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.
However, the MPs rejected Bahati’s argument saying the business community shouldn’t be blamed for Uganda Revenue Authority’s failure to carry out audits of loss making companies and accused Bahati of wasting Parliament’s time by reintroducing a matter that was rejected by Parliament last year.
It should be recalled that the same proposal was brought before Parliament and was thrown out by MPs.
Budadiri East MP, Nandala Mafabi tasked the Minister to explain the name he would give to the tax he is to impose on loss making businesses; “What would be the name of the tax that will be collected from businesses making losses?”
Patrick Isiagi (Kachumbala County) also weighed into the matter asking the Ministry of Finance to close down URA if it has failed to conduct audits to establish companies evading taxes.
He said: “Can you tell us that URA has failed in audit because we pay them salary. 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?”
