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S/N
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Tax Proposal
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Implication
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ICPAU’s Comment
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1.
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Tax on income resulting from the sale of a non-business asset
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- For every sale of a personal asset (not business-related, such as land or a family home), the income from that sale will be taxed at a rate of 6% (will be withheld by the purchaser at the time of sale. The seller will receive less by the amount withheld).
- This will punish ordinary citizens because people sell off their personal properties for emergencies like paying medical bills, school fees, or in the case of relocation. This should not be taxed because non-business assets are not used in the generation of income, and therefore, their disposal has no profit motive.
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ICPAU proposed that the proposal be dropped and the status quo be maintained (currently exempt).
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2.
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Revised PAYE thresholds - Proposal to raise the lower band for resident individuals to UGX 4,020,000, introduce a 25% middle band, and retain the 30% rate structure with the additional 10% on income above UGX 120,000,000.
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- This one has been designed to offer some relief on employment income for the lower-income earners. The tax-free threshold is set to increase to UGX 4,020,000 (UGX 335,000 per month). This means that everything above 335,000 gets into the tax net.
- The proposed threshold of UGX 335,000 is still too low to create a real impact in the economy. This change, when analysed, does not go far enough to effectively impact the disposable.
- A heavy contribution for the higher band (those earning above UGX 120,000,000 per annum) has been maintained at 40%. The 40% income tax rate impedes the ability of the highest-earning category to save more and drive local entrepreneurship, which would enhance economic activity.
- In comparison with the member states in the East African Community, Uganda not only has the highest rates in the region, but also Uganda's higher rates kick in at lower incomes compared to the region. This makes it uncompetitive as a location for many regional head offices and projects. In the long term, high taxes impede efforts to increase the tax base.
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ICPAU proposed:
- To raise the lower band instead to UGX 4,920,000 (410,000 per month).
- To also consider raising the upper band to UGX 216,000,000 (18,000,000 per month) because it would be unfair to adjust the lower band and leave the upper band untouched.
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3.
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Excise duty
The bill proposes revised rates for, among others, petrol, diesel & sugar. Among the proposed figures are UGX 1,750 per litre for petrol, UGX 1,430 for diesel, and UGX 300 per kg for sugar.
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- We will likely see immediate price effects across the market because excise changes move quickly into consumer and business pricing. The fact that higher fuel duties feed into transport and supply chain costs. When fuel becomes more expensive, the cost of moving people and goods goes up immediately, and the pain will spread.
- Transport fares will go up, and food will become more expensive since they charge more to transport the food. The market vendor then sells it to you at a higher price.
- Everyday Goods will cost more since Items like sugar are inputs for some sectors, manufacturers use diesel as an alternative energy source, e.t.c, all this affects households
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ICPAU proposed:
- The government should consider capping increases in excise duty on fuel to cater only to inflation levels in the country, and therefore apply an inflationary increase of shs 50 per litre annually.
- A phased increase in the excise duty on sugar of UGX 300 per kilo, over at least three years.
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4.
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VAT
The bill seeks to increase the VAT registration threshold from 150 million shillings to 250 million shillings.
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- The higher VAT registration threshold is likely to be welcomed by smaller businesses because it removes some businesses from the full burden of VAT registration and ongoing compliance.
- Many small businesses will no longer be required to register for VAT unless they reach 250 million annual sales. This will make businesses free from the costly and complex administrative requirements, such as filing monthly returns and issuing Electronic Fiscal Receipts & Invoices (EFRIS).
- Lower Operational Costs, staying below the VAT threshold, will mean businesses will not need to invest in expensive EFRIS-compliant gadgets. This lowers their cost base.
- Improved Cash Flow, Non-VAT registered businesses will not have to collect 18% VAT from their customers and remit it to the Uganda Revenue Authority (URA). This will allow them to keep more of their working capital for day-to-day operations
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ICPAU welcomes the proposal.
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5.
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Withholding tax on betting or gaming winnings
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- The gaming sector has also been considered in the new tax proposals, with a proposed 15% withholding tax on winnings from betting and gaming activities.
- The tax will be applied on net winnings, defined as the amount received less the stake placed.
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ICPAU welcomed the proposal and further proposed that the rate be increased to 35%. This will generate a fair share of revenues that would otherwise have been misdeployed.
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6.
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Withholding tax on a public entertainer
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- The payments made to public entertainers will attract a 6% withholding tax under the proposed amendments.
- The amendment is targeting an emerging and previously undertaxed sector, with growing economic activity among creatives and individuals earning income outside traditional employment
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ICPAU welcomed the proposal and further proposed that the rate be increased to 15% of the gross payment. This will not only aid in revenue generation but also help in formalising taxation within the entertainment sector.
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7.
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Stamp duty
The bill seeks to revise the stamp duty payable on transfers from 1.5 to 3% of the total value.
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This is a significant commercial issue as the increase in duty on transfers to 3% raises the cost of transfer transactions, especially in property and asset-related dealings. The increased cost could push people away from the formal system and towards informal transactions. This means deals will happen without a formal title transfer, which will lead to:
- Under-declaration, buyers and sellers might agree to declare a lower sale price to reduce the tax owed.
- Loss of Government Revenue. Ironically, while the policy is intended to raise revenue, it could end up reducing it, as more transactions will go unrecorded.
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ICPAU proposed that the 1.5% stamp duty rate should be maintained.
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