Uganda Budget 2014/2015

12th June 2014 Final Budget Speech FY 2014/15
THE REPUBLIC OF UGANDA
BUDGET SPEECH
Financial Year 2014/15
Theme: Maintaining the Momentum: Infrastructure Investment for Growth and
Social Economic Transformation
DELIVERED AT THE MEETING OF THE 4th SESSION OF THE 9TH PARLIAMENT
OF UGANDA
ON
THURSDAY, 12TH JUNE, 2014
BY
HONOURABLE MARIA KIWANUKA
MINISTER OF FINANCE, PLANNING AND ECONOMIC DEVELOPMENT
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12th June 2014 Final Budget Speech FY 2014/15
PREAMBLE
Your Excellency the President,
Your Excellency the Vice President,
Right Honourable Speaker of Parliament,
His Lordship the Chief Justice,
Right Hon. Deputy Speaker of Parliament,
Right Hon. Prime Minister,
Right Hon. Leader of the Opposition
Honourable Ministers,
Honourable Members of Parliament,
Distinguished Guests,
Ladies and Gentlemen
I. INTRODUCTION
1. In accordance with Article 155(1) of our Constitution and in exercise
of the powers delegated to me by H.E the President, I have the
honour to present the Government Revenue and Expenditure
Proposals for the FY 2014/15.
2. I beg to move that Parliament resolves itself into a Committee of
Supply to consider:
i. The Revised Revenue and Expenditure Estimates for the
Financial Year 2013/2014; and
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ii. Proposals for the Estimates of Revenue and Expenditure for
the Financial Year 2014/2015.
3. Madam Speaker, despite challenges including the aftermath of the
global economic crisis, the Government has achieved significant
milestones in the socio-economic transformation journey over recent
years. These include the following:-
i. The proportion of people living below the poverty line has
declined from 56.4 percent in 1992/3 to 24% in 2009, and
further to 19.7 percent in 2012/13. This indicates that our
country has already surpassed the Millennium Development
Goal (MDG) target of halving the proportion of its population
living in extreme poverty by 2015. This is the first and most
significant MDG.
ii. An improvement in the quality and stock of physical
infrastructure with 830 km of new roads constructed; 1,630
kilometers of transmission lines were laid; and over 42,000 new
rural users were connected to the national grid.
iii. Increased quality and access to social services like education,
water and health; and
iv. An overall improved business and economic environment.
4. The challenge going forward is to ensure that we sustain this
inclusive growth trajectory towards true socio-economic
transformation. This year's Budget is a continuation of our long
journey towards creating a better Uganda for people today and future
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generations. The theme for the FY 2014/15 budget is therefore
"Maintaining the Momentum: Infrastructure Investment for
Growth and Socio-Economic Transformation." It will focus on
implementing key development priorities over the next year within
existing resource constraints, continue to narrow the infrastructure
gap, while promoting economic productivity and diversification for
better job creation to satisfy Ugandans.
5. I wish to extend thanks to H.E. the President for continued guidance
in the entire budget process, my Cabinet Colleagues, Members of
Parliament, our Development Partners, Civil Society and the Uganda
people for the time dedicated to scrutinise the budget proposals and
the valuable input towards finalising the forthcoming year's budget.
This was a truly consultative budget process.
II. ECONOMIC PERFORMANCE AND OUTLOOK FOR FY 2014/15
A.MACRO-ECONOMIC PERFORMANCE AND OUTLOOK
Real GDP growth
6. Madam Speaker, Uganda's economy continued to grow through
Financial Year 2013/14 albeit more modestly than the 6.2% that was
projected year ago. This was a result of a slow-down in performance
by the manufacturing, construction, telecommunication and financial
services sub-sectors. Meanwhile the ongoing unrest in the region
reduced our export and remittance proceeds, and the last stages of the
global crisis effects were played out on the world stage towards a
new equilibrium.
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7. Although the estimated growth has been less than expected it still
represents a credible performance by our economy, and is higher
than the average growth achieved by the non-oil producing countries
in sub Saharan Africa, estimated at 5.3 percent in 2013.
8. During next fiscal year, real GDP growth is projected at 6.1 per cent.
Cash crops production, manufacturing, mining and quarrying,
increased electricity production, and transport and communication
are projected to be the major drivers of growth. Government's
medium term objective is to restore real GDP growth to 7 percent per
annum. This is the minimum level of growth that can achieve socioeconomic
transformation. This will require continued
implementation of sound macro-economic policies, implementation
of financial sector reforms and the acceleration of the intervention
required in removing bottlenecks to private sector development and
competitiveness.
Annual Inflation
9. Madam Speaker, inflation has remained low this year and dropped to
5.4% by May 2014. Annual core inflation declined to 3.3% as of
end-May 2014. The slowdown in price increases followed a
reduction in food prices resulting from drought in the first half of this
financial year. The price increases were contained by coordinated
prudent fiscal and monetary policy management. Maintaining low
inflation continues to be a key objective of Government's
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macroeconomic policy in order to ensure a stable investment climate
and preserve the welfare of Ugandans.
Savings and Investment
10. Madam Speaker, Government long term objective is to boost
domestic savings to provide long term development finance. This
will help match domestic project finance requirements to project
implementation profiles, as well as lower lending interest rates to
borrowers.
Exchange Rate
11. Madam Speaker, over the year, the exchange rate has remained
relatively stable, with the marginal appreciation of the Shilling by
about 2 percent against the US dollar. The strengthening of the
Shilling has largely been on account of strong foreign inflows from
investment portfolio inflows and foreign direct investment. This is
due to the attractive investment climate in Uganda. In addition, the
Shilling has appreciated as a result of the persistent weakness of the
US dollar on the global financial markets.
Balance of Payments
12. Madam Speaker during the year now ending, our balance of
payments (BOP) continued to be affected by the persistent current
account deficit, which has been largely financed by surpluses on the
capital and financial account. The current account has remained
weak due to a large trade deficit which is projected to widen from
US$ 2 billion last to US$ 2.46 billion by the close of the year. This is
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equivalent of about 14 percent of GDP. This is mainly due to the
continued strong demand for imports, especially investment imports
and weaker than expected global and regional demand for our
exports. Whilst exports registered an improvement compared to last
financial year, performance was undermined by political unrest in the
region.
Exports
13. Madam Speaker, during the year now ending, Uganda's value of
exports of goods and services are projected to be US$ 5.4 billion.
