Finance Defends Fuel Tax Increase

State Minister for Finance, Henry Musasizi, has defended the government’s decision to implement increased levy on fuel.

Government  proposes a sh100 additional levy on each liter of fuel, increasing the tax on fuel items such as petrol to 1,550 shillings per liter, diesel and other fuels to 1,230 shillings per liter, and kerosene to sh500 per liter, as outlined in the Excise Duty Amendment Bill 2024.

While appearing before members of Parliament on the Finance Committee, Hon Musasizi cited Uganda’s economic recovery from the COVID-19 pandemic. He explained that it was agreed by Parliament that that Government would increase Excise duty on fuel products by Shs100 per litre every two financial years except the COVID-19 Pandemic period.

Musasizi emphasized that the fuel levy was not only supported by Members of Parliament but was also in line with previous recommendations.

“You may wish to recall that previously, it was agreed with Parliament that Government would increase Excise duty on fuel products by Shs100 per litre every 2 financial years except the COVID-19 Pandemic period. Since the economy has recovered, we think it is time to make the adjustments” he said

Musasizi further pointed out the need for the adjustment considering the depreciation of the Uganda Shilling and the rising fuel prices, which have resulted in a decline in the proportion of tax on fuel price over time.

The Uganda Shilling has depreciated and the price of fuel has increased yet tax has remained the same which implies that the proportion of tax on fuel price has been declining. Therefore, the proposed increase which is equivalent to Shs1.9% average pump price is a modest increase,” said Musasizi

The government anticipates generating an additional revenue of Shs200.92 billion from the fuel tax.

The expansion of excise duty tax to include adhesives, grout, and lime in the FY 2024/2025 is a move, according to Musasizi, aimed to create fairness in the tax regime.

However, some Members of Parliament, such as Hon. Kateshumbwa Dicksons of Sheema Municipality, called on the Minister to focus on measures leading to economic growth rather than imposing more taxes.

The proposals presented by Minister Musasizi before Parliament last week encompass five sets of tax Bills including the Excise Duty Amendment Bill 2024, Stamp Duty Amendment Bill 2024, Income Tax Bill 2024, Value Added Tax Bill 2024, and Tax Procedures Amendments Bill 2024.

The Government proposes to among others impose an excise duty tax rate of Shs500 per 50 Kgs of Cement, adhesives, grout, white cement or lime, in a move that will likely increase prices of these products on the market.

Government has also proposed to impose a 10% or Shs75 per litre whichever is higher, on mineral water, bottled water & other water purposely for drinking.

The government has proposed implementing a 5% withholding tax on profits gained from the sale of various assets, including land in cities and municipalities, rental property, and shares in private companies.

This provision is outlined in clause 3 of the Income Tax Amendment Bill 2024, presented before Parliament by the Ministry of Finance.

Minister Musasizi stated that the government aims to generate UGX 1.9 trillion ($488 million) from these proposed taxes to fund the UGX 58.3 trillion ($15 billion) budget for 2024/25.