PricewaterhouseCoopers (PWC) an audit agency has appealed to parliament to reject government’s proposal that seeks to compel landlords and companies with more than one property to declare income from each asset separately.
PricewaterhouseCoopers has appealed to parliament to reject
government’s proposal that seeks to compel landlords and companies with more
than one property to declare income from each asset separately.
Francis Kamulegeya, the PWC Senior Partner told parliament’s
Finance Committee that there was need to avoid introducing administrative
measures that impose huge tax compliance burden on taxpayers and property
investors in the country.
Kamulegeya appeared before the committee chaired by Rubanda East
MP Henry Musasizi together with PWC Senior Manager Trevor Lukanga Bwanika to
respond to new tax proposals formally presented to MPs by State Minister for
Finance in-charge of Planning David Bahati.
Government seeks to collect 860 billion shillings from the different tax
measures in the coming financial year 2019/2020.
The new property proposal that seems to be an attempt by
authorities to catch landlords, who have been hiding behind making losses to
evade taxes, is among a raft of new tax measures in the Income Tax (Amendment)
Bill, 2019. Under this new measure, government envisages to collect 7 billion
shillings.
If approved by parliament, the new proposal will come into effect
on July 1st 2019, the commencement of the new financial year. The current
arrangement is that an individual or company sums up all the monies earned from
rent in different properties. If it doesn’t go above Shillings 2.8 million
threshold after deducting 20 per cent allowable expenses, the property is
exempted from taxes.
For those whose earning is above the threshold, their rental
income is taxed at 20 per cent for individuals and 30 per cent for corporate
companies.
Now government suggests that each property’s income to be filed independently
with PWC remarking that the justification is that ‘’landlords are deducting
expenditure incurred in putting up a new building...’’ thereby paying little or
no tax.
Kamulegeya critiqued the proposal saying it does not deal with the
perceived problem of deducting expenditure incurred when constructing
buildings.
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He added that the proposed tax measure will distort taxation of companies
involved in rental property by forcing them to treat each property as if it is
separate business.
Kamulegeya says that the government proposal increases the cost of compliance
on companies involved in the rental of commercial property and may lead to
arbitrary apportionment of expenses between properties owned by the same
company.
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Kamulegeya asked legislators not to support the tax proposal.
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Bwanika advised that tax policies should be simple saying that the more complex
the tax laws, the greater the costs for government to administer them hence an
increase in the compliance costs of taxpayers which is likely to result into
low revenue collects.