Motorists Decry UGX100 Tax on Fuel


Motorists in a bumper to bumper traffic jam amid little rains in Kampala, Uganda. (COURTESY PHOTO)

Kampala – A section of motorists has decried that increasing taxes – with most recent slapping of a UGX100 tax on fuel, bashing the tax system.

This development comes barely a month since the Government met resistance on a proposed UGX200,000 annual license on vehicles. The Finance Ministry has since proposed to introduce UGX100 tax per litre of fuel starting next financial year.

This was revealed by the Finance minister in charge of planning David Bahati who was appearing before the parliamentary finance committee chaired by Henry Musasizi.

Government had also proposed an Shs 50,000 annual license fee for motorbikes under Traffic and Road Safety Amendment Bill 2021.

One reporter took time to engage motorist to understand the impact of the new tax. In his endeavours, he approached matatu (commuter taxi) operators at the Kirinnya Stage, a Kira Municipality surburb, Wakiso district.

A one, Mzee Donozio Kibuka, a taxi driver, castigated that the new tax is going to affect their activities and revenues.

“We are already burdened by the COVID-19 rates that called for social distancing in the taxi. For instance we take people from here (Kirinnya) to Kampala at UGX3000.” said Kibuka.

With the new tax on the fuel that is already at UGX3610 (Diesel), we could the same at about UGX3800-4000 per liter. Abasabazze (commuters) will be affected because our bosses will still want the same remittances each day without Question. Omuntu wa’wansi agenda kunyigiriibwa,” added Kibuka.

Katushabe Daphine, a resident of Bukasa Kirinya village, Bweyogerere Division of Kiira Municipality in Wakiso District, resonates with Kibuka, asserting shared transport might be the way to go.

As a car owner, increase in pump prices will eat into my saving and resources to run our home, school fees, et cetera. A budget constraint awaits us. We urge the government to seek alternative domestic tax sources,” said a bubbly Katushabe, a mother of four.

Government Explains New UGX100 Tax of fuel

According to Bahati, although the government has critical expenditure pressures, it is constrained to generate resources through borrowing, yet government needs to maintain the current levels of revenue generated.

He says that it is in this regard that they have opted to compensate for the loss of revenue earlier projected from the proposals on motor vehicle and motorbike annual licensing of Shs 200,000 and Shs 50,000 respectively by putting a modest increase on excise duty by Shs 100 per litre on diesel and petrol.

This measure is expected to generate Shs 196 billion. He says this proposal is based on the decision of the committee not to impose another direct tax on the ownership of motor vehicles to avoid compliance and challenges.

“The increase is not expected to cause a significant increase in pump prices. We estimate that an increase of Shs 100 per litre in excise duty will increase pump prices by Shs 100 assuming the entire increase in duty is passed on to the consumer and the exchange rate and international fuel prices remain constant,” Bahati told the committee.

He says the annual licence proposal could return at a time when government is prepared. He adds that the impact on transport will also be minimal because of the good infrastructure which reduces on the wear and tear of vehicles and time spent on the road.

Bahati however stated that the proposed fees to be introduced by the regulation, at registration on importation of motor vehicles of Shs 300,000 and motorcycles of Shs 50,000 which are a one-off remain.

Ilukor Charles, the Kumi County MP questioned why government was introducing more tax on fuel yet fuel is already expensive. Petrol currently retails on average at Shs 3,991 per litre while diesel trades at Shs 3,667.

Another proposal withdrawn is the proposed levy of $0.4 or Shs 1,440 per kilogram on wheat bran, cotton cake, maize bran or any other by-products of the milling industry, which was expected to generate Shs 20 billion.

The ministry has also replaced the flat Shs 70,000 export levy per kilogram of fish maws exported instead introducing a 10% charge on the value of fish maws exported out of Uganda. This proposal is expected to generate Shs 10 billion initially.