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HomeOPINIONS AND COLUMNSFULGENCE SSENDAGALA KAJUBI: 2023/2024 Budget Highlights

FULGENCE SSENDAGALA KAJUBI: 2023/2024 Budget Highlights

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“Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding & Broadening Services, Digital Transformation and Market Access’’

By CPA Fulgence Ssendagala Kajubi

Uganda Revenue Authority has been entrusted with this mandate and the actualization of this through revenue collections. This mandate we need to work together to raise and sustain this mandate. URA starts early engagements in each year through its post budget highlights to make citizens aware of what they have to carry ahead and put on the plate and coffers of the treasury.

It is predicted that in the next five years, Uganda will be able to fund its budget and attain its economic sovereignty. Currently the GPD stands at 13.5% and it is forecasted to reach at 14.6% at the end of the financial year 23/24 indicating an increment of 1.1% Averagely on Sub Sahara Africa the GPD stands at 16%. This creates full confidence in government to work together and do business in unusual way to achieve this target.

In this budget of 23/24, no new taxes increases and tax rates have been introduced and this has been so in the last three years. The goal is to increase and expand on the tax base by making sure that all taxable persons be in individuals and non-individuals are put on the tax register, which can be done through massive digital transformation and applicability.

Make out a number of activities across a bigger sector of the society by doing the following;

  • Strong tax regulation programmes.

Make use of the available data to know who pays which tax and on which activities. Due to Implementation of the technologies and tax, digitalization through EFRIS 1.5 Million taxpayers have been identified in the last financial year and this has never existed before. Carry out inter institutional connections or linkages  like NIRA, KCCA, UMEME, NWSC, NSSF, investment authorities Ministry of land and once all give support, you will e able to identify new tax payers who will be put on the tax register and hence Expansion of the tax base.

  • Sensitization.

Creating massive awareness to the taxpayers to understand their rights and obligations based on the canons of taxation is ideal. Let them be aware that their rights are not abused and tempered with by anybody and have a balance overall equation of taxation. Campaigns like “Mpa e-Receipt Yange” must continue in the public and other benefits like winnings, best taxpayer in all categories must be introduced. Strengthening the Tax Agent work to avoid shred and unqualified tax practioners in the field who make mistakes to the taxpayers and later face huge tax liabilities.

  • Technologies.

To improve services and improve customer experience technologies are needed so that paying taxes, filling as well as keeping records becomes, and enjoyment. From 2009, the online filing system has been working effectively, taxpayers no longer go to their area offices for filing, payments are online and real time. There is and introduction of USSD payment code system now using the Kabiriti Phone by dialing *285# where you can pay your taxes by choosing the right tax type, bank, mobile money extra. Contact person is working 24 hours, there a Wasp line to channel your queries, TINS can be accessed online by putting your NIN, Passport number, Permit, the date of birth the rest is populated, and a TIN is generated in a minute. The technology is to improve on accuracy of assessments, monitor every sale, payment and purchases on local market or imports. This allows the refunds in VAT and WHT fast. EFRIS platforms like system-to-system, EFSTs, Web application USSD, and DTS (digital tracking systems) are in place

  • Full Monetization of Uganda’s Economy through Commercial Agriculture, Industrialization, Expanding & Broadening Services, Digital Transformation and Market Access’’

These can be done by implementing the following;

  • To accelerate by dividing resources, jobs, wealth maximization.
  • Effective implementation of the Parish Development Model
  • Upgrading infrastructure example the standard gauge railway and roads. 6Milliosn USD has been appropriated to renovate and remodel all roads in Metropolitan Kampala in the current budget.
  • Promote the use of Small Solar
  • Build infrastructure of industrial parks. We have a lot of them including Mukono, Namanve, Kapeka have already attracted a good number of Investors
  • Invest in oil and gas and start production
  • Continue to support the public private partnership to access credit example Agriculture credit fund, Small and Medium business recovery fund ( SMBRF) , Emyoga Parish Development Model, Uganda Development Bank for medium and large companies etc.
  • Invest in tourism to market Uganda
  • Continue investments in peace and security

WHAT DOES URA INTEND TO DO?

