A government proposal to charge income tax from loss making entities has led to an angry debate in the Finance Committee of Parliament today.
The proposal tabled before the committee last week by the State Minister in charge of planning David Bahati seeks to charge a 0.5% tax on the gross turnover for every year of income in which the taxpayer continues to carry forward the accrued losses after the seventh year.
The MPs on the committee were meeting officials from the Uganda Revenue Authority who argued that the Section 38 of the Income Tax Act provides for capital allowances as an incentive to investors, this allows investors to deduct amounts invested in capital equipment or industrial buildings from taxable income and carry forward the losses.
The tax collectors insist that as companies continue to take advantage of this exemption the country loses revenue.
However the proposal to tax loss making companies has led to an uproar from the budget committee chairperson Amos Lugoloobi who attended the meeting. He argued that the URA has to be strengthened to do thorough audits to ascertain whether the exemptions are genuine instead of taxing losses. He says such a proposal will discourage reinvestment in the country.
His submission attracted a sharp rebuttal from the Kabula county MP James Kakooza who argued that companies could be using the capital allowance incentive to hide profits he said there is no company that can stay in business just to make losses year in year out.
His line of argument riled Lugoloobi who told him off and stated that this is how investment works.