MPs push for review of PAYE tax

While launching the Parliamentary Forum on Labour, Decent Employment and Productivity on Tuesday, the Deputy Speaker of Parliament, Mr Thomas Tayebwa, raised concerns about the tax’s effect on workers who are struggling to make ends meet amid the rising cost of living in the country.

“I wonder why in Uganda we have the highest [Paye] rates in the region because when you look at Tanzania, it is capped at 30 percent, the same with Kenya and Rwanda. But in Uganda, it is capped at 40 percent,” Mr Tayebwa said.

The Deputy Speaker told colleagues that “your salary as an MP which people always sing about is Shs11 million, but when you look at our payslip, you remain with Shs6.1 million or Shhs5.5 million”. 
He advised the government to instead concentrate on creating conditions that encourage investment so that more people get jobs, thereby widening the catchment area for the country’s revenue collectors.

“We must see a way that we tax our people, but we leave them with some income to go and do side business. If you take all the money in taxes, then I will forever remain employed,” he said. 

Calculating Paye
The URA tax handbook provides that any employee who earns Shs235,000 or less is exempted from paying Paye.  
Those with salaries exceeding Shs235,000, but not more than Shs335,000 pay 10 percent of the amount by which their income exceeds Shs235,000. And whoever earns more than Shs335,000 but not exceeding Shs410,000 pays Shs10,000 plus 20 percent of the amount by which chargeable income exceeds Shs335,000.

 For employees whose pay exceeds Shs410,000, the breakdown is as follows: (a) Shs25,000 plus 30 percent of the amount by which chargeable income exceeds Shs410,000, and (b); where the chargeable income exceeds Shs10,000,000 an additional 10 percent is charged on the amount by which chargeable income exceeds Shs10,000,000. 

Mr Tayebwa called for a downward review of the tax so that Ugandans who are employed in the formal sector are not overburdened. He also referred to a parliamentary demand for the government to begin explaining its taxation policy effective the 2023/2024 Financial Year.
 “Government must share with us studies it has [carried out] that inform decisions on tax revisions. If you are saying you are going to increase Paye to 40 percent, what informed that? What is the basis of your decision? … This is something we need to look at as Parliament very seriously,” he said.
 
MPs speak out
Mr Roland Ndyomugyeni, who chairs the forum, agreed with the Deputy Speaker saying: “Workers in the formal sector keep suffering yet there’s a lot of tax to be collected from the informal sector. The government goes for the low hanging fruits and leaves out the taxable businessmen in the informal sector”. 

Mr Robert Migadde, who is the deputy chair of the House Committee on National Economy, recalled that he had warned the Finance ministry officials against introducing rental income, which like Paye, targets the already overburdened narrow tax base.

 He said the government should instead encourage more construction, which would solve the problem of the housing crisis and also stimulate trade in building materials, which attract Value Added Tax. 

“In relation to this proposal of Paye, there are not very many Ugandans who earn salaries. Reducing Paye from 40 to 20 percent may affect the economy in the short run, but in the long run will give Ugandans more incomes that they can invest,”Mr Migadde said. 

National female workers’ representative, Ms Agnes Kunihira noted that since tax thresholds were reviewed more than 10 years ago, an urgent evaluation is need in light of the high cost of living. 

“Anybody who earns more than [the threshold] is taxed which is very unfair comparing the cost of the living currently… We are saying this should be raised to Shs500,000 at a minimum,” she said. 
At the Tuesday function, Uganda’s National Organisation of Trade Unions (Notu) told MPs that they had raised this issue many times before, but the government never listened to them. 

“We had also proposed the increase from Shs235,000 to Shs500,000 sometime back and we had tasked our Workers Member of Parliament’, Hon Arinaitwe Rwakajara, to lead the process. By next week, we should be able to put our argument together,” Notu chair Usher Wilson Owere said.
Yesterday, the State Minister of Finance (General Duties), Mr Henry Musasizi, said the push for a review of paye is “is a tax policy issue and we arrive at tax policy issues through studies”. 

“We don’t just announce a policy shift without looking at the implications. So, what they need to do is to present their concerns to us formally. We do studies, and if we find it is feasible, then we can take action,” the minister said, adding: “This is because we have to look at the implications of their concerns on revenue collection. As of now, they have not presented any formal documentation of their issues, but are just presenting their feelings and no engagement has taken place yet”. 

URA spokesperson Ibrahim Bbosa told this newspaper that he would not comment on policy issues, but leave it to the Finance ministry. Mr Bbosa, however, acknowledged that Paye has been the best-performing tax. 
“Maybe this is because government employs more people and they always pay their taxes promptly,” he said.
Mr Bbosa also said the authority is struggling with collections from income tax, VAT, and others.

“For example, look at VAT. This is a consumption tax and the work of those businesses registered to collect this tax is to collect them and pass them to the government, but look at what is happening. Many do not want to pay this tax,” he said.