Members of Parliament have rejected President Museveni’s proposal to have their allowances subjected to income tax.
Parliament, which resumed sittings on Tuesday 15 November 2016, following a month’s recess, reconsidered and approved the Income Tax (Amendment) Bill, 2016 and passed it without approving the President’s proposal.
The 9th Parliament passed the Income Tax (Amendment), 2016 in March this year, but the President returned it to Parliament for reconsideration over Clause 21, which exempted MPs from paying taxes on their allowances, which include mileage, town running and constituency facilitation.
The President said that “The decision of Parliament to grant itself a tax exemption status is not only injurious to the revenue effort but is also not politically and morally correct as small income earners like teachers, nurses and other public employees cannot be expected to pay income tax on their consolidated meager salaries and yet MPs who earn considerably well are exempted.”
The Committee on Finance, which reconsidered the Bill, rejected the argument that MPs do not pay taxes saying in its Report that each Member pays Shs 3.3m per month translating into Shs 40.4m a year from taxes on salary; Shs 16m on gratuity at the end of a twelve year period; while each Member’s committee sitting allowance is also taxed.
The Committee added that the payments of mileage, town running, constituency facilitation and purchase of motor vehicle contributions were not taxed until the court ruling in January 2016; where, following Francis Byamugisha vs Attorney General, the Parliamentary Commission and Uganda Revenue Authority, court ruled that all emoluments paid to MPs are subject to tax under the provisions of the Income Tax.
The Committee on Finance however said that “These funds are meant to facilitate Members of Parliament to perform their legislative duties and are duty facilitation, which is protected under the Income Tax Act.”
“While computing pension and gratuity, the duty facilitation allowances are not included. Pension and gratuity are only computed on income earned,” reads the Committee Report, adding that “Therefore, the duty facilitation allowances are not income and cannot be taxed under the Income Tax Act.”
The Committee recommended that the Bill be passed in its current form and returned to the President for assent. The Income Tax (Amendment) Bill, which was passed at the Third Reading will now be returned to the President for his assent.