MPs reject proposal to waive  Shs13b in taxes for 7 entities

A proposal to waive a range of taxes for seven businesses met with resistance in Parliament yesterday when it emerged the Finance ministry may have smuggled unapproved companies onto the list.

 The House Committee of Finance ejected officials from the Uganda Revenue Authority and the junior minister of Finance, Mr Henry Musasizi from a meeting when they failed to give a satisfactory explanation for the waivers and the additional, unapproved beneficiaries.

 The committee chair, Mr Amos Kankunda, reminded the minister that Parliament only agreed to exempt taxes for Makerere Business Institute (MBI), Nkumba University, and J2E Investment Corporation Limited.
 “You presented only three entities to Parliament, can you explain to the committee how the list got to seven entities without Parliament’s approval?” Mr Kankunda asked.

 The minister’s team had walked in with an expanded list that included MBI, Nkumba University, J2E Investment Corporation Limited, and Busoga University. 

 Waivers were also sought in respect to VAT and income tax reportedly owed by Mr Donati Kananura and M/S NICONTRA Limited. Mr Peter Lokwang was also included for withholding tax reasons. In total, the tax arrears for which a government tax waiver was sought amounted to Shs13.3 billion.
 Mr Musasizi had told the committee that these were struggling entities, with MBI and Nkumba suffering from the aftereffects of the Covid-19 pandemic, which led to a drastic reduction in student numbers. At Busoga University, the reason given was that the institution is struggling with severe budget constraints.

 “J2E Investment Limited has faced financial challenges that have constrained resumption of works at Kaweweta [Army] Recruits Training School following suspension of construction works… To that end, the contractor is unable to pay the tax liability,” Mr Musasizi said.

Minister’s defence
 Defending the waiver of Shs3.7 billion for Mr Kananura, the minister said, “the taxpayer faced financial hardships occasioned by his medical condition which required expensive treatment abroad.” 
 He told the committee Mr Kananura is more than 80 years old and suffers from acute diabetes, hypertension and prostate enlargement.
 “M/S Nicontra Limited deals in construction services and has been registered since 4/07/1999. The taxpayer faced financial hardships that resulted from high indebtedness due to loans obtained from banks and borrowing from other unsecured lenders,” Mr Musasizi said.

 But the Butambala MP and former shadow minister for finance, Mr Muwanga Kivumbi, wagged his fingers, telling the minister it was wrong to waive taxes for a few selected agencies under unclear circumstances when thousands of local businesses continue to close.

 “Almost all businesses were affected by Covid-19; a number of schools closed, why aren’t we having all these affected businesses on the list? Some of the presented entities have been working for the government and getting paid. We cannot waive VAT and rental taxes because someone is sick,” he said.
 Mr Kivumbi, who is now the chairperson of the House Public Accounts Committee, cautioned that it is economically disingenuous to waive taxes, pointing out that  “Ugandans should know that when we exempt these taxes, ministry of finance is required to pay [on behalf of those who benefit from the waiver]”.

 “By the end of the Financial Year 2022/2023, the ministry had tax arrears of over Shs800 billion which arose from tax waivers,” he said.
 Against this background, the committee resolved that the minister reappears next week with detailed reports justifying the need for tax waivers for the selected agencies. Equally, the legislators asked Mr Musasizi to present the four ‘smuggled’ agencies before House plenary for approval before returning them to the committee for consideration.