Breaking

Private Sector, UMA Oppose Tax on Loss Making Businesses

The Private Sector Foundation Uganda (PSFU) together with Uganda Manufacturers Association (UMA) have opposed a renewed government proposal to tax businesses that have been making losses for seven consecutive years.
Officials from Uganda Manufacturers Association led by the Executive Director Richard Mubiru.

Audio 1

The Private Sector Foundation Uganda (PSFU) and Uganda Manufacturers Association (UMA) have opposed a proposal by the government to tax loss-making businesses.

In their separate presentations to Parliament’s Finance Committee currently scrutinizing the new tax measures presented by government, PSFU and UMA officials demand that the proposal to tax loss-making business should be revoked.

The State Minister of Finance in charge of Planning, David Bahati earlier told the committee chaired by Rubanda East MP Henry Musasizi that government seeks to amend Section 38 of the Income Tax Act by inserting a new subsection requiring a taxpayer who has carried forward assessed losses for a consecutive period of seven years of income to pay a rate of 0.5 percent tax on gross turnover for the period after seven years.

Bahati said the amendment is intended to limit revenue loss that occurs when a business that is making profit takes advantage of an assessed loss to avoid paying revenue for years. He said that the new tax proposal was aimed at dealing with such schemes with the aim of raising 13 billion shillings in the coming financial year 2019/2020.

But Moses Ogwal, the Director Policy Advocacy PSFU told MPs that taxing loss-making companies is against tax principles and will disadvantage genuine loss-making businesses.

“Has Uganda Revenue Authority given up on verifying whether the losses are genuine? Is URA saying those who declare profits are actually declaring genuine profits?” asked Ogwal.

He proposed that the proposed amendment by government is revoked as it is against tax principles and planning. Ogwal said that government should instead strengthen URA to carry out proper audits and license private audit or tax professional firms to support in conducting these tax audits in order to raise capacity of URA.

Richard Mubiru, the Executive Director UMA also said that the proposal should be rejected arguing that businesses must be assessed based on performance as evidenced by financial statements and tax returns.

Mubiru told MPs that government should focus on addressing bottlenecks that impede optimal performance of the private sector rather than hide in simplistic and unsustainable tax innovations.

PricewaterhouseCoopers (PWC) Senior Partner, Francis Kamulegeya, says that taxation has to be stable, predictable, and progressive and designed in a way to encourage investment and economic activity.

Kamulegeya said that if this tax is passed into law, it would be unconstitutional and risks being challenged in law since it are not a tax on income and not a tax on sales but rather on losses.

//Cue in: “let this committee...

Cue out:...an investment destination.”//

 

Images 1

Keywords