This performance is due to the slow recovery in export demand in
Europe, and unrest in South Sudan. However, our demand for
Imports of goods and services remained robust with imports
expected to increase to US$ 7.9 billion during this fiscal year.
14. Government's medium term export strategy includes maintaining
and stable and competitive exchange rate, ensuring political stability
and undertaking investments in infrastructure to facilitate trade.
Government will also promote manufacturing and agro-processing.
Our Export Strategy will maximize demand for our products and
services above and beyond local effective demand, thereby spurring
demand for jobs here in Uganda. In the medium term, our
competitive advantage lies in agro-processing using locally-sourced
inputs and lower skilled labour, even as we train for higher value
added industries. This budget will focus on enhancing the business
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environment for already existing firms and SMEs in rural areas, and
encourage productivity for existing key crops.
Foreign Exchange Reserves
15. The level of our foreign exchange reserves has slightly improved
from US$ 2.9 billion in June 2013 to US$ 3.1 billion, expected at the
end of June 2014. This is equivalent to 4.2 months of future imports
of goods and services. Government's medium term objective is to
maintain a level of foreign exchange reserves of at least five months
import cover, which adequately provides a buffer against external
shocks.
B. FISCAL SECTOR PERFORMANCE FY 2013/14
Domestic Revenues
16. Madam Speaker, net URA revenues for FY2013/14 were projected at
Shs. 8,578 billion, but collections are estimated at Shs. 8,104 billion
or 94% of the projected revenue, which represents a shortfall of
Shs.475 billion for this year. The underperformance of revenue
collections was mainly due to the lower than projected growth in the
economy, which affected particularly Value Added Tax and
Corporate Income Tax. However, in comparison to last financial
year, URA revenue collection have increased by 13.4%.
17. Madam Speaker, during next year, Government will take corrective
measures to improve revenue performance. This will include
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strengthening tax revenue administration, and new tax revenue
enhancement measures. I will spell out these measures later when I
come to the tax proposals.
Domestic Financing
18. Madam Speaker, financing from the domestic financial markets for
the FY2013/14 budget amounted to Shs.1,747.8 billion, on a net
basis to supplement domestic revenues for the infrastructure
investment projects (especially roads). In the coming financial year,
net domestic financing will amount to Shs.2,539.1 billion, which
includes a drawdown of the energy fund to finance the Karuma and
Isimba hydropower projects, and reflects an additional Shs.791.3
billion over and above the approved levels in Financial Year
2013/14.
External Financing
19. Madam Speaker, development partners continue to provide critical
financial support in the development of our country, for which I
acknowledge. External financing has been directed towards areas
that we have prioritized in the implementation of our national
development objectives. Government has been able to accelerate
progress especially in infrastructure and social sectors. Together with
our development partners, we have strengthened public financial
management to eliminate wastage and corruption in the utilisation of
public resources.
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20. Madam Speaker, during the year, external assistance to finance the
Budget was projected at US$ 1,028 million. It is projected that by
the end of the financial year, Government will realize just above half
of this assistance. The slow disbursement is largely attributed to low
absorption by sector ministries arising from slow implementation of
projects. Government agencies will be required to implement
projects as programmed in order for the country to fully accrue the
benefits from external assistance.
21. Madam Speaker, next financial year, US$ 1,017 million in external
support. Project support constitute US$991 million. In addition
general budget support amounting to US$ 25.7 million, excluding
debt relief, has been committed by our bilateral Development
Partners. We recognise that even though our development needs are
still substantial, Official Development Assistance (ODA) is declining
worldwide. We will work together with development partners to
ensure maximum value for money of the ODA.
Expenditure Performance
22. Madam Speaker, total expenditure during the year is projected to
amount to 19.7 percent of GDP, compared to 18.8 percent in the
previous financial year. Government expenditure, excluding Karuma
during the year is project to be Shs. 11.93 Trillion, 99.7 percent of
the planned.
Public Debt
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23. The stock of public debt is projected to rise to US$ 7 billion by the
end of FY 2013/14, from US% 6.4 billion in financial year 2012/13.
US$ 4.2 billion of the debt is external and US$ 2.8 billion is
domestic. Notwithstanding the increase, our public debt remains
sustainable and Uganda is not under debt distress. Over the medium
term, the debt-to-GDP ratio is projected to peak at about 39.8 percent
of GDP. However, this level of debt excludes pipeline borrowings,
in particular for the Karuma and Isimba hydropower and the
Standard Gauge Railway projects.
24. Madam Speaker, as Government diversifies its sources of debt
financing, we will ensure our borrowing strategy remain sustainable
in line with our Public Debt Management Framework 2013. The
underlying principle will be to confine any commercial (or nearcommercial
financing to only infrastructure projects with an income
stream to ensure guaranteed repayments. Meanwhile, grants and
concessional financing will continue to finance social projects with
long term indirect benefits.
C. FINANCIAL SECTOR DEVELOPMENTS
Banking Sector
25. Madam Speaker, during the year now ending, the banking sector
remained stable and registered rapid asset growth, arising from
increased deposits and lending activity by bank customers. However,
interest rates have remained high, primarily because of high levels of
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borrower risk. Profitability in the banking sector declined largely due
to non-performing assets which increased from 4% to 6.2%. The
good news is that the Central Bank reference interest rate was
reduced to 11% in June 2014, and average commercial bank lending
rates have also declined from 24.2% to 20% during the year.
26. The emergence of new mobile telephone technology and agency
banking have been key drivers of improving financial inclusion over
the year. During last year, 14 million persons utilized mobile money
services with transaction value of Shs. 18.6 trillion during the year.
In the next financial year, Government will deepen the financial
sector by accommodating alternative banking approaches including
mobile banking, agent banking, bank assurance, and Islamic
Banking. To this end, Government will present to Parliament
amendments to Financial Institutions Act 2004 (FIA) and Bank of
Uganda Act 2001, in line with international best practise.
Non-bank Financial Institutions
27. Madam Speaker, access to non-bank financial services increased
from 49 percent in 2009 to 65 percent in 2013. The effect of this was
a significant reduction in the financially excluded population from
4.3 million (i.e 30 percent of adults in 2009) to 2.6 million (i.e 15
percent of adults in 2013).
28. In order to promote savings and enhance consumer financial
protection for majority Ugandans. Cabinet approved the policy
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principles for the Tier 4 Microfinance Law to regulate and supervise
the Microfinance institutions including SACCOs and money lenders.
The Bill will be presented to Parliament in the coming financial year.
