Kigulu North Member of Parliament Edward Baliddawa has faulted government on the proposed re-introduction of the Accommodation VAT Tax in the 2013-2014 Budget Speech made by the Minister of Finance Maria Kiwanuka.
Baliddawa argues that the tax is bound to hurt the tourism industry on which the country’s economy is currently relying for its contribution to Gross Domestic Product (GDP).
The Budget proposed a 18 percent VAT on hotel accommodation and if it is passed by Parliament the cost of hotel accommodation in the country could rise by a corresponding figure.
Baliddawa noted that although Parliament has not yet debated and pronounced its self on the Tax, the Minister of Finance basing on the provisions of Taxes and Duties Provisional Collection Act of 1993 she has already started administering this tax since the new financial year set in on 1st July.
He informed the house of the effects that the impromptu tax collection has caused citing the cancellation of bookings due to the unexpected increase in the pricing of accommodation saying that all booking that were made in advance are to be affected.
He added that contracts that were made with agencies abroad are at risk of termination which he said that Uganda’s tourism sector is going to become even less competitive compared to that of its East African Patterns and consequently jobs will be lost hence increasing the unemployment problem.
During the Budget presentation in the East African community, it was only Uganda and Kenya that proposed the Tax on accommodation but Tanzania rescinded this tax allegedly after reconsidering its potential advance effect on the countries’ tourism sector.
Baliddawa asked government through Deputy Speaker Jacob Oulanyah to rescind the VAT on accommodation in order to make the tourism industry competitive.
He asked government to start investing at least 1% of the total earning from tourism annually in marketing tourism.
The government Chief Whip Justine Lumumba noted that the TAX was proposed and a decision was made by cabinet thereby proposing that the MPs proposal will be discussed in Cabinet and a response made thereafter.
Deputy Speaker Jacob Oulanyah noted that the issue raised by the MP is important since one of the opportunities raised in the Vision 2040 that would achieve the goals outlined in the Vision was the investment in tourism.
MP Henry Banyenzaki said that the VAT is a budget issue and taxation matter and that the Budget Act is clear on the procedures of the budget saying that parliament should follow the right procedure of waiting for the tabling of the budget before it’s debated in bites.
Speaker Oulanyah said that this was an urgent issue that was brought his attention by MP Balidawa since the Minister of Finance had already imposed the tax when the new financial year set in and that the taxes are already affecting the people thereby ruling that it was procedurally right for the matter to be debated in parliament even before the budget is formally tabled and debated.