soar, production becomes more costly, hindering economic growth and potentially leading to job losses," he said.

"Moreover, the average Ugandan faces a significant reduction in disposable income, as higher fuel costs trickle down into increased prices for goods and services across the board.

"This scenario not only jeopardizes individuals' financial stability but also undermines consumer confidence and investment, exacerbating economic instability. The more reason why many businesses close every year,” added Ssemujju.

MPs queried how the government would opt to tax kerosene and the other taxes without consideration of jet fuel which they termed unfair.

Parliament unanimously rejected the withholding tax on land arguing this would affect the cost of production.

Parliament has passed into law the Value Added Tax Amendment Bill 2024 and giving the government powers to collect VAT on donated goods or services given by an employer to an employee.

The government had argued that employers had been abusing the provision by using it as an avenue to give free taxable goods to their employees without consideration but claim input credit for the goods supplied, arguing that this was an abuse of the law since URA on the other hand cannot recover output VAT.

The Opposition in the minority report had described such a move as inhumane, saying it would discourage companies from making donations.

The Opposition MPs including Ssemujju, Muwanga Kivumbi (Butambala County) and Hanifah Nabukeera (Mukono Woman) revealed that government is currently collecting Shs1450 per litre of petrol, Shs130 per litre of diesel.

Annually, the government collects Shs1.6 trillion on petrol, Shs1.1 trillion diesel and about Shs3 billion on kerosene and these taxes on both petrol and diesel are the key driver of fuel pump price and that Uganda levies the highest tax on fuel in the region.

The Finance Committee has backed the proposal by government to impose a 0.5 percent excise duty rate the value of the transaction on payment services of withdrawals of cash through agent banking, saying such a move would ensure equal distribution of the tax burden amongst all taxpayers, instead of limiting it to only mobile money users.

The Committee also recommended to Parliament to remove excise duty imposed on incoming international call services of 0.09 cents per minute on calls originating from Tanzania and Burundi.

It said Uganda is already in the One Area Network in which interconnection calls between Uganda, Rwanda and Kenya enjoy lower rates of telephone calls between each other, the proposed amendment will add Tanzania and Burundi into the network within the Ugandan laws.

The Committee has asked Parliament to increase the excise duty levy on fuel from Shs1,450 per litre to Shs1,550 per litre.

The the proposal by government to impose Shs300 per litre on each litre of kerosene has been rejected by the Committee on grounds that such a levy would affect the low income earners in Uganda.

The Committee has rejected the proposal to impose a 75-percent excise duty rate on each liter of mineral water, describing the rate as too high and instead proposed to have the rate lowered to Shs50 in order to encourage investments into the sector.

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