Deepening Financial Markets
a. Retirement Benefits Sector
29. Madam Speaker, Government is making progress in reforming the
retirement benefits sector to improve savings in the economy, protect
savings of workers, and restore trust in the retirement benefits
system. The framework for regulating and providing oversight of the
sector is now fully operational. Government has liberalised the
pension sector to allow workers to have a choice in the pension
schemes they contribute to, the form of benefit payments and in
terms of annuity or lump-sum; while ensuring maximum safety of
their savings.
b. Capital Markets
30. Madam Speaker, during the year the stock market registered a record
turnover of Shs. 198 billion up from Ushs 31 billion recorded in
2012. Capital assets under professional management grew to over
Shs 800 billion by the end of 2013. This growth has mainly been
driven by the recent reforms in the pensions sector that have
encouraged more occupational pension funds to outsource
investment management to licensed professional fund managers.
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31. Capital markets development is critical to attain long term
sustainable economic growth, because it plays a major role in the
mobilization of domestic resources and promoting investment. There
are currently only 40,000 registered shareholders in Uganda. Public
awareness will be stepped up in order to draw many more Ugandans
into the formal savings sector, thereby increasing investment
opportunities. This will lead to an increased level of domestic
savings, which is currently estimated at only 10% of GDP. During
the next financial year, we intend to reach an additional 20,000
potential investors in the securities market, through a focused capital
markets development campaign.
32. Government will amend the Capital Markets Authority (CMA) Act
in order to provide for a greater diversity of financing opportunities,
and to facilitate movement of capital across the East African region
in line with the EAC Common Market protocol.
c. Insurance Sector
33. Madam Speaker, during the year, gross insurance premiums rose to
Shs 457 billion, representing a 30% annual growth. Agricultural
insurance products were offered for the first time and currently 8
insurance companies are underwriting agricultural related policies.
The first ever re-insurance company, Uganda Reinsurance Company
Ltd, was licensed to underwrite risks locally and reduce on the
amount of premiums issued outside Uganda.
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Anti-Money Laundering
34. During the FY 2013/14 the Anti-Money Laundering Act was passed.
This demonstrates our clear commitment to fight money laundering
and the financing of terrorism. During FY 2014/15 the Financial
Intelligence Authority will be operationalized and begin to conduct
financial sector surveillance in order to secure all international
financial transactions and insure that they occur in compliance with
the Anti-money laundering Act.
Public Private Partnerships
35. Madam Speaker, Government will use Public-Private Partnerships
(PPPs) as an important option for delivering public infrastructure
projects and services. The Public Private Partnership Bill 2012 that
supports PPP regulation is before Parliament, and I appeal for its
expeditious enactment. The law will provide the regulatory
framework for the institutional arrangements and monitoring the
implementation of PPP projects throughout the country.
36. Madam Speaker, PPPs if not well regulated, increase contingent
liabilities and fiscal obligations on the public. Contingent liabilities
create the possibility that Government may be required at some
future date to make unexpected and substantial payments. In this
respect, Government is will track and monitor PPP projects in order
to mitigate any future fiscal risks by establishing a robust PPP fiscal
risk management framework. In accordance with reporting and
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disclosure principles of Public Sector Management, the PPP Project
contingent liabilities currently stand at Shs 169 billion or 0.27% of
GDP.
III. BUDGET STRATEGY FOR FY 2014/15
37. Madam Speaker, in the next financial year, Government's budget
strategy is built on four key inter-linked interventions. These
interventions are :-
i. Improving the Business Climate by undertaking key economic
infrastructure investments, while maintaining peace, security,
and macro-economic stability;
ii. Leveraging Government assistance Agriculture, Agribusiness,
Agro-processing, Tourism, Industry and Services such as ICT;
iii. Improving the Productivity of Uganda's Human Resource by
enhancing the provision of quality education, health and water
services; and
iv. Strengthening Institutional Governance, Accountability and
Transparency.
38. Madam Speaker, this budget strategy will lead to faster economic
growth and higher employment levels; acceleration in growth of per
capita incomes and sustained poverty reduction. The strategy also
ensures that Government facilitates the private sector by
implementing measures that improve efficiency and lower the cost of
doing business.
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A. IMPROVING UGANDA'S BUSINESS CLIMATE
39. Madam Speaker, the budget strategy to improve Uganda's business
climate will focus on inter-linked actions that reduce the cost of
doing business. I will later elaborate on each of the sectoral actions
to improve the business environment as part of next year's sector
priorities.
Business Environment
40. Madam Speaker, Uganda ranks among the top 10 recipients of
foreign direct investment (FDI) in sub-Saharan Africa. Investment
opportunities in infrastructure development, oil and gas, agriculture,
mining and telecommunication are supported by sustained political
stability and the macro-economic environment.
41. In the next financial year 37 licenses will be abolished and
amendments to laws affecting 307 licenses will be completed. I wish
to also appeal to Parliament to expedite consideration and enactment
of the Investment Code (Amendment) Bill, the Counterfeit Bill and
the Public Private Partnerships Bill to further facilitate the business
climate and encourage investment.
42. The Uganda Investment Authority and the Uganda Registration
Services Bureau will be transformed into one-stop centers to
efficiently facilitate investors and quicken business registration.
Company Registration online will also be launched to speed-up
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registration. Government will reduce the burden of multiple data
requirements for business start-ups, by use of information collected
at business registration for taxation and licensing.
43. Madam Speaker, in the next year, Government will roll-out the
National Land Information System from 6 zones to 21 land offices,
thereby significantly reducing the time and cost of undertaking land
transactions, and enhancing the security of land registration. This
will reduce fraud and corruption related to transfer and titling of
land.
Regional Integration
44. Madam Speaker, key interventions that have been implemented
under the East African Community include implementation of the
Customs Union, Common market and Monetary Union protocols.
EAC partner states are now undertaking common infrastructure
investments and reducing non-tariff barriers. By removing road
blocks, weigh bridges, and multiple bonds, the number of days it
takes a container from Mombasa to Kampala has been reduced from
18 to a maximum of 4, and to Kigali from 22 to a maximum of 7. A
Single Entry East African Tourist Visa, and Common Payment
system has also been introduced. In addition, the EAC Monetary
Union Protocol which was signed in November 2013 is undergoing
ratification in all partner states.
Science, Innovation and Industrialization
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45.Madam Speaker, during the year now ending, Government has
continued to build infrastructure to ensure serviced industrial and
business parks have water, roads and power. Specific focus attention
has been placed on making the Luzira, Soroti, and Namanve
Industrial Business Parks operable.
