Parliament passes tax on fuel and internet, drops OTT tax

Parliament has today passed a 12% tax on internet data with an exemption on data meant for medical and education services. The new tax proposals also repealed the daily 200 shillings Over the Top (OTT).

Kampala Central MP Muhammad Nsereko rejected the internet tax saying it does not help for a country whose internet costs are already high.

He says that Government cannot tell when one is buying data for leisure or educational services.

Jonathan Odur the Erute South MP also asked Government to revise the tax on the internet. He said that it will hurt the economy which is trying to go digital.

Minister of State for Planning David Bahati however countered this by saying that MPs have been asking them to stop borrowing, and that is why they have decided to bring in new taxes.

Motorists will also pay a Shs100 tax increase per litre of petrol and diesel in other new taxes proposed. Parliament, however, rejected a Shs100 tax proposal on wheat.

Government argues that the fuel tax would compensate for the earlier proposed annual road licence fee; Shs200, 000 per motor vehicle and Shs50, 000 per motorcycle, that has since been dropped.

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The fuel tax is expected to fetch an additional Shs196 billion.

All the new taxes take effect on July 1.

The fuel increment will raise the tax on petrol to Shs1, 450 per litre and Shs1, 130 per litre of diesel.

Other Taxes Passed

A tax of 30% or 230 shillings per liter has also been introduced on locally produced other than non-alcoholic beverages not including fruit or vegetable juice, made out of fermented sugary tea solution with a combination of yeast and bacteria.

On plastic Packaging, a tax of 5% or 150 dollars per ton has been imposed while 5% or 100 dollars per ton for Plastic Granules has been imposed.   The MPs rejected the 100 shillings’ tax on wheat grain per kilogram.      

Parliament also passed the Stamp Duty Amendment Bill 2021 which exempts a manufacturer whose investment capital is at least USD 50 Million or, in the case of any other manufacturer, that makes an additional investment equivalent to USD 50 Million from bearing the stamp duty on all transfers.

The house also passed the Tax Procedures Code(Amendment) Bill, 2021 which requires a license to be given to only a person with a tax identification number.

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It also imposes a penalty of 10 million shillings or imprisonment of five years or both for a taxpayer who attempts to acquire or sell the Tax Stamps without goods and also if the taxpayer acquires tax stamps with the authority of the Commissioner.  

Lwemiyaga County MP Theodore Ssekikubo said the levy on fuel was not timely as transport costs were already high. The 100 shillings tax on fuel was however passed.

The house stood over Income tax amendment bill 2021, where Government proposes that landlords earning rental income from more than one rental property account for the income and expenses on each property separately.  

The Finance committee chairperson Henry Musasizi who presented the report on the tax bills rejected this proposal saying it will remove distortions in the rental tax regime which arise from capping the allowable deductions for a year of income of individual rental taxpayers, but allows unlimited deductions for non-individual rental taxpayers. 

Musasizi also recommended that Government considers a review of tax legislation from annually to at least three years.  The committee also called for a study on tax exemptions.  

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