MPs Reject Tax on Digital Services, Allow DPP Salaries to Be Tax Exempt

Parliament has passed the Income Tax (Amendment) bill, 2023 that will see the salaries of staff in the Office of the Directorate of Public Prosecutions (DPP) exempt from taxation.

The reasons presented by the prosecutors were to correct an anomaly that had left them as the only actors in the criminal justice cluster whose employment income is still being taxed.

The prosecutors led by the Director of Public Prosecutions, Jane Frances Abodo  had while appearing before the Finance Committee, reasoned that that the proposal was meant to strengthen her office and avoid losing experienced staff to other related entities like the Judiciary.

Butambala County Member of Parliament and Shadow Finance Minister, Hon. Muwanga Kivumbi however, was opposed to the exemption saying that state prosecutors are public civil servants but are not under the judicial service.

This, he said, would create an unprecedented chain reaction where all institutions which fit the bill will demand similar treatment.
“Exempting any given group of civil servants from paying tax on their employment income creates a non-neutral tax system, erodes the tax base and undermines tax morale. It will open floodgates whereby more people will request similar treatment,” he said.

He added that exempting a section of civil servants would eventually mean exempting all of them.

Kivumbi added that paying tax is a civic duty which should be embraced by all working law-abiding citizens.
“When we do this, we imply that the voiceless with no proximity to power and lack power of legislation should be the ones to pay tax,” he added.

Budadiri County West MP, Hon. Nathan Nandala Mafabi said the exemption of public prosecutors would only make sense if it applied to staff working in the Attorney General’s Chambers.

The Leader of Opposition (LOP), Hon. Mathias Mpuuga said that it would be fair if the House only processed the tax exemption only after the office of the DDP concludes investigations that implicate some of the legislators that are processing the matter.

“For Justice’s sake, one would opine that let the DPP first handle and conclude the files against the accused and then seek this exemption. It defeats all tenets of fairness where the accused are the very people to debate and decide either for or against the person investigating them on graft-related charges,” Mpuuga said.

The legislators rejected a proposal that sought to have a five per cent tax on global entities offering digital services and or products in Uganda.

The Opposition Members opined that the tax needed to be premised on an informed research and clear processes of how it would implemented, if adopted.

Kampala Central Division MP, Hon. Muhammad Nsereko said that the tax lacks clarity in terms of applicability like the ambiguity in the distinction between resident and non-resident digital service providers which could result in double taxation, stifling the growth of the digital economy.
“The Ministry of Finance did not provide us with anything like so; we are just on fishing expedition trying to hunt out for taxes wherever they are with no adequate knowledge. That is why I asked, ‘who has the facts on how many people are having promotive advertisement, using digital platforms. How many know the users of data services?’”

Nsereko added that a lot of work is conducted online supporting forms of remote employment which would be affected by the introduction of digital tax.
“When we are here to legislate on tax, we should make our countrymen aware. What is our projection from what we are imposing on to them…So that we are certain that we are introducing a tax based on facts and statistics,” Nsereko added.

The Minister of State for Finance, Hon. Henry Musasizi said that the tax was specifically targeting the non-resident companies to protect the local players who provide similar services.

The bill that was passed in a House sitting chaired by Speaker Anita Among on Tuesday, 02 May 2023 will also see the imposition of a 15 per cent tax on all monies realized in any stake placed and won by persons indulged in betting.

Moses Kayigwa