  • More use of technology 3- Invest in Bonded ware house information systems
  • Create and strengthen better relationships with taxpayers.
  • Limit and eliminate Agency Notice Issuances as its not goods to taxpayers.
  • Emphasize compliant
  • Invest in e commerce -EFRIS
  • Sensitize taxpayers to file right returns and pay right taxes.
  • Over 60 staffs have been allocated to carry out ledger reconciliation. This has been a challenge due to application of different laws
  • Ensure expedite the issuance of Tax credit certificates (TCC)
  • WHT exemptions
  • ADR guidelines and fast tracking and solving of cases.
  • Voluntarily payment of taxes through the voluntarily schemes.
  • Embark of Sharing about financial flows abroad and overseas through the Convention on Mutual Administrative Assistance in Tax Matters (the Convention) is a freestanding multilateral agreement designed to promote international co-operation for a better operation of national tax laws, while respecting the fundamental rights of taxpayers and Article 25 which  establishes a “mutual agreement procedure” (MAP) that  enables the parties to a bilateral treaty to better carry out the interpretation and application of the substantive treaty provisions.
  • In addition URA to redefine its pillars in terms of Values, Integrity and Professionalism which will reduce corruption to zero.

Budget Commentary

The budget for the FY 2023/24 is aimed at achieving the following broad objectives:

  • Completion of key public investments with higher multiplier effects;
  • Enhanced revenue mobilization;
  • Full-scale operationalization of the Parish Development Model (PDM); and
  • Enhanced government efficiency and effectiveness through rationalization of public expenditure, payroll audit, etc.

ESTIMATED INCOME FOR 2023/2024

INCOME
  FY 23/24 (Ugx/Tn) FY 22/23 (Ugx/Tn)
Tax revenue 27.4 23.75
Non Tax revenue 2.3 1.8
Domestic financing 3.68 5.01
Others –Debt Refinance 8.36 8.24
External -project/Budget support 11.03 9.33
TOTAL INCOME 52.72 48.13

The revenue collection target for the fiscal year ending June 2024 represents 14 percentage of GDP. The Public Debt is projected at Ugx 88.9trillion by30th June 2023. This is about 48.2percentage of GDP a drop from 48.6 percentage in FY June2022. About Ugx.16.2Tn is allocated to public debt related obligations

ESTMATED EXPEDNITURES

EXPENSE
FY 23/24 (Ugx/Tn)   FY 22/23 (Ugx/Tn)
Wage 7.29 6.37
Non-wage 14.88 14.26
Interest & refinancing 16.2 12.93
Development-GoU 6.1 7.85
Development-External financing 8.25 6.72
TOTAL EXPENSE 57.72 48.13

 

Budget allocations

Selected allocations FY23/24
ITEMS UGX
Human capital development in terms of Health, Education, Safe water 9.6Tn
Security, governance and rule of law 9.1Tn
Transport infrastructure  4.5Tn
Private Sector Interventions 2.4Tn
SMES in manufacturing/ export  209.3bn
Promotion of Tourism 249bn
Electricity interventions  1.3Tn
Parish Development model  1.1Tn
Skilling youth 60bn
Development of Petroleum  447bn
Science, Innovation and technology 257bn
Digital transformation 192bn

 

Resource Envelope

The resource envelope for the FY 2023/24 is Ushs 52.7 trillion broken down as follows:

Domestic revenues 29,670 56%
Domestic borrowing 3,380 6%
Budget support 2,780 5%
External financing 8,260 16%
Appropriation in Aid 287 1%
Domestic debt refinancing 8,358 16%
Total 52,735 100%

 

UNDERSTANDING THE KEY TAX AMENDMENTS FOR 2023/2024

There are roughly seven Tax Amendment Bills 2023 as below

  1. The Income Tax (Amendment Bill 2023)
  2. The VAT (Amendment Bill 2023)
  • The Excise Duty ( Amendment Bill 2023)
  1. The Tax Procedure code ( Amendment Bill 2023)
  2. The Lotteries and Gaming ( Amendment Bill 2023)
  3. The Traffic and Safety ( Amendment bill 2023)
  • The Convention and Mutual Administrative Assistance in Tax Matters ( Implementation Bill 2023

Below are the Amendments in each bill

Income Tax

  • Unit trusts.

