In a bid to get the Ugandan economy moving again after nearly three months of lockdown to curb the spread of coronavirus, the government on June 11 presented a budget offering a host of tax waivers and funding for the business community. The plan to boost economic recovery seeks to support the agriculture sector for food security and export, make credit accessible to small businesses, give tax holidays to firms and put money directly into people’s pockets.
Hon. Matia Kasaija, Ministry of Finance, Planning and Economic
“These objectives address the three most critical aspects of Ugandan society namely: The peoples’ welfare, the viability of farms and businesses, and the social eco-system in which they exist,” Mr Kasaija said. This, he said, will also restore household incomes and safeguard jobs by reigniting business activity, providing tax relief to businesses, enhancing economic infrastructure, improving governance and maintain security law and order.
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Here Is What You Need To Know
- According to Finance Minister Matia Kasaija, the country’s Ush45 trillion ($12 billion) budget for the 2020/2021 financial year is aimed at “stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery in the wake of the effects of the coronavirus pandemic.”
- According to a recent report by Makerere University-based Economic Policy Research Centre (EPRC), the lockdown affected mostly the micro-, small- and medium-sized enterprises, a number of which have either ground to a halt or are operating at below 50 per cent capacity. To improve credit and cash flows of these businesses, Mr Kasaija proposed Ush94 billion ($25 million) to be provided through Saccos and micro finance institutions.
- Manufacturing, agribusiness and other private sector firms will see an increase in access to credit at the Uganda Development Bank, which will be recapitalised with Ush1 trillion ($267 million) over the medium term.
“We shall increase funding to Uganda Development Corporation for public-private partnership investments to facilitate our import substitution and export promotion strategy, starting with Ush138 billion ($36.8m),” Mr Kasaija said.
- The government will also push for banks to restructure loans to their borrowers who are facing liquidity constraints and reduce charges on mobile banking and mobile money transactions, “to improve efficiency, reduce person-to person contact to prevent the spread of coronavirus.”
- A total of Ush673 billion ($180 million) has also been earmarked as payment of arrears by government to private sector firms starting next month to address liquidity constraints faced by government suppliers.
TAX RELIEF
- To further address the short-term liquidity requirements of businesses in the tourism, manufacturing, horticulture and floriculture sectors, the government will defer payment of Corporate Income Tax or presumptive tax for tax compliant corporations and SMEs with a turnover of less than Ush500 million ($133 million) per annum with no accumulation of interests and penalties.
- The Pay as You Earn (PAYE) tax will also be deferred until September while interests and penalties on tax arrears accumulated before July 1, will be waived to reduce the tax liability of businesses.
- The minister also said that about Ush120 billion ($32 million) will be refunded as outstanding VAT refunds by the Uganda Revenue Authority. However, controversial taxes like the Over the Top tax levied on social media and the mobile money tax have remained.
- The government is on the other hand encouraging the reduction of mobile money and other digital transactions fees that are charged by mobile network operators and commercial banks in order to limit the use of cash and customer visits to banks.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
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He is also an award-winning writer.