Government has failed to expand the tax base. Instead, it is imposing more taxes on already overburdened taxpayers.
Government has come up with a string of tax amendments, which have either introduced new taxes or increased the rates at which the current taxes are imposed.
The changes are included in the Tax Procedure Code (Amendment) Bill, 2021, Traffic and Road Safety (Amendment) Bill, 2021, Excise Duty (Amendment) Bill, 2021, Income Tax (Amendment) Bill, 2021, Value Added Tax (Amendment) Bill, 2021, External Trade (Amendment) Bill, 2021, The Stamp Duty (Amendment) Bill, 2021 and The Mining (Amendment) Bill, 2021.
For example, under the Traffic Bill, motor vehicle owners will have to pay an annual fee on or before the January 31 of every year. If the owners fail to pay that fee on time, it will attract a penalty of ten currency points (each currency point is equivalent to Shs 20,000) for all the days defaulted.
There is a belief that no one including the taxman likes to pay tax. That could be true to an extent. But let us be honest. Who milks an in-calf cow before it delivers?
To borrow the logic of herdsmen, when cows deliver, they will not immediately milk away all that is in the udder. Even when the herdsman starts to milk, he must remember to leave enough for the calf to survive on. This does not seem to be the thinking of government.
Every person has a right to organize his tax affairs in such way that he pay minimal tax. The reason behind this is that a tax should not be punitive and one should not work for tax alone. There should be some other motivation such as profits.
It is even worse in Uganda. A taxpayer cannot ask the collector to account, whereas conversely, the latter is given a lot of powers to intrude and investigate the income of the payers! They want to tax every income that persons earn!
There are also no direct rewards expected to be earned by the payers; it is a contribution to the common public good. Under rental income government intends to increase it from 20% to 30%.
That is not all. The bill says if a person who during the year of income, earns rental income from more than one property, he or she has to account for the income and expenditure of each property separately and pay taxes for each property separately. This is likely to distort the tax especially for real estate companies, which run such properties as a business. One of the principles of taxation is fairness.
Fairness in the sense that taxation should be compatible with ability to pay vis-à-vis the person’s and family needs. Tax should not be a deterrent for doing business. True taxes provide income for the government to run its affairs.
Unfortunately, the taxpayer is at the mercy of the tax collector and the latter seems to be given more powers to use all manner of enforcement measures to get the tax. In the Tax Procedures Code (Amendment) Bill, the minister wants parliament to give powers to the URA commissioner general during investigations to arrest, issue interim closures of premises, to record a charge and caution statement or execute a bond with or without security.
This proposal not only defeats principles of natural justice but it can also be unconstitutional. You cannot make one entity to be a judge in it own cause. The severe punitive efforts will discourage business and also encourage tax noncompliance. The taxman should behave like a herdsman who minds the wellbeing of his animals where he harvests the milk.