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Where is the demand boost in 2020/21 Budget?
Import duty. A worker on a farm. While presenting the National Budget last week, Finance Minister Matia Kasaija among the measures, slapped a 60 per cent import duty on agricultural products. PHOTO BY RACHEL MABALA
What you need to know:
- While currently under scrutiny by Parliament over reading alternating figures as opposed to what was passed, Uganda’s Budget was read last week. But economists note that the Budget needed to devise means to increase purchasing power amongst the masses.
A cross section of professionals believe that the 2020/21 Budget leaned more towards boosting agricultural and industrial production while neglecting purchasing power of the people in the country.
Speaking during a post budget webinar organised by Ernst and Young (E&Y), Dr Fred Muhumuza, economics lecturer at Makerere University noted that the Budget needed to devise means to increase purchasing power amongst the masses.
“We also need to be targeting the demand side because anyone who is producing will be targeting a market. So unless we send a signal on the market side, it will also be difficult for the producers to respond and benefit from the measures they have been promised,” he said.
While currently under scrutiny by Parliament over reading alternating figures as opposed to what was passed, Uganda’s Budget was read last week by Finance minister Matia Kasaija.
It highlighted some measures aimed at revitalising the business environment.
For example; capitalising Uganda Development Bank to enable businesses access cheap loans as well as paying arrears to government suppliers to increase business liquidity among others.
Tax measures
There were also tax measures such as increased import duty on agricultural imports to 60 per cent, up from 25 per cent.
Taxes on imported tiles were also increased to 35 per cent, up from 25 per cent to increase appetite for the locally manufactured ones from Kapeeka.
However, while the moves were welcomed, there is a noted mismatch in regards to ensuring the public has the purchasing power.
Government committed Shs107b to roll out the social assistance grant to elders above 80 years and those above 65 in 15 select districts for the pilot phase.
Shs130b was committed to expanding public works with the aim of creating jobs for the vulnerable yet able bodied persons affected by Covid-19.
But the brutal reality of a public that has lost their jobs and embraced salary cuts is not expected to purchase products made by the revitalised businesses without support.
Unsupportive tax environment
For instance, Tanzania raised the Pay As You Earn (PAYE) minimum threshold for employment income not liable to tax to TzShs270,000 from TzShs170,000 per month to increase employed workers’ disposable income.
“We feel this is in line with the ongoing pandemic and they feel the lower bracket should not be taxed much,” Mr Hamza Ssali, senior manager tax, E&Y noted.
In Kenya, the tax bracket for people earning rental income was moved up to Kshs15m (Shs525.9m) from Kshs10m.
Kenya, Mr Muhammed Ssempijja, partner tax, E&Y says, also reduced the corporation tax rates and PAYE to 25 per cent from 30 per cent.
Tax deference
Uganda, on the other hand, deferred tax payment to a later date.
Finance Minister Matia Kasaija, while appearing on NTV recently said the measures taken by government are expected to address concerns on purchasing power.
“When I talked about removal of taxes or reducing taxes, when I talked of giving money to people to go and produce... when I said income tax is frozen for this kind of period, we believe that money will circulate in the community and increase their purchasing capacity,” he said.
Uganda currently might not afford to amend tax rates since the finance ministry in the Shs45.5 trillion budget set a higher target for the taxman.
Tax collection target
Uganda Revenue Authority is, in the next financial year starting July 1, expected to raise Shs21.8 trillion in taxes.
Ministry of Finance is currently reviewing the budget to cater for the impact of Covid-19.
