Gov’t drops proposed tax on vehicles, adopts shs100 increment on Fuel

PARLIAMENT: The government has scrapped the proposal Shs 200,000 annual license on vehicles, and instead introduced Shs 100 tax per litre of fuel starting next financial year.

The Finance minister in charge of planning David Bahati revealed this was appearing before the parliamentary finance committee chaired by Henry Musasizi.

The government had also proposed Shs 50,000 annual license fee for motorbikes under Traffic and Road Safety Amendment Bill 2021.

According to Bahati, although government has critical expenditure pressures, it is constrained to generate resources through borrowing, yet government needs to maintain the current levels of revenue generated.

He says that it is in this regard that they have opted to compensate for the loss of revenue earlier projected from the proposals on motor vehicle and motorbike annual licensing of Shs 200,000 and Shs 50,000 respectively by putting a modest increase on excise duty by Shs 100 per litre on diesel and petrol. 

This measure is expected to generate Shs 196 billion. He says this proposal is based on the decision of the committee not to impose another direct tax on the ownership of motor vehicles to avoid compliance and challenges.   

“The increase is not expected to cause significant increase in pump prices. We estimate that an increase of Shs 100 per litre in excise duty will increase pump prices by Shs 100 assuming the entire increase in duty is passed on to the consumer and the exchange rate and international fuel prices remain constant,” Bahati told the committee.  

He says the annual licence proposal could return at a time when government is prepared. He adds that the impact on transport will also be minimal because of the good infrastructure which reduces on the wear and tear of vehicles and time spent on the road.

Bahati however stated that the proposed fees to be introduced by the regulation, at registration on importation of motor vehicles of Shs 300,000 and motorcycles of Shs 50,000 which are a one-off remain.

Ilukor Charles, the Kumi County MP questioned why government was introducing more tax on fuel yet fuel is already expensive. Petrol currently retails on average at Shs 3,991 per litre while diesel trades at Shs 3,667. 

Another proposal withdrawn is the proposed levy of $0.4 or Shs 1,440 per kilogram on wheat bran, cotton cake, maize bran or any other by-products of the milling industry, which was expected to generate Shs 20 billion.  

The ministry has also replaced the flat Shs 70,000 export levy per kilogram of fish maws exported instead introducing a 10% charge on the value of fish maws exported out of Uganda. This proposal is expected to generate Shs 10 billion initially.