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Gov’t abandons vehicle license fees, raises fuel levy instaed

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Gov’t abandons vehicle license fees, raises fuel levy instaed

Minister Bahati


The Ministry of Finance, Planning and Economic Development has given up on the proposed tax on vehicles and motorcycles and instead transferred the controversial tax to fuel.

State Minister for Planning David Bahati revealed this while appearing before Parliament’s Finance Committee as Parliament plans to embark on debating on the tax proposals next week.

Presenting the new amendments to the Excise Duty Amendment Bill 2021, Bahati acknowledged that implementing the tax proposal on the Vehicle license would not be easy. The ministry instead opted for the common tax on fuel so as to close the revenue gap created by dropping the tax proposal on vehicle license.

In the new amendment, UGX100 will be charged on each liter of diesel and petrol, and Bahati said the increase on fuel prices won’t create a significant impact on transport costs since government has already worked on the roads and they are now in good shape, which implies there won’t much wear and tear of vehicles.

“This increase is not expected to cause a significant increase in pump prices. The impact on transport will also be minimal because of the good infrastructure which reduces on the wear and tear of vehicles and time spent on the roads.”-Bahati

Government had anticipated generating UGX20.5 Billion from vehicle license fees although the tax measure faced protest with MPs arguing it would increase corruption within traffic officers while enforcing the said tax proposal.

“We have adjusted on the license fees after listening to the committee members and also the stakeholders we have replaced the license fees with an indirect tax of a modest UGX100 on fuel per litre to be able to finance the critical expenditures of our budget mainly the vaccines for covid19” Bahati emphasized

Government has also backed off plans to impose USD 0.4 per kilogram on wheat bran, cotton cake, maize bran which was expected to generate UGX20Bn.

Meanwhile the Finance Ministry has also amended the proposal to impose Shs 70,000 on each kilogram of fish maw after complaints that it was unfair, and instead, the Government settled for a 10% charge on each kilogram of fish maw exports.

“On the fish maw, we have made some adjustment from 70,000 per Kilogram to 10% because this will be a fair, equitable and also very easy to monitor and collect”, the minister further noted

There has been a charge of UGX100 slapped on each kilogram of wheat grain expected to generate UGX30 Billion.

According to the ministry this is basically to discourage imports of wheat flour after realizing that in 2019/20 Uganda imported wheat worth UGX600 Billion yet there are substitutes like cassava, millet.

And in a deliberate move to curtail importation of plastic products, a 2.5% tax has been imposed on these products although; this tax will be exempted on manufacturers of plastic products with recycling plants. The proposal that aims at protecting the environment if approved by Parliament would generate UGX20 Billion in taxes.

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