Africa & Middle East
The Minister for Finance and Planning (MoFP) on 8 June 2017, issued to the National Assembly the estimates of government revenue and expenditure for 2017. The government plans to organise and spend TZS 31,712.0 billion in the 2017/18 budget.
The Budget reflects priorities to speed up economic growth to achieve middle-income status, keep back revenue leakage and resource wastage, develop infrastructure, and reform government bureaucracy to boost service delivery. The Budget Bill 2017 has been published, pending tabling before the National Assembly for debate and approval. It is assumed that this Bill will be enacted into law later in the year. It will be effective from 1st of July 2017 as specified in the Bill. The overview of tax proposals contained in Budget 2017 are given below:
- A 5% withholding tax (WHT) on payment made for specified minerals (minerals that a licenced dealer is authorized to deal with) or minerals supplied by a resident person.
- The government has proposed to reduce Corporate Income Tax from 30% to 10% for the first five years from commencement of operations, for new assemblers of
vehicles, tractors and fishing boats.
- The bill provides for a rise in the threshold from TZS 15 million to TZS 30 million to apply for tax relief on non-commercial motor vehicles.
- A zero VAT rate is proposed for ancillary transport services in relation to goods in transit in Tanzania. This will reduce costs of transporting goods through Tanzania and will ultimately make Tanzanian ports more competitive.
- An extension of time to submit VAT returns to the first working day following a weekend or public holiday when the due date falls on a Saturday, Sunday or a public holiday.
- Tax exemption is proposed on machinery and plant used in textile, edible oil, leather and pharmaceutical (including veterinary) industries. It is geared towards promoting investments in small and medium scale industries.
- The Bill also includes some amendments to the Excise (Management and Tariff) Act. A 5% excise duty increase is proposed on specific non-petroleum products, including alcohol, soft drinks and tobacco (except locally produced water, fruit juices and spirits).
- A decrease of excise duty is proposed on locally produced fruit juices and wines.
- An increase in excise duty on petrol, diesel and kerosene by TZS 40 per litre.
- The Minister has proposed an increase of TZS 40 per litre in the excise duty on fuel.
- An increase of 5% or 3,481 per litre in excise duty is proposed for imported spirits.
The Minister of State for Finance and Economic Cooperation presented the draft budget to Parliament on 8 June 2017.
The Council of Ministers proposed to spend 320.8 birrs (USD 13.8 billion), which is a rise of 2.02 billion (16.9%) over the current financial year. Of this total, approximately $ 4.9 billion is allocated to investment spending, while some $ 3.55 billion is scheduled for regular spending.
Over $ 5.08 billion (around 36.6%) is allocated to subsidies to regional states. About 303 million US dollars are made available to implement the goals of sustainable development (SDGs).
The State Secretary said that the draft budget was designed to take into account socio-economic activities and the impact of the continental and global economic situation as well as the promises of the international donors.
After discussion, Parliament referred the draft budget to the committee for budgetary and financial matters for further consideration. It is expected to be approved by the end of June 2017.
Finance minister has presented national budget for 2017/18 to Parliament in April 2017. The budget, which is hoped to deliver Uganda into middle-income status has seen sectors like electricity, oil and gas, ICT, education, health and agriculture receiving substantial funding. Government plans to raise Shs14 trillion, about 48% of its Shs 29 trillion budget, through local revenue collections, and the rest through budget support and borrowing, according to the Budget Framework Paper 2017/18, to boost revenues. Government also plans to increase taxes on sectors like beverages, tobacco, spirits and others.
- As an incentive for businesses to invest upcountry, deductions for accelerated depreciation have been introduced. This will allow recovery of costs of acquiring plant and machinery and construction of industrial buildings much faster before the payment of corporate income tax;
- To improve compliance in rental income, Minister of Finance issues minimum rental charge to estimates of rent based on location and value of properties, as basis for rental tax for non-compliant taxpayers for failing to file a return or filing a deceptive return;
- The income of a body established by an Act of Parliament to regulate the conduct of professionals, such as the Institute of Certified Public Accounts of Uganda and the Uganda Law Society has been exempted;
- Re-instatement of preliminary allowance at 50% and 20% on entitled property and industrial infrastructure respectively outside a 50km radius from Kampala;
- Related party transactions for Transfer Pricing objective prolonged to include employment relationships. Failure to provide records in respect of transfer pricing within 30 days after the request will now be liable to a penal tax equivalent to UGX 50M and 20M;
- Re-introduction of withholding tax at 15% on winnings of sports or pool betting;
- SACCO Income tax exempted for 10 year;
- The Bujagali Energy Limited has been exempted from corporate income tax (for a 5-year period) as part of the effort to reduce the cost of power effective 1 July 2017;
- The income of a Savings and Credit Cooperative Society is exempted to promote savings;
- Introduction of interest rate caps to avoid exceeding the assemblage of the principal and penal tax including waiver of any outstanding interest due and payable as of 30th June 2017.
Energy and mineral development:
To meet the energy needs of Uganda’s population for social and economic development in an environmentally sustainable manner.
- To use the country’s oil and gas resources to contribute to early achievement of poverty eradication and create lasting value to society.