46.Madam Speaker, in the next year, Government will enhance support
to industrial research institutions in order to develop and
commercialise technology innovations..
Financial Inclusion
47.Madam Speaker, the budget strategy will deepen the financial sector
to facilitate the availability of affordable credit for the private sector,
including agricultural and SMEs. Government has prioritized the
promotion of financial literacy to sensitize potential beneficiaries
about new products such as crop insurance, and stimulate domestic
capital mobilisation through investment clubs.
B. ENHANCING PRODUCTIVE EMPLOYMENT
Employment
48.Madam Speaker, as Uganda celebrates progress with the MDG's our
work force is growing due to better life expectancy and social service
delivery. Their pathway to stable value-added employment is our
economy's opportunity but also our challenge. SMEs are critical in
creating jobs and mobilizing the informal and rural economic
activity. It is important to note that SMEs span the whole economy
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including artisans, health services, schools, entertainment tourism,
ICT agriculture and agriculture to name but a few. The two main
constraint to job creation from increased SME activity are the lack of
knowledge skills transfer; and inadequate availability of affordable
credit for viable and 'bankable' projects on a sustainable basis.
Stable value added employment will be achieved in the medium
term, within the following framework:
i. enhanced life expectancy, as depicted by progress on the
MDG's;
ii. significant opportunities presented by agriculture and
agribusiness; and
iii. emphasis on a holistic approach encompassing increased
formal employment, higher staff productivity, contract farming
and support to SMEs , both formal and informal.
49. Government's task remains how to facilitate productivity and
encourage the private sector to create jobs. Government agencies will
implementation and integrated strategy focusing on the commodity
chain, to undertake the following interventions:-
i. Curriculum reform to enhance market orientation and private
sector entrepreneurship;
ii. Implement the Skilling Uganda initiative in the Business,
Technical and Vocational Education Training with an emphasis
on provision of hands on technical skills training, business
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skills development, and re-orienting the mind-set of potential
entrepreneurs
iii. Enhancing Financial Literacy and Inclusion,
IV. REVENUE AND EXPENDITURE FRAMEWORK FOR FINANCIAL YEAR
2014/15
50. Madam Speaker, the revenue and expenditure framework for the
Financial Year 2014/15 Budget has been developed in line with the
recent trends in the domestic, regional and international economy.
Next financial year, total resource inflows are projected to amount
to Shs 15,054 billion. Domestic sources will contribute Shs 12,321
billion representing 81.8% of the total budget resource for the year.
The Uganda Revenue Authority will collect taxes amounting to Shs
9,577 billion; and Non-Tax Revenues of U. Shs 206 billion will be
collected. The Budget will also be financed by issuing Government
securities worth Shs 1,437 billion on domestic markets; and net
Government drawdown from our savings of Shs 1,102 billion.
51. Total external financing of the Budget will amount to Ushs 2,733
billion, equivalent to 18.2 per cent of the total budget resources.
Budget support comprises of Shs 69 billion while Project aid
amounts to Shs. 2,664 billion, an increase of Shs. 116.3 billion
over the financial year now ending.
52. The resources available to finance discretionary Government
expenditure next year, therefore amount to Shs 11,088 billion,
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excluding project aid, public debt and other statutory obligations,
which amount to Shs 3,966 billion. The total resources available
for discretionary Government expenditure next financial year
represent an additional Shs 1,546 billion above the approved level
for the year now ending.
V. SECTOR PERFORMANCE FOR FY 2013/14 AND PRIORITIES FOR FY
2014/15
53. Madam Speaker, in order for a detailed report on sector performance
over the last year, the Background to the Budget for Financial Year
2014/15 has endeavoured to cover the performance of all sectors
comprehensively. I will therefore only highlight the key
achievements of the major sectors; while emphasizing the priorities
for the forthcoming year and the medium term.
54. The FY 2014/15 budget strategy is based on the following
objectives:
i. Achieve real economic growth rate of at-least 7% per annum;
ii. Keep annual consumer price inflation within single digit;
iii. Position Uganda in the context of EAC integration to ensure
competitiveness;
iv. Maintain a prudent level of foreign exchange reserves of at
least five months import cover, that can provide a buffer
against external shocks;
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v. Maintain a competitive real exchange rate which can support
export growth.
55. In order to achieve these objectives, the following priorities underpin
allocations of resources in the FY 2014/15 Budget:
i. Maintenance of National Security and Defence;
ii. Infrastructure Development in Transport and Energy;
iii. Enhancement of Scientific Research, Technology and
Innovation for Industrialization, Competitiveness and
Employment creation;
iv. Enhance production and productivity in Agriculture,
Tourism, Trade and Industrial Development;
v. Human Capital and Skills Development; and
vi. Continue to strengthen Institutional Governance and Public
Service Delivery.
A. NATIONAL DEFENCE AND SECURITY
56.Madam Speaker, peace and stability remain the cornerstone for
socio-economic transformation of our country. Under the strong
leadership of H.E. the President, we have built a strong, professional,
well equipped and pro-people army and other security forces. This
has provided a peaceful, secure and politically stable environment
that gives confidence and assurance to both foreign and local
investors to consider Uganda a viable investment destination.
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57. Over the financial year now ending, Government continued to
strengthen the capabilities of our armed forces and other security
agencies by the acquisition of modern security and defence
equipment and other logistical facilities, as well as the improvement
of staff welfare and training.
58. In order to facilitate the Government programme of
professionalization and equipping the security agencies, Shs 1,005.5
billion has been allocated to the security sector in the FY 2014/15
representing 7.1% of the total budget. The key priorities will be in
professional development of our forces, consolidation of peace,
promotion of defence diplomacy, resolution of conflicts, internally,
regionally and internationally and support the country's foreign
policy of peaceful co-existence and good neighbourliness.
B. INFRASTRUCTURE DEVELOPMENT
Transport Infrastructure
Roads and Bridges
59.Madam Speaker, in the financial year 2013/14, the Transport and
Works sector was allocated Shs 2,510.66bn. These resources have
been used to upgrade to gravel 264 km, rehabilitated 178km,
completed construction of six (6) new bridges, and undertaken the
routine maintenance of 10,500 km of unpaved roads. A further 1,720
km of paved roads underwent routine maintenance. The
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rehabilitation of the existing Nalubale Bridge and construction of the
New Nile Bridge at Jinja have also commenced.