In the new amendments, the definition of a company has been changed to exclude Unit trusts from the definition of a company.

Section 2(n) states that a company means a body of persons corporate or unincorporated whether created or recognized under the law inforce in Uganda or elsewhere and a unit trust but does not include any other trust or partnership. If trusts are removed from the definition of a company, it implies that these units should not be treated as companies and more so on how to treat the returns to the participants as dividends. The justification for the exclusion is that all unit trusts are registered as companies

Removal of Initial Allowance

The bill has removed initial allowances of 50% of the cost of items of eligible property placed into services for the first time outside a radius of 50 KM from Kampala as well as an initial allowance of 20% of the cost of a new building for the first year the building is placed in services. Therefore, Section 27A has been repealed; in effect, taxpayers will not be entitled to this capital deduction. The rationale is to increase revenue for the government.

Interest deductibility under section 25 of the Income tax act.

Section 25(3) has been amended to include Micro Finance Deposit taking and Tier-4 Micro finance Institutions.  There has been exclusion of the interest capping on debts owed by the micro finance and Tier 4. The objective is to level the ground for all deposit taking financial institutions and allow access to finance by Micro, Small and Medium Entropies.

Exempt income of prosecutors

Section 21 has been amended to include employment income in the prosecutor in the office of the Director of Public Prosecutions.

Introduction of 10% WHT on commissions to agent bankers

There has been an introduction of 10% WHT on commissions to agents’ bankers to match with other agents and level the ground.

Value Added Tax

Auctioned goods

Auctioning goods by an auctioneer to be a supply of goods made by the auctioneer. Auctioneer will have an obligation to charge VAT and comply accordingly.  Act has been amended by treating the disposal of goods at auction as a supply of goods made by the auctioneer. The Act further provides that the treatment of the supply of goods by the auctioneer under subsection (3) is separate from the treatment of the supply of the auction services by the auctioneer.

Where the auctioneer deals in goods and or services that attract value added tax, that auctioneer will be required to register for value added tax provided the sales meet the turnover threshold.

The auctioneer will also be required to charge VAT on the auctioned goods, and auction services, remit it to URA and file monthly value added tax. This will enhance the revenue collections

Broadening the definition of Electronic and related services

The Amendment expands the rules for electronic services supplied in Uganda to cover persons outside Uganda who do not have a place of business in Uganda but supply to recipients in Uganda. .Such suppliers under the new provisions may file a VAT Return and pay the VAT in United States Dollars. A supplier from a place of business outside Uganda to a recipient in Uganda including has amended the Act to expand the definition of electronic services to mean services supplied through an online or digital network;

  1. websites, web-hosting or remote maintenance of programs and equipment;
  2. Software and the updating of software;

iii. Images, text, and information;

  1. Access to databases;
  2. music, films, and games; including games of chance;
  3. Political, cultural, artistic, sporting, scientific and other broadcasts, and events; including television;

vii. Advertising platforms;

viii. Streaming platforms and subscription-based services;

  1. cab-hailing services;
  2. cloud storage;
  3. Data ware housing; and

xii. Any other service as the Minister may by statutory instrument determine.

The definition of electronic services has been widened to include advertising platforms; streaming platforms and subscription-based services; cab-hailing services; cloud storage; and data ware housing.

Expansion of the scope of supplies considered to be made in Uganda.

This will include a person carrying on a business in Uganda if the recipient of the supply is not a taxable person or a person who makes a supply with a total annual value in excess of UGX 150 Million or a Government entity that is not registered.

The amendment is that the Persons providing those services will be required to register and account for VAT in Uganda, if the sales from these services meet the turnover threshold. The essence is to widen the Tax base and collect more revenues for the Government.

Cancellation of exemption and amendments to the Second Schedule (VAT Exmept Supplies)

  • Supplies added to the exemption list
  • Animal feeds, premises, concentrates and seed cake.
  • Billets for further value additions in Uganda
  • Supply of liquefied and denatured fuel ethanol
  • Supplies to be removed from the exemption list.
  • Cotton seed cake
  • All production inputs into iron ore smelting into billets

The supply of all production inputs necessary for processing of hides and skins into finished leather products in Uganda and the supply of leather products wholly made in Uganda; The above supplies will not be exempted from VAT and as such suppliers of those items will be required to register and account for VAT on them if they meet the turnover threshold.

