Gov't Renews Proposal to Tax Loss Making Businesses

Officials from the Finance Ministry faced difficulty explaining a proposal by government to tax businesses that have been making losses for seven consecutive years. This same proposal was last year rejected by parliament.

Ministry of Finance officials led by the State Minister of Finance in charge of Planning, David Bahati on Wednesday appeared before the Parliament’s Finance Committee chaired by Rubanda East MP Henry Musasizi to present amendments to tax Bills for the coming financial year 2019/2020.

Bahati proposed an amendment to 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 amendment once approved by parliament shall enhance progress and productivity of the Income Tax regime.

Bahati also argued that Government had noticed that a number of companies were hiding behind the veil of making losses to evade taxes and the new tax proposal was aimed at dealing with such schemes with the aim of raising 13 billion shillings. 

]inance Ministry’s Director Economic Affairs, Moses Kaggwa further explained that the intention of the measure is to put a cap on carrying forward the losses.

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However some MPs said the business community shouldn’t be blamed for Uganda Revenue Authority’s failure to carry out audits of loss making companies and accused Finance Ministry of wasting Parliament’s time by reintroducing a matter that was last year rejected by Parliament when considering the 20118/2019 budget.

Budadiri West MP, Nathan Nandala Mafabi tasked the Minister to explain the name he would give to the tax he is to impose on loss making businesses.

Kachumbala County MP Patrick Isiagi also asked the Ministry of Finance to close down URA if it has failed to conduct audits to establish companies evading taxes.

“Can you tell us that URA has failed in audit because we pay them salaries. Can you assure us that you can’t manage? Some people invest in these businesses and the best you can have is to order them to close. Why am I paying salary of investigators in URA?” asked Isiagi.

Agago Woman MP Franca Akello also questioned the proposed 0.5 tax.

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Bahati said that he was to make another written explanation on the proposed tax on losses by businesses.