Experts poke holes in new tax proposals

Financial and tax experts have warned that government’s proposed new taxes may easily be legally challenged since they are unfair and discriminative.

They also said that the reasons given for banning importation of second hand cars are satisfactory.

Francis Kamulegeya, Director of Accounting and Audit at Pricewaterhouse Coopers (PwC) told the Parliamnetary committee on Finance that the tax proposals are only aimed at exploiting the public.

Kamulegeya appeared before the committee on Monday with a team of auditors from PwC to present their views on the proposed tax amendments ahead of the reading of the 2018/2019 National Budget.

Kamulegeya for instance said that taxing mobile money transactions is them is discriminative, unfair and breaks all rules of taxation.

He said, the Shs 115bn that government anticipates to collect in taxes on mobile money is untenable since figures from Bank of Uganda indicate that Shs 54 trillion was transacted in 2017.

He said that if Government’s objective is to take 1% out of Shs 54Trn, as value of transactions of mobile money transactions, then this puts the figure to be collected at potentially Shs 540bn.

In the Tax Amendments Bill tabled in Parliament by the State Minister for Planning David Bahati, government is introducing a 1% excise duty on mobile money transactions which is expected to fetch Shs 115bn.

Kamulegeya also argued that the proposed tax will impose a very heavy burden on Ugandans and that is why the projection of the amount to be collected is being understated as Shs 115bn yet in reality it will be over Shs 500bn.

He criticised the move saying it is wrong for government to simply impose a tax just because money is moving from one place to another noting that an economy is grown by encouraging economic activity and by encouraging people to transact.

He said that this particular tax is destructive to the economy like Uganda’s where efforts are being made to encourage financial inclusion.

“You grow an economy by discouraging putting the money under the mattress, in pots or wherever, but to be in a feasible monetary economy and increased velocity,” Kamulegeya told the MPs.

“You want money to move as fast and quickly, whenever it is moving, it is adding value, wealth and income,” he added.

He warned that if government is going to tax the same money simply because it is moving, then the state is actually taking away from the economy.

“The 1% tax violates all the principles of taxation in the sense that; it is not fair as it applies on the same money so many times. It isn’t equitable as it applies on every one regardless of their ability to pay. It is discriminative since it applies only on mobile money transactions and not on bank transactions,” Kamulegeya said.

“It may sound like a windfall tax to collect, but it breaks all rules relating to taxation,” he added.
He further argued that the tax to be levied on mobile money transactions has already been subjected to tax when it was earned as Pay As You Earn (PAYE) or corporation tax paid by businesses.

Kamulegeya warned Parliament against passing the tax proposal on Mobile money saying it risks being challenged in courts of law.

“It is a wrong tax, discriminatory and without being a prophet of doom, I think there will be potential possibility of challenging its constitutionality,” Kamulegeya said.

According to Price Waterhouse Coopers, data available from telecom companies shows that Uganda has 24 million users of the mobile money facility.