- To develop the mineral sector for it to contribute significantly to sustainable national economic and social growth.
The Education and Sports sector priorities are aimed at enabling the country to offer education as a basic human right with the main goal of equipping learners/students/trainees with relevant knowledge and skills necessary for socioeconomic transformation and development by 2040. UGX 2.4 trillion allocated for Education and Skills Development as the third top priority sector (12% of the budget) representing an increase in percentage of budget spend 12% of budget but a decline in actual funds allocated. The education sector will get roughly Shs 2.47tn, slightly above what it got last year.
Supporting private sector development for export promotion and import substitution:
In order to improve Uganda’s balance of payments position, the private sector will be supported to enhance exports and substitute imports through the following priority interventions:
- Provision of fully serviced sector demarcated industrial and business parks with adequate electricity, water, telecommunications and Lake/Rail and Road access at Luzira, Jinja and Namanve/Bukasa
- Tourism Market Promotion, Tourist Product Development and Tourism Skills capacity development to enable world-class standard service delivery for certified hotel and restaurants
- Promoting value addition by Small and Medium Enterprises (SMEs) through skills training, work space provision and financing SME product start-up kits; and
- Increase efficiency in investment promotions through roll out of the One Stop Centre.
Agriculture, where more than three quarters of the population earns a living, will get at least Shs 863bn, a 4.8% increment compared to FY 2016/2017.
Completing Oil related Infrastructure Development to support the commercialization of Oil and Gas sector with a view to have the first oil out in 2020.
- Infrastructure and oil sector investments predicted to contribute to economic rebound to growth rate of 5.5% in FY 2017/18;
- As for the Oil and Gas sector, 98% of land acquisition for the Oil Refinery has been completed.
During Nigeria’s plenary session on 25th May 2017, the Senate passed the Petroleum Industry Governance Bill (PIGB). The PIGB is only a segment of the original Petroleum Industry Bill (PIB). The bill splits the Nigerian National Petroleum Corporation (NNPC) into two, namely National Petroleum Company (NPC) and the Nigeria Petroleum Assets Management Company (NPAMC).
The draft law proposed the establishment of the Nigeria Petroleum Regulatory Commission (NPRC) to serve as the guide for licensing, monitoring, regulations and standards across the value chain, supervision of petroleum operations enforcing laws. In accordance with the draft law, the companies would absorb the present Department of Petroleum Resources, Petroleum Products, Pricing and Regulatory Agency (PPPRA) and the Petroleum Equalization Fund (PEF).
This Bill seeks to give instructions and institutional framework for the Nigerian Petroleum Industry and create clear separation between, the policy, regulatory and commercial organizations. When enacted, the PIGB will seek to create effective governing institutions with clear and separate roles for the Petroleum industry, establish an outline for the creation of commercially-oriented, profit driven petroleum entities that ensures value addition and internationalization of the petroleum industry, promote transparency and accountability in the administration of petroleum resources in Nigeria, and build a conducive business environment for petroleum industry operations.
The Government of Morocco published the Finance Law 2017 on 12th of June 2017 in the official gazette. The law provides an anti-avoidance rule, a tax relief in case of dividends, interest, and rental income for real estate collective investment undertakings under some conditions, A 3 years VAT postponement for the acquisition of equipment developed for investment projects of at least MAD 100 million according to an investment agreement with the government for both new and remaining corporations, a tax relief extends for five years for profits resulting from export operations to indirect exporters conditioning that exporters do not stayed inside the free zones. Additionally, the conditions for tax exemption in case of rental income are: the only activity of the undertaking is the lease of immovable features used for professional purposes, no less than 85% of the annual rental profits are distributed and the assets added to the undertaking are measured by a certified contributions assessor and kept for at least 10 years. The Finance law 2017 applies from 1st January 2017 and it is available in French language.
The Government on 14th of June 2017, approved the signing by Nigeria of the Multilateral Instrument (MLI) to implement into bilateral tax treaties the tax treaty-related measures arising from the OECD / G20 BEPS Project to tackle base erosion and profit shifting. First signing ceremony held on 7th of June 2017 in Paris. That time, eight countries, including Nigeria formally expressing their intent to sign.
The BEPS recommendations combat tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax being paid. The multilateral instrument will enable countries to adjust their bilateral tax treaties to include BEPS treaty-related recommendations without having to renegotiate each bilateral treaty.
The Finance Ministry of the United Arab Emirates (UAE) on 10th of May 2017 arranged a briefing session in respect of the new Excise Tax Law. Implementation of the UAE Excise Tax Law follows the Gulf Cooperation Council (GCC) Ministers of Finance approval in principle, of a unified agreement, in June 2016. In accordance with agreement, excise duty will be introduced in the UAE by the fourth quarter of 2017. The other GCC Member States also have a plan to implement the excise tax by the end of 2017. The 5 per cent excise tax is to be implemented across the GCC countries by 2018. The UAE government has proposed a 50 per cent excise tax on carbonated drinks, and a 100 per cent tax on energy drinks, tobacco and tobacco products. The importer will need to pay the accurate amount of excise tax to the tax authority before discharging the goods from the designated storage area. The final excise tax law is expected to be published before the end of June.