Government had proposed to have the withholding agent who fails to withhold tax to be personally held liable to pay to the Commissioner the amount of tax which has not been withheld, but the withholding agent is entitled to recover this amount from the person.
The Finance Committee of Parliament has rejected the proposal saying that such a move would shift the mandate of Uganda Revenue Authority (URA) to the withholding agent, which is contrary to the provisions of the Value Added Tax Act.
“The proposed provision has the implication of compelling a withholding tax agent to remit 6% of the withheld VAT. As a consequence, this is not accounted for in the VAT input returns. It also has the implication of assuring URA of a minimum of 60/o of any VAT received or withheld by an agent. This is not accounted for in the VAT input returns and disadvantages the supplier. The proposal shifts URA's mandate to the tax payer on account of failure to withhold tax. In addition, all URA registered tax payers are required to issue EFRIS or invoices and this gives URA visibility of transactions by such taxpayers,” added Amos Kakunda the Committee chairperson.
. The Ministry of Finance tried to defend the proposal arguing that currently there is no law compelling a designated withholding tax agent to withhold VAT, therefore this amendment seeks to compel the withholding agents to withhold or face the inconvenience of paying for the taxpayers and pursue a reimbursement.
“Not all tax agents are withholding agents under section 5 of the Act and this makes the ground not leveled. In addition, all VAT registered taxpayers are required to issue EFRIS receipts or invoices and this gives Uganda Revenue Authority visibility of transactions by such tax payers and yet both Uganda Revenue Authority and the tax payers incur administrative costs to implement the VAT withholding regime,” added Hon Kakunda.
Kira Municipality Member of Parliament Hon Ibrahim Ssemujju in his minority report questioned the asserting by Gov’t that the proposed tax measures in Value Added Tax Amendment Bill 2024 would generate Shs74Bn in revenue, arguing that there was no study carried out to back such a claim. “The Minister doesn’t know how much it will cost to collect the new taxes. If he knows, he doesn’t want to tell Parliament as it is required in the law. He without any study concluded that the new measures in this amendment will yield an estimated Shs74Bn. The certificate doesn’t show the overall impact of the new tax proposals on the economy. Moreover, Parliament recommended that in addition, every bill should be accompanied by stand alone evaluation or regulatory impact assessment,” noted Ssemujju.
“There is a general feeling of over taxation with very little to show for it in terms of social services. Roads in Kampala City and Kampala metropolitan districts of Wakiso, Mukono, Mpigi and in other areas of the country have completely broken down. There is a general cry that leaders are swimming in luxury at the expense of taxpayers. The other day, Parliament approved a supplementary budget of Shs1.1Trn including Shs576Bn that was gifted to Mathias Magoola. What do you think citizens felt about this?” remarked Ssemujju Nganda.