Restriction on the Credit for Input Tax and

There has been Expansion the list of taxable supplies for which VAT input credit cannot be utilized to include

  • payment for entertainment made by a taxable person for membership of a person in a club, association, or society of a sporting, social or recreational nature ; or
  • Payments made by a nontaxable person outside Uganda making as supply of services to a nontaxable person in Uganda such as nonresident suppliers of electronic services
  • The Act has also been amended to limit the input credit claimable to that incurred for “business use” or “use in the business” purposes to apply only to the related business, generating a taxable supply.

Provision to file VAT returns and pay tax in United States

  • The Act has been amended to allow a non- resident taxpayer to file VAT returns and pay the resultant tax in United States Dollars.
  • This applies to non-resident persons who supply services to persons who are not registered for VAT in Uganda or where the non-resident’s sales exceed the turnover threshold
  • This implies that a non-resident who supplies services to a person in Uganda not registered for tax or where the non-resident’s sales exceed the turnover threshold will be allowed to account for the VAT in United States Dollars.

Others include.

  • To remove the waiver on interest payable as at 30th June 2027, where the interest exceeds the aggregate of principal
  • To add to the First Schedule of the Vat act Public International organizations EP-RE (PTA Reinsurance Company) these organizations are entitled o certain VAT relief like claiming VAT refunds and services becomes cheaper.

Tax Procedures Code Act

  • Requirement of a Tin to register and an instrument required to pay stamp duty under the stump duty Act 2014. No local Authority, Government institution or regulatory body shall be register for an instrument to pay stamp duty unless the person lodging the instrument has a TIN
  • Waiver of interest and penalty where the taxpayer pays in whole or in part of the principal tax outstanding at 30th June 2023, by 31st December, 2023. Where part of the principal tax is paid, the amount of interest and penalty waived will be on a pro –rata basis.
  • Limitation on the presentation of new information at objections stage or under the Alternative Dispute resolution. Proceedings. Where a taxpayer fails to provide the information requested, that taxpayer should not be allowed to provide that information at objection to a tax decision or during alternative dispute resolution procedure proceedings. This restriction will not apply where the information requested for is more than 3 years from the date the document was authored or beyond the past 3 financial years.
  • Clarification on payment allocation where the taxpayer makes a payment that is less than the total amount of the tax, penal and interest. The amount paid in part will be applied to the principal tax first.
  • Parliament to approve remittance of tax. It will help on decisions that affect the consolidated fund.
  • Introduction of new offences relating to Digital tax stamps and impose high penalties and sentences upon conviction to offences committed. This will enhance compliance

Lotteries and Gaming Bill: Amendment Bill, 2023

Exclusion of winnings derived from gaming from Withholding tax. This implies that a 15% will not apply of payment of winnings from gaming. This will address the compliance challenges and collection has been a problem as taxpayer continue gambling as they win the games. The bill will increase the gaming tax rate from 20% to 305 of the total amount of money staked less the payouts or winnings for the period of filing returns for the gaming activity

Convention on MAA in Tax Matters (implementation Bill), 2023

The Bill domesticates and gives the force of law in Uganda to the Convention on Mutual Administrative Assistance in Tax Matters; and the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information; and the Standard for Automatic Exchange of Financial Account Information in Tax Matters.

The Traffic and Road Safety (Amendment) Bill, 2023

  • Introduction of acceptable speed limit and provision of a fine upon conviction.
  • Requirement of a professional driving permit (not a badge of recognition for drivers of persons who wish to provide an online digital platforms for the provision of public service transport to passengers or goods

Customs Amendment for the financial year 2023/2024

The HS code and items are listed in the Amendment Bill.

Excise duty (Amendment) Bill, 2023

  • Introduction of the definition of Fruit Juice.
  • Introduction of the definition of un denatured spirits
  • Introduce the definition of Vegetable Juice
  • Amendment of the second schedule of the Excise Duty act.

The writer is a Certified Tax Advisor & a Member of the institute Certified Public Accountants of Uganda (ICPAU)

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