The Finance ministry Permanent Secretary Ramathan Ggoobi has defended the proposals, arguing that they are intended to make taxpayers’ lives easier and prevent tax distortions. However, several experts and sources have urged Parliament to scrutinize the proposals closely, particularly the proposal for a five percent final withholding tax on the gross proceeds from the disposal of assets. The proposal may affect the cost of doing business in the country and cause a compliance burden to many.
Uganda’s Finance Ministry has proposed a Value Added Tax (Amendment) Bill, 2023 that has divided the nation. The bill seeks to impose capital gains tax on asset purchases, broaden the exceptions to limit interest deduction to microfinance deposit-taking institutions, and impose a final withholding tax of five percent on gross proceeds. Experts have expressed concern about the proposed withholding tax of five percent on the gross proceeds from asset disposal. They argue that it is a tax on wealth and not income and could have significant consequences for ordinary Ugandans. However, the Finance Ministry Permanent Secretary, Ramathan Ggoobi, defended the proposal, saying it is intended to make taxpayers’ lives easier.
The proposed bill would introduce a five percent and 15 percent withholding rate on profits derived from collective investment schemes. Unit trusts are a way for investors to combine their money and invest in various opportunities. The bill seeks to tax the interest or profit earned from such schemes. Critics argue that this proposal will lower public interest in the saving schemes that were previously tax-exempt. However, the Permanent Secretary argues that the proposal is not a new tax but an alignment to ensure that all returns on investment are taxed equally.
Experts have urged Parliament to scrutinize the proposed tax changes carefully, as they could have adverse effects on the economy. They recommend exploring alternative solutions to achieve the same goals with fewer adverse effects. The proposed tax changes could increase the compliance burden on many individuals and businesses, affecting the cost of doing business in the country. The Finance Ministry needs Parliament’s approval before the proposed tax changes can be implemented.
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