URA to Tax Wealth, Inherited Property

Uganda Revenue Authority (URA) is proposing the imposition of inheritance and excessive wealth taxes as part of its plans to widen the tax base and revive the economy from the effects of the Coronavirus pandemic.

Appearing for the first time before a Parliamentary committee since assuming office two months ago as URA Commissioner General, John Musinguzi Rujoki expressed optimism that taxing the wealthy, will not only add to the national coffers but will also reduce income inequality in the country

“This will help mobilise and reduce income inequality that is bound to increase and impact COVID-19. Wealth taxation would be the possible response to this type of situation because it is least likely to drag on economic recovery and will impose less or no burden on the poor,” Musinguzi told MPs on the Committee on National Economy.

He said that the tax will also address the growing accumulation of wealth into a very small number of hands.

Speaking about his proposed inheritance tax, Musinguzi said, it is another way of taxing wealth, but noted, the potential for avoidance of this tax is very high especially through locating wealth offshore, but it would be feasible to levy presumptive inheritance taxes in the case of people known to be wealthy.

He said that currently, the effects of COVID-19 have been that the economically less well-off persons are suffering and businesses have been generally affected, yet trade in many developing countries is expected to take a nosedive in the second quarter of 2020, due to the unprecedented effects of the coronavirus pandemic.

Musinguzi further told the MPs that due to the slowdown in economic activities as a result of COVID-19, the Authority together with the Ministry of Finance revised the revenue projections to Shs 19.8 trillion compared to the initially projected Shs 21.8 trillion.

According to URA, the COVID-19 pandemic has affected its revenue collections pointing out non-tax revenue collections including appropriation in May 2020, only Shs 9.8 billion was collected against the target of Shs 95.01 billion, hence posting a performance rate of 10.38 percent and a deficit Shs 85.14 billion.

Imports declined by Shs 1.06 trillion from Shs 8.8 trillion realized during the same period in 2018/19 with the most outstanding decline in imports values experienced in April.

Another proposal to raise revenue is a tax on loan interests and the reintroduction of the withholding tax on Agriculture trader’s supplies. This they propose should be a one percent levy on middlemen trading and supplying agricultural products.

URA also proposes a tax policy package for the digital economy looking at the fact that most businesses have now gone online.

Another proposal is to consider a surcharge on transactions through the commodity exchange, adding that Uganda is among the top 10 coffee growers and exporters in the world, but unlike Ethiopia, there is no surcharge on these transactions.