60.Madam Speaker, during the year, 830km of the following roads was
completed:- Nyakahita-Kazo; Kazo-Kamwenge; Fort Portal-
Bundibugyo; Mbarara-Kikagati; Malaba-Bugiri; Tororo-Mbale;
Jinja–Kamuli; Kawempe- Kafu; Mbale-Soroti; and Kampala-
Masaka. With support from the World Bank, the rehabilitation and
reconstruction of the road networks in the following Municipalities
commenced during the year:- Mbale, Jinja, Masaka, Gulu, Lira,
Arua, Mbarara, Entebbe, Soroti, Masaka, Fort Portal, Kabale,
Moroto, Tororo and Hoima. In addition, routine and periodic
maintenance for approximately 17,650 kilometres of national,
district, urban and community access roads, including an estimated
265 kilometres of roads under Kampala Capital City Authority was
carried out. Government has commenced the rehabilitation and
constructed numerous bridges across the country. These bridges are
mainly in Northern, Karamoja, Rwenzori and other areas of North
Eastern Uganda.
61.Madam Speaker, with these interventions, the proportion of the
national unpaved road network in fair to good condition is currently
at 66% while that of National Paved Road network is at 77%. Our
target is to improve the condition of these roads further to 75% and
85% respectively over the medium term.
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62.Madam Speaker, in the forthcoming financial year 2014/15, I am
increasing the allocation to the Works and Transport sector to Shs
2,575.5bn. Government has targeted the upgrading from gravel to
bitumen of 200km of roads, the reconstruction of 178 km of roads,
the construction of 10 new bridges, and the rehabilitation of 7
bridges. In addition, 12,875 km of unpaved roads are scheduled for
re-grading,
63.Madam Speaker, during the forthcoming year, Government will
accelerate the construction on at least 1,700 km of the following
ongoing Road projects:- Vura-Arua-Oraba upgrade; Buteraniro -
Ntungamo – Rwentobo; Ntungamo-Kabale –Katuna; Hoima–Kaiso–
Tonya; Kampala - Mukono – Jinja; Gulu-Atiak-Nimule upgrade;
Ishaka-Kagamba; Kampala-Entebbe Expressway; Moroto–
Nakapiripirit; Kafu – Kiryandongo; Luuku – Kalangala upgrade; Fort
Portal-Kamwenge; Mbarara Bypass; Mukono-Kyetume-
Katosi/Kisoga – Nyenga; Mpigi-Maddu-Ssembabule; Kiryandongo -
Kamdini; Kamdini – Gulu; Pakwach – Nebbi; Ntungamo-Mirama
Hills; Kampala Northern Bypass upgrade; Masaka – Bukakata;
Kigumba – Bulima- Kabwoya; Olwiyo-Gulu-Kitgum - Musingo
Road; Villa Maria – Sembabule; Musita-Lumino-Busia/Majanji;
Mubende - Kakumiro – Kagadi; and Mukono - Kayunga – Njeru.
64.Madam Speaker, construction on 650 km on the following new road
projects will also commence in Financial Year 2014/15: Kabwoya –
Kyenjojo; Tirinyi - Pallisa - Kumi/Kamonkoli; Kapchorwa-Suam;
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12th June 2014 Final Budget Speech FY 2014/15
Rukungiri-Kihihi-Ishasha-Kambuga; Kihihi - Kanungu – Kambuga;
Mbale-Bubulo-Lwakhakha; Kyenjojo - Fort Portal; Ishaka - Rugazi –
Katunguru; Sironko - Namunsi – Muyembe; Nansana – Busunju; and
Mbale – Nkokonjeru.
65.Madam Speaker, I have allocated an additional Ushs 75bn to the
Uganda Road Fund to facilitate the maintenance and rehabilitation of
approximately 10,000km of national, district, urban (including
Kampala City) roads and community access roads across the country.
Government will also continue the construction and several strategic
bridges including the Mitaano Bridge in Kanungu distict as well as
the bridges destroyed by the recent floods in Kasese and other parts
of the country.
Rail
66.Madam Speaker, in the railway sub-sector, Government, in
collaboration with other Partner States within the East African
region, is scaling up efforts to revitalize the railway transport system.
The upgrade to Standard Gauge Rail of the Tororo - Kasese and
Mirama Hills to link with Kigali in Rwanda. During FY 2014/15, the
construction of an Inland Container Depot at Mukono, and the
redevelopment and upgrading of facilities at Port Bell and Jinja piers
will commence.
Energy Infrastructure
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12th June 2014 Final Budget Speech FY 2014/15
Electricity
67.Madam Speaker, during the financial year, the total national power
generation capacity increased to 852 MW. Feasibility studies have
been completed for the several small hydropower sites, totalling to
130 MW. The sites are at Kikagati, Mitano, Lubilia, Nyagak III, Siti,
Waki, Rwimi, Ndugutu, Nkusi, Nyamwamba, Nengo Bridge, Esia
and Muzizi. Construction for these projects will begin in Financial
Year 2014/15, with the support from development partners including
the World Bank, Norway, the United Kingdom, the European Union,
and Germany; together with the Private Sector.
68.Madam Speaker, 1,630 kilometers of transmission lines were added
to the national grid during the year now ending. 16 substations were
also constructed to improve transmission and distribution efficiency.
There are ongoing procurements for 6,250 kilometers of transmission
and distribution lines for which construction will begin during
Financial Year 2014/15. The terms of the distribution concession will
be also be further enforced to reduce systems losses and increase
efficiency from 23% to 20%. This will include rolling out of the
prepaid system.
69.Madam Speaker, during the year now ending, Government has
extended electricity to under-served areas of the country as part of its
Rural Electrification Programme. An additional 15 districts have
now been connected to the national grid. These include the
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12th June 2014 Final Budget Speech FY 2014/15
Kyegegwa, Katakwi, Amuria, Kiruhura, Lamwo, Nakapiripit,
Amudat, Kaberamaido, Dokolo, Amolatar, Ntoroko, Alebtong,
Moroto, Buhweju and Napak. This brings the total number of district
with electricity connections to 98 out of 112 districts.
70.Work has commenced also commence for the connection an
additional eleven (11) districts. These are Bulisa, Adjumani, Moyo,
Amuru, Otuke Zombo, Koboko, Maracha, Yumbe, Nwoya and
Namayingo. The remaining three (3) districts of Kotido, Kaabong
and Kalangala will be supplied by the end of 2016, thus completing
the long but steady journey of supplying electricity to all district of
the country.
