URA says they are prepared to commence the implementation of the measures as soon as His Excellency the President gives his approval.
This was stated Cedric Job Osuret, a planning and policy supervisor at the Uganda Revenue Authority (URA).
Osuret also highlighted that apart from generating additional government revenue for funding state projects, the initiative aims to curb tax evasion.
Under the existing legislation, companies are only required to pay taxes on their profits.
However, Osuret revealed that certain companies, with the assistance of astute tax consultants, exploit a loophole by consistently declaring losses even when they are making substantial profits.
Consequently, the government loses revenue due to this practice.
“Several foreign companies claim to import machinery or borrow money from overseas, then manipulate their loss margins under the pretense of paying interest on those loans within the country,” he explained, particularly noting the prevalence of such practices in the construction and mining sectors.
Osuret further noted that they have identified instances of profit manipulation through a thorough examination of the documents submitted during the tax return filing process.
These revelations were made during a training session on Illicit Financial Flows (IFFs) organized by the Advocates Coalition for Development and Environment (ACODE) in collaboration with the Financial Intelligence Authority (FIA), Uganda Revenue Authority, and Uganda Registration Services Bureau (URSB).
The training aimed to equip journalists with the necessary skills to proficiently report on IFFs.
If President Museveni signs the Bill into law, it will mark the 10th bill to be enacted this year.
According to reports, Uganda has the lowest tax-to-GDP ratio in the East African region, standing at 13.9 percent.
The tax-to-GDP ratio is a metric used to measure a country’s tax revenue relative to its gross domestic product (GDP).
Overview of the Bill:
In recent amendments to the Income Tax Act, the Parliament introduced a tax on companies that report losses for more than seven years, with 50 percent of the carried forward losses now being subject to taxation.
During the parliamentary session on July 11, 2023, lawmakers settled on a compromise of seven years, deviating from the government’s initial proposal to tax losses carried forward for five years.
The tax was imposed through the addition of Section 38(5) (a) to the Income Tax Act.
“Notwithstanding the provisions of this section, a taxpayer who carries forward assessed losses for a period of seven years shall only be allowed a deduction of 50 percent of the carried forward loss at the beginning of the subsequent year of income when determining the taxpayer’s chargeable income in subsequent years of income,” the section reads.
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