CPA Tindyebwa Obed
Member of the Institute of Certified Public Accountants.
2024-25 tax proposals are being considered by Parliament of Uganda. In this article, I will highlight the likely impact of some of the key tax proposals.
Tax Procedures Code bill requires taxpayers to inform the Commissioner in writing, before destroying goods due to; damage, expiry, or obsolescence. Failure renders the related amount non-allowable which can increase tax liability.
Income Tax bill introduces 5% tax on gains from the disposal of non-business assets namely; shares in a private company; land in cities or municipalities, except principal place of residence; and rental property that is subject to rental tax. This proposal reduces the rate of tax on the above shares from the current about 30% and also sheds more light on the treatment of rental property owned by individuals as compared non-individuals like a company (business asset).
VAT bill imposes 18% VAT on the recipient of proceeds of the auction of goods by an auctioneer. This will create a serious challenge to banks and their clients in cases where banks auction collateral security to realise outstanding loan balances. The VAT will significantly reduce the amounts applicable to loan balances to the detriment of clients.
Excise Duty bill increases tax from UGX 1,450 - 1,550 on petrol and from UGX 1,130 to 1,230 on diesel, which may trigger pump price increase beyond the UGX 100 increment. This may lead to increase in prices of commodities due to increased transport charges.
The following important aspects were not included in the tax proposals and should be considered for adoption:
Income tax threshold has been fixed at Ushs 235,000 since 1 July 2012 despite significant changes in economic factors like prices and value of the shilling. Low income earners are brought into the tax net at low income levels stifling their capacity to save, invest and consume. The threshold should be revised to at least Ushs 410,000.
VAT threshold has also been fixed since I July 2014 and should be revised to at least Ushs 500m. The current threshold captures many small traders (taxpayers) that can barely meet the complicated requirements of the VAT system thus increasing their compliance costs as well as URA collection costs. The recent traders strike sparked by EFRIS implementation could have been partly due to above situation.
Tindyebwa Obed FCCA, CPA(U), BA Econ. is a Tax Consultant, email: otindyebwa@gmail.com