71.Madam Speaker, in the forthcoming year, special attention will be
placed on accelerating implementation of the construction of the
major Hydropower plants at Karuma and Isimba.
Oil, Gas and Petroleum Development
72.Madam Speaker, during the year now ending, Government has made
significant progress in Oil, Gas and Petroleum development. A total
of one hundred and sixteen (116) wells have been drilled, with
successful results from one hundred one (101) wells where oil has
been found. Of the wells with positive exploration results, Twenty
nine (29) wells have been flow tested.
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12th June 2014 Final Budget Speech FY 2014/15
73.With respect to the development of an Oil Refinery, land acquisition
has progressed with the compensation for 50% of Project Affected
Persons. In addition, the Environmental baseline study for the Oil
refinery has been concluded. The process for selection of the Lead
Investor for the Oil Refinery has also reached advanced stages
following submission of proposals by four (4) of the six (6)
shortlisted international firms.
74. The Oil Refinery will be developed as a Public-Private Partnership
(PPP) with the selected Lead Investor holding a 60% shareholding;
and Government and participating East African Community partners
states holding upto 40% of the Oil Refinery shares. Over the next
year, the engineering design of the Oil Refinery will be completed to
pave way for construction to begin.
Mineral Development
75.Madam Speaker, in the area of mineral exploration, iron ore
discoveries at Buhara, Nangara, Kisoro, Rugando, and Butogota
estimate total reserves at 116 million tonnes, with a gross value of
US$ 15.6 billion. In addition, reserves of 7.8 million ounces of gold
have been proven at Tiira in Busia, Kamalenge in Mubende,
Mashonga in Bushenyi, Kampano in Ibanda and Alupe in Busia.
These gold reserves have a total gross value of US$ 10.9 billion.
Vermiculite reserves at Namekhara in Manafwa have been valued at
US$ 11.5 billion while Limestone/Marble reserves in Hima, Dura
Muhokya and Tororo have increased to over US $ 300 million.
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12th June 2014 Final Budget Speech FY 2014/15
Government will support the development of these strategic mineral
reserves to ensure the benefits accrue to Uganda, and the localities
where the reserves have been discovered.
76.Madam Speaker, I have allocated Shs 1,675.7 billion to the Energy
and Minerals Sector to undertake mineral development.
Information and Communication Technology (ICT)
77.Madam Speaker, during the year now ending, Government has
completed construction of two phases of the National Transmission
Backbone Infrastructure (NBI). This has improved Internet
connectivity at a more affordable cost. This has reduced the cost of
bandwidth to USD 300 per Mbps (Megabit per second) per month,
down from USD 600 per Mbps prevailing on the market. Bulk
Internet bandwidth agreements have to date been signed to
Government Institutions with 18 Ministries are being supplied with
cheaper bandwidth. I encourage the private sector to utilize this
infrastructure in order to reduce their costs of doing business and
enhance their efficiency and profitability.
78.Madam Speaker, in order to increase the economic benefits the
country receives from improved connectivity, a Business Process
Outsourcing (BPO) incubation center at the Statistics House was
officially launched. The Centre employs 250 employees, directly. An
additional 4,000 employees are currently employed by other BPO
operators in the sub-sector. This represents an opportunity for
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12th June 2014 Final Budget Speech FY 2014/15
Uganda to become a business process outsourcing (BPO) hub on the
global market.
79.Madam Speaker, in the Financial Year 2014/15, Government will
accelerate the commercialization of the second phase of the National
Backbone Infrastructure project and commence construction of the
National ICT Park and Innovation Center. Government will also
promote and support the operations of Business Process Outsourcing
(BPO) centers.
C. KEY GROWTH SECTOR PRODUCTIVITY AND PRODUCTION
Agriculture Production and Productivity
80.Madam Speaker, agriculture and agribusiness is a priority to
Government to create jobs, improve productivity and expand exports
in the medium term. The sector employs 70 percent of the Uganda's
labour force, and contributes about 21 percent to the GDP.
Government plays an important support role to ensure value for
money and lower the cost of doing business.
81.Madam Speaker, during the next year, Government will support
interventions in the agriculture sector on the following key actions:-
i. Focus on provision of inputs, while minimizing expenditure on
administrative costs, seminars and workshops;
ii. Place resources available for inputs provision under a single
umbrella and leverage them to effectively focusing on the
needy and graduates
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12th June 2014 Final Budget Speech FY 2014/15
iii. Encourage small holders to produce surplus, focusing on
enterprises that provide high returns to small holder farmers
iv. For medium and commercial scale farmers, encourage
commercial ranching, large scale crop production and value
addition.
82. The above strategy will be implemented holistically by Government
agencies working in concert.
Tourism Development
83.Madam Speaker, the tourism sector will significantly contribute to
national output if its full potential is utilized. In order to realize the
tourism sector's potential, Government will formulate a
comprehensive Tourism Sector Strategy that addresses promotion,
training regulation, and infrastructure development. I have
accordingly allocated an additional Shs 5.0 billion to the Uganda
Tourism Board (UTB) for Tourism Promotion, for the formulation of
the strategy.
D. HUMAN CAPITAL AND SKILLS DEVELOPMENT
84.Madam Speaker, Government strategy for skills development entails
among others, increasing access to quality education with emphasis
on skilled development, quality health care as well as safe water and
sanitation facilities. Government spending on the three sectors of
Health, Education and Water in the forthcoming year will amount to
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12th June 2014 Final Budget Speech FY 2014/15
over Shs 3,550 billon, which is approximately 25% of the total
budget.
Education
85.Madam Speaker, during the year now ending, Government has
continued to increase the availability of school facilities
infrastructure to enhance access, improve the quality of learning
through provision of teaching materials, recruitment of additional
teachers and enhanced monitoring and supervision.
86.Madam Speaker, 8.4 million primary school age going children now
have access to an education, against a target of 8.5 million. At
secondary school level, enrolment has reached 1.26 million
compared with a target of 1.33 million students. Enrolment in
Business and Vocation Education and Training (BTVET) has also
increased to about 24,000 while enrolment in higher education
institutions is now close to 200,000 students. 2.4 million copies of
core textbooks and teachers' guides have been procured and
distributed, to improve the quality and relevance of primary
education.
87.Madam Speaker, 486 secondary schools have been rehabilitated and
constructed, with the support of the World Bank. Construction works
are on-going at an additional 639 schools.
