JOSHUA KATO: The Implications of Tax Amendments in Uganda’s 2024/2025 National Budget

The 2024/2025 Uganda national budget, unveiled, charts a path toward significant fiscal and economic reforms aimed at strengthening the nation’s economic foundation. The total resource envelope stands at Shillings 72.136 trillion, with a robust emphasis on domestic revenue mobilization, strategic borrowing, and prudent expenditure. Key among the reforms are several tax amendments designed to increase revenue while fostering economic growth. This article explores these tax changes and their broader implications for Uganda’s economy, businesses, and citizens.

Revenue and Expenditure Breakdown

Revenue Sources:

1. Domestic Revenues: Shs 31.982 trillion (tax revenue: Shs 29.366 trillion; non-tax revenue: Shs 2.616 trillion)
2. Budget Support: Shs 1.394 trillion
3. Domestic Borrowing: Shs 8.968 trillion
4. Treasury Bonds: Shs 7.779 trillion (for settling government obligations to the Bank of Uganda)
5. Domestic Refinancing: Shs 12.022 trillion (maturing domestic debt)
6. Petroleum Fund Drawdown: Shs 115.4 billion
7. Project Support (External Financing): Shs 9.583 trillion
8. Local Government Revenue: Shs 293.9 billion

Expenditure Allocation:

1. Wages and Salaries: Shs 7.926 trillion
2. Non-wage Recurrent Expenditure: Shs 17.454 trillion
3. Development Expenditure (Own Resources): Shs 6.152 trillion
4. External Project Financing: Shs 9.584 trillion
5. Appropriation in Aid: Shs 293.9 billion
6. External Debt Repayment: Shs 3.149 trillion

Tax Amendments and Their Economic Implications

Excise Duty:

1. Powdered Beer: Introduction of excise duty at Shs 1,000 per kilogram.
2. Withdrawals from Other Platforms: 0.5% excise duty on withdrawals from non-bank platforms.
3. Fuel: Increase in excise duty on petrol and diesel by Shs 100 per liter.
4. Imported Wines: Increase from 80% or Shs 8,000 per liter to 100% or Shs 10,000 per liter.
5. Adhesives and Building Materials: New excise duties to align with cement taxation.

Value Added Tax (VAT):

1. E-Mobility: Exemption for electric motorcycles, vehicles manufactured in Uganda, and related charging infrastructure.
2. Employee Benefits: Taxable provision of goods/services by employers to employees.

Income Tax:

1. Private Equity and Venture Capital: Exemption of capital gains tax on sales regulated by the Capital Markets Authority.
2. Electric Vehicle Industry: Tax holidays for manufacturers and fabricators of electric vehicles and charging equipment.
3. Medical Facilities: Tax holidays for developers and operators of medical facilities.
4. Arrears Waiver: Extension of penalties and interest waiver on arrears outstanding by June 2023.
5. Withholding Tax: 10% on commissions paid to banking agents and fintech agents.

Tax Administration:

1. URA Presence: Expansion with 5 new liaison offices.
2. Technology Integration: Enhanced use of Electronic Fiscal Receipting and Invoicing System (EFRIS) and Digital Tax Stamps (DTS).
3. International Cooperation: Strengthened information exchange with other tax authorities.
4. Enforcement: Improved compliance and enforcement measures.

Preparing for the Fiscal Year 2024/2025: Strategies for Ugandans and Businesses

For Individuals:

1. Budget Management: With increased excise duties on essentials like fuel, individuals should anticipate higher costs of goods and services and plan their budgets accordingly.
2. Investing in Green Energy: The VAT exemption on electric vehicles and related infrastructure presents a good opportunity for individuals to invest in sustainable transport solutions, potentially reducing long-term costs.
3. Compliance and Record Keeping: Staying compliant with the new tax regulations, especially for self-employed individuals and small business owners, will be crucial to avoid penalties and benefit from possible tax waivers.

For Businesses:

1. Cost Adjustments: Businesses should prepare for higher operational costs due to increased fuel excise duties and new taxes on building materials. Strategic cost management and operational efficiency will be key.
2. Green Initiatives: Companies in the transport sector can benefit from the VAT exemption on electric vehicles, which can lower operational costs and align with global sustainability trends.
3. Investment Opportunities: The tax incentives for private equity and venture capital funds provide a favorable environment for investment. Businesses should explore partnerships with these funds to attract capital and drive growth.
4. Healthcare and Technology Sectors: Businesses in the medical and electric vehicle manufacturing sectors can leverage the tax holidays to expand and innovate, contributing to economic growth and job creation.

Economic Preparations and Balance:

1. Diversification and Innovation: Businesses should focus on diversifying their products and services and embracing innovation to stay competitive and absorb the impact of new tax regulations.
2. Financial Planning: Both individuals and businesses should adopt sound financial planning practices, including saving and investing wisely, to navigate the economic changes.
3. Policy Advocacy: Engaging with policymakers through industry associations to advocate for favorable regulations and support measures can help mitigate the adverse effects of tax changes.

In summary, the 2024/2025 Uganda national budget reflects a comprehensive approach to fiscal policy, aiming to boost revenue while fostering economic growth and sustainability. The tax amendments, though modest, are poised to have significant implications for various sectors of the economy. By understanding and adapting to these changes, individuals and businesses can better position themselves for the year ahead, contributing to Uganda’s economic resilience and development.

The writer is a Chartered Tax Advisor and Accountant