The 18 percent Value Added Tax on domestic water as announced by the Minister of Finance Maria Kiwanuka, in her budget speech, is no cause for alarm.
John Mayanja Walakira, an Assistant Commissioner at Uganda Revenue Authority, says however that the high prices charged are illegally put up by middlemen.
Mayanja explains that in actual terms a litre of water according to the National Water and Sewerage Corporation costs 1.92 shillings for domestic water. VAT would then cost about 34 cents. For a 20 litre jerrycan the tax component amounts to seven shillings for the cost of 38.4 shillings.
However, water consumers are forced to buy a jerrycan at 150 or 200 shillings which Mayanja says is a burden put on them by the seller and not government.
Civil society organisations faulted government for the 18 percent tax on water with health organisations calling it the Typhoid tax. But Mayanja says with VAT inclusive, domestic water should cost 45 shillings a jerrycan.
Moses Ogwapus, the Acting Assistant Commissioner in the Tax Policy Department at the Ministry of Finance, explains that the overall intention to increase VAT on water is to increase the budget for National Water to enable it extend water services around the country.
This is due to the fact that by 2012, over 10 million Ugandans still lacked access to safe water especially piped tap water. Ogwapus notes that majority of Ugandans use water from boreholes and protected springs who will not be affected by the tax regime.
He adds that to the extent that the ordinary people even in Kampala do not consume tap water, the tax will only affect the rich who use water to wash cars, water lawns and have connected sewage systems among others.
The 18 percent VAT on water takes effect on 1st July 2013.