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12th June 2014 Final Budget Speech FY 2014/15
88.Madam Speaker, I have allocated Shs 1,699.4 billion to the education
sector in the next financial year to enhance the quality of education.
Priorities to be implemented include the enhancement of Teachers'
salaries, with emphasis on Primary School Teachers. Shs 215bn has
been allocated for this purpose. I have also provided Shs. 5 billion
towards supporting Teachers' SACCOs, in addition to the Shs. 2.5
billion provided during this year.
89.Madam Speaker, I have also specifically allocated 68.7 billion for the
implementation of the Skilling Uganda programme. Workshops will
be constructed at technical schools at Kihanda in Kanugu; Namasale
in Amolator; Namisindwa in Manafwa, Bukoli in Bugiri, and St.
Joseph Kyalubingo in Kamwenge.
90.Madam Speaker, Government will also operationalise and expand
the Student Loan Scheme with emphasis on science and vocational
training. The Loan Scheme will be rolled out starting with
undergraduate students in both Public and Chartered Private
Universities.
91.Madam Speaker, in addition to the primary and secondary schools
construction programme already underway, Government will
commence the construction of 8 Primary Teachers Colleges (PTCs).
These are at Buhungiro, Paidha, Bundibugyo, Bukedea, Kapchorwa,
Arua, Ibanda and Canon Lawrence. Construction of the National
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12th June 2014 Final Budget Speech FY 2014/15
High Altitude Training Centre (NHATC) will also commence, in
addition to the rehabilitation of 6 regional stadia.
92.Madam Speaker, Government will also provide instructional
materials to support the roll out of the new curriculum for 45 Primary
Teacher Colleges Educational institutions, and also for Special
Needs Education (SNE).
Health
93.Madam Speaker, during the year now ending, Government in the
Health Sector procured and distributed medicines and drugs worth
Shs 124 billion. These include essential medicines including Anti-
Retrovirals, Tuberculosis Medicines and Reproductive Health
Supplies. The enrolment for Anti-Retroviral (ARVs) Treatment
increased from 376,000 in 2012 to 570,000 in 2013. In order to
reduce the incidence and impact of malaria, Long-lasting insecticide
treated Nets were also distributed in all districts and Indoor Residual
Spraying (IRS) has also been ongoing in the high prevalence districts
of northern Uganda, Kumi and Ngora. Vaccines for the nine (9)
vaccine-preventable diseases were also procured and distributed in
order to eliminate stock-outs completely.
94. In order to decongest the Mulago National Referral Hospital, the
construction of new hospitals in Kawempe and Kiruddu in Kampala
is ongoing. In addition, Regional Referral Hospitals at Moroto
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12th June 2014 Final Budget Speech FY 2014/15
Mityana, Nakaseke, Kiryandongo, Nebbi, Anaka, Moyo, Entebbe
and Iganga General Hospitals, are being rehabilitated.
95.Madam Speaker, in the next financial year, Government will enhance
Health workers remuneration and improve their skills through
capacity building. Health facility infrastructure at both local
government and referral levels, will also be expanded, in addition to
the construction of additional staff houses in lower level health
facilities to minimize on absenteeism.
96. Government will also implement the Malaria Strategy for effective
prevention and control through the mass distribution of Long-lasting
Insecticide-Treated Nets (LLINs), and mass Indoor Residual
Spraying (IRS), commencing in the high malaria-prone areas of Lake
Kyoga and Northern Uganda. The Malaria Strategy will also entail
the Enhanced Diagnosis and Treatment of all cases before treatment
to improve case management, and provide correct treatment.
97.Madam Speaker, I have allocated Shs 1,197.8bn to enable
implementation of the Government priority programmes in the health
sector.
Water and Sanitation
98.Madam Speaker, Government has made considerable progress in
access to clean safe water and sanitation. 65% of Ugandans now
have access to safe water within a distance of 0.5 km. The expansion
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12th June 2014 Final Budget Speech FY 2014/15
of the Ggaba Water Works and construction of Namasuba Hill
Reservoir commenced during the year. Piped water systems and
Gravity Flow schemes in Kahama in Ntungamo district, Wadelai and
Singila in Alwi dry corridor, the expansion of the Tororo-Manafwa
Water supply and Kanyampanga were completed. The cumulative
storage for water for production is estimated at 28.3 million cubic
meters. The functionality of water sources at rural water supply
points ranges between 83%-85%.
99.Madam Speaker, during the year, the construction of the Lubigi
Waste water Treatment Plant and rehabilitation of Bugolobi
sewerage treatment Plant was completed. The construction of the
Nakivubo and Kinawataka Waste water Treatment Plants was also
started. Sanitation coverage is estimated at 71% for rural areas and
83% for urban households. Our target is to improve access to safe
water and sanitation to 100% for all Ugandans by 2018.
100. Madam Speaker, in the next financial year, the Gaba Water works
will be expanded increasing water production in Kampala from
180,000 cubic meters per day to 230,000 cubic meters per day.
Government will also implement the Kampala Sanitation Master
Plan Project to increase sewerage coverage in Kampala, construct
works for the Nakivubo Treatment Plant facility and rehabilitate and
expand the water supply systems in the towns of Arua, Gulu, Mbale
and Bushenyi.
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12th June 2014 Final Budget Speech FY 2014/15
101. Madam Speaker, I have allocated an additional Ushs 30bn for the
purpose of enhancing safe water provision and sanitation.
E. STRENGTHENING INSTITUTIONAL GOVERNANCE AND PUBLIC
SERVICE DELIVERY
102. Madam Speaker, during the year now ending, Government has
vigorously instituted accountability measures to effectively and
efficiently utilize public resources.
Cash Management
103. The Treasury Single Account was implemented to strengthen day
to day cash and debt management.. All redundant Bank Accounts at
the Bank of Uganda have been closed, and the number of Bank
Accounts operated by any Government Agency have now been
restricted. We have also enforced limits on cash withdrawals to a
maximum of Ushs 20 million per day to reduce the amount of public
funds exposed to abuse. In the next financial year, Government will
strictly enforce the Commitment Control System which bars any
Accounting Officer from over-committing Government beyond the
available resources. Accounting Officers will be required to honour
payments to contractors and service providers within 14 days from
receipt of invoices.
Payroll Management
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12th June 2014 Final Budget Speech FY 2014/15
104. Madam Speaker, we have fully decentralized payroll management
in the public sector from the Ministry of Public Service and the
Ministry of Finance, Planning and Economic Development, to
Accounting Officers. This has addressed the perennial problem of
delayed salary payment and existence of "Ghosts" staff on the
Government payroll. With this arrangement, Accounting Officers are
personally and financially responsible for all salary transactions.
