Public Finance and Management Act(PFMA) Simplified the Work of the Tax Man.

Published 2 years ago -

The Public Finance and Management bill (PFMA) was passed by parliament on 27th November 2014. The President assented to it on 23rd February 2015 and it gazetted on 6th March 2015. Though the Act was amended even before it could make its first anniversary, the amendments didn’t affect the budgeting process as it remained in its totality in the Principal Act.

The Act consolidated and amended provisions in the Budget Act, 2001, repealed the Public Finance and Accountability Act, 2003 and introduced sections for the management of petroleum revenue. Consequently, affecting the Budget calendar by reducing the budget preparation and approval process from twelve to nine months.

Sec 8 of the PFMA obliges the Minster for Finance, Planning and Economic Development, as part of achieving the objectives of the Charter for Fiscal Responsibility, to present to Parliament tax and revenue bills which give the Government power to obtain money from taxes, fees, charges and other impositions to be proposed in the annual budget. These bills are supposed to be approved together with the annual budget. Since under Section 14 of the PFMA, the consideration and approval of the budget by Parliament is to be done by 31st May

This gives Parliament (the Citizens Representatives) the primary opportunity to have the tax proposals debated, approved or even rejected before the start of a new financial year. Under the Budget Act 2001, the taxes were considered and approved in a quarter of the financial year. This often times affected the operations of the tax collector. It also made it difficult for Parliament to reject some of the taxes because the Executive would fight hard to see them through.

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For instance, in FY2014/15, the Excise Tariff(Amendment) Bill experienced a back-and-forth. Parliament passed the bill on 12th September, 2014 by rejecting the proposal to impose excise duty of Shs 200 per litre on kerosene. This was on account that it will affect the poor who are the main consumers of kerosene.

However, the President did not assent to the bill and referred it back to the House on 30th September 2014. He reasoned that the projected revenue from this tax measure was Ugx 15 billion meant to contribute to rural electrification. The bill was eventually passed on 8th October, 2014 in favour of the President’s proposal.

With the PFMA legislation guiding the annual budget for FY2016/17, Parliament on 14th April 2016, rejected some of the tax bills for the coming financial year. These include; the increased tax of 20% from 15% on second hand clothes. It also rejected Ugx 1000 increment on cement in order to promote the construction industry. This will not affect the tax agency because the budget has not been yet passed.

With this particular process, improvement in tax collection is most likely to be realized. Unlike under the Budget Act of 2001, where tax proposals and allocations were debated well into the start of the financial year which used to disrupt the revenue collection targets because some taxes revenues were rejected, others reduced though new ones could be rarely introduced.




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