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Parliament rejects VAT exemption on wheat, older computers

By Hannah Marion Namukasa

Parliament has passed amendments to the Value Added Tax rejecting a proposal by Kampala Central Member of Parliament, Hon. Muhammad Nsereko to exempt from bread, wheat and five year old computers.

Nsereko said bread, or any other inputs like wheat should be VAT exempt to make it affordable to citizens, who he said are currently grappling with the skyrocketed prices of basic commodities.
“For as long as it [wheat] is declared as an input in the making of bread, let it be exempt,” he said which proposal was rejected by MPs upon being put to vote.

Hon. Martin Muzaale (NRM, Buzaaya County) said the 11th Parliament needs to develop an approach to comprehensively look at the tax laws with the intention to release the pressures on citizens.

He said instead of looking at bread only, it would have been equally good if Parliament varied by way of reduction or outright exemption, VAT on fuel, which he said has an effect on all other basic commodities.

Removing VAT on computers five years older, reasoned MP Nsereko would help families afford the machines which he argued is increasingly becoming the basis of learning in Uganda.

Hon. Fox Odoi Oywelowo (NRM, West Budama North), however, differed.
“A five year old computer is due only for destruction; they are an environmental hazard. Destroying them is expensive and Uganda cannot afford it,” he said.

Speaker of Parliament, Anita Annet Among said it would be better to provide requisite conditions for the assembly of computers in the country instead of encouraging the importation of older computers.
“Are we encouraging this country to be a dumping ground? If we can have Kiira Motors [a vehicle manufacturing and assembly plant], why can’t we instead push for an assembly plant [for computers]?” she said.

Imports used by businesses in exempt supplies have also been slapped with VAT, following the amendment of Section 20(2) of the VAT Act by passing clause 2 of the Bill, which deleted the supplies from categories exempted from the tax.

Oxygen cylinders and oxygen for medical use, assistive devices used by persons with disabilities have been exempted from VAT.

Educational materials including those manufactured in any of the East African Community countries will also be exempt from VAT should President Museveni assent to the VAT Bill passed by Parliament.

Sanitary towels, menstrual cups, tampons and the inputs for the manufacture of sanitary wear have also been relieved from the taxman’s jaws, in passing clause 5 of the Bill.

An amendment by the Vice Chairperson of the Committee on Finance, Planning and Economic Development, Hon. Jane Pacutho to zero rate supply of electricity to consumers was also rejected.
“…the zero-rating of the connection of electricity to new consumers will make power affordable to the end user and also save the environment,” said MP Pacutho, but Finance State Minister, Hon. Henry Musasizi opposed the idea.
“…zero rating is a bad practice; I stand to oppose it because revenue loss will be bigger than the benefit [of zero rating] to the taxpayer,” said Hon Musasizi.

Zero rating is a tax practice that provides for items as taxable under the Value Added Tax but tag a rate of zero to it so that the effect is that the item is actual VAT free.

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