Government will lose over 145 billion shillings in an attempt to exempt several entities from paying tax in bid to enhance economic development.
The revenue enhancement measures for financial year 2017/2018, by the Ministry of Finance, Planning and Economic Development, will ensure some gains in terms of revenue but also losses.
For granting a tax holiday to Bujagali Hydro power project up to 2033, as a measure to reduce the cost of power supplied by the project to the national grid, it is estimated that 80 billion shillings will be lost.
Another 33 billion shillings will be lost for reintroducing exemption on capital investments outside a radius of 50 kilometres from Kampala, while seven billion will be lost when the ministry removes import duty on imports of pen-stock pipes for use in the hydroelectricity power project. This move is aimed at incentivising investment in the hydro-power project.
At least seven billion shillings will be lost in exempting Value Added Tax (VAT) on animal feeds and premises, while removal of VAT on crop extension services will cost the country two billion shillings. The move is aimed at lowering the cost of crop extension services. One billion shillings will be lost in exempting irrigation equipment from VAT.
Tour operators may be exempted from taxes and this will cost the country four billion shillings, while removal of VAT on solar batteries and lanterns will cost government two billion shillings.
Removal of excise duty on confectioneries to reduce smuggling and under-declaration will cost government four billion shillings.
But the government stands to gain 500 billion shillings in the tax enhancement strategy with 197 billion coming from an enhanced revenue for the standard gauge railway, 30 billion as a result of reinstating VAT on wheat grain, and 32 billion on the change of the excise duty regime for beer, wine, spirits and soft drinks among others.
Another 50 billion shillings will also be gained from reinstating the 10 percent import duty on crude palm oil.
