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

By: MUSA MU­GOYA

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.

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.