105. In order to improve payroll management, the biometric
information of all Public Servants across the country has been taken
and a comprehensive audit of the payroll by The Auditor General has
been completed. The Integrated Personnel and Payroll System (IPPS)
is being rolled out and will interface with the Integrated Financial
Management System (IFMS) to ensure payment of all staff salaries
through the IFMS, as Government's payment system.
106. In order to improve the management of Government Pension
and Gratuity, with effect from 1st July 2014, the budgeting and
payment of Gratuity will be decentralized from the Ministry of
Public Service to the individual institutions where the Public Officers
retire from. This decentralization will be extended to the payment of
monthly Pension, in the medium term.
Budget Transparency and Accountability
107. Madam Speaker, the Ministry of Finance, Planning and Economic
Development continues to publish the quarterly releases to all
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12th June 2014 Final Budget Speech FY 2014/15
Government Departments and Agencies in the print media. I call
upon Hon. Members of Parliament and the public to take keen
interest in this information and use it to monitor the implementation
of Government programmes and utilization of tax payers' money.
108. During the year, the Ministry of Finance, Planning and Economic
Development launched the Budget Information Website which
provides all budget related data. The budget information on the
website provides the performance of Government programmes by
locality, and serves as a platform for the public to provide feedback
and report any information related to implementation of the national
budget.
109. Madam Speaker, in the next year, budget transparency will be
enhanced by working closely with the Civil Society. The Ministry of
Finance is establishing an SMS system and Hotline for the public to
air their views, seek responses from Government agencies on
implementation of public programmes, and whistle-blow
irregularities in public financial management.
Additional Key Interventions
110. Madam Speaker, in the next year, other key priorities for
improving institutional governance, accountability and efficiency
measures will include the following:
i. Conduct the National Population and Housing Census to gather
demography and economic data critical for proper planning. I
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12th June 2014 Final Budget Speech FY 2014/15
have allocated an additional of Shs. 40 billion to the Uganda
Bureau of Statistics for the census.
ii. To ensure timely preparation for the 2016 General Elections, an
additional Shs. 105.6 billion has been allocated to the Electoral
Commission to carry out preparatory activities. I have also
allocated an additional Shs. 80 billion to the Uganda Police
Force, to cater for recruitment of required personnel and other
activities in preparation for the elections. An additional Shs 74
billion has been allocated to the implementation of the National
Security Information Systems Project, commonly known as the
National ID Project.
iii. Madam Speaker, I have allocated Shs 450 billion to enhance
the salary of all Public Servants. This includes provisions for
the teachers' pay increase in line with Government's agreement
with the Uganda National Teachers' Union (UNATU). The
salary of the lowest paid Teacher will therefore increase by
between 15% and 25%. Other Public Servants' salaries will
also be adjusted within the available resources.
iv. Government will institute tax inclusive budgeting for all goods
and services procured by Government, including those of
development partners supporting public programmes, with
effect from Financial Year 2014/15. This measure will remove
distortions and loopholes that arise by not treating Government
transactions in the same way as those of the private sector, and
also eliminate the accumulation of Government tax arrears.
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12th June 2014 Final Budget Speech FY 2014/15
v. Government currently spends colossal sums of money on
acquiring Right of Way to implement key infrastructure
projects, which causes a major fiduciary risk. Accordingly, next
financial year, Government will establish a common corridor
for key infrastructure investments to avoid double costs of
compensation. Government will not compensate any private
entity or person for investments undertaken in gazette public
facilities, especially road reserves.
vi. In order to improve service delivery at local government level,
we shall reform inter-governmental transfers system by making
it simpler, more equitable and reduce the number of conditional
grants.
vii. Madam Speaker, in accordance with the PPDA (Amendment)
Act Section 59A , it is now mandatory for all Government
agencies, when using the open bidding, to grant a 15% margin
of preference to goods which are domestically manufactured,
mined, extracted or grown in Uganda; and 7% margin of
preference for works by Ugandan contractors or services
provided by Ugandan consultants. This is meant to promote
local content.
viii. Government will work with the Utility Companies to rollout
the prepayment system for electricity and water starting with
Government institutions to address the problem of
accumulation of utility bills and eliminate domestic arrears.
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VI. CONSTITUTIONAL SELF ACCOUNTING BODIES
111. Madam Speaker, the budgetary proposals of the following Self
Accounting Bodies have been submitted in compliance with Article
155(2) of the Constitution.
i). Courts of Judicature
ii). Electoral Commission
iii). Inspectorate of Government
iv). Parliamentary Commission
v). Uganda Law Reform Commission
vi). Uganda Human Rights Commission
vii). Uganda Aids Commission
viii). National Planning Authority
ix). Office of the Auditor General
112. In accordance with Article 155(3) of the Constitution, Government
has made recommendations on these proposals. I hereby lay both the
budgetary proposals and the recommendations of Government before
this august House, as required by the Constitution.
113. In order for me to submit a fully financed National Budget for your
consideration in accordance with Article 155(1) of the Constitution,
the budget provisions of these Self Accounting bodies are in
accordance with the resource envelope conveyed to them in the
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course of budget preparation, including the presentation of the
National Budget Framework Paper to Parliament, in accordance with
the Budget Act 2001.
VII. FINANCIAL YEAR 2014/15 TAX AND REVENUE MEASURES
114. Madam Speaker the objectives of the various tax measures for the
Financial Year 2014/15 are to raise revenues, enhance transparency in
collection and enforcement, improve compliance and encourage
investment by promoting value addition.
115. I will propose amendments to the tax laws to achieve the above
objectives and introduce amendments to simplify the laws, clarify
ambiguous provisions and enhance compliance in the various tax
laws. I will also highlight the decisions reached at the East African
Community (EAC) Pre-Budget consultative meeting.
A. INCOME TAX
Elimination of Initial Allowances on Eligible Property
116. Madam Speaker, a person who places an item of eligible property
into service for the first time during a year of income is allowed a
double tax deduction for that year of income of accelerated
depreciation and ordinary depreciation. I, therefore, propose to
terminate initial allowance on eligible property in order to widen the
tax base. This measure is expected to generate Shs.53.2 billion.
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12th June 2014 Final Budget Speech FY 2014/15
Increase the Presumptive Tax Threshold from 1% to 3%
117. Madam speaker, a lot of businesses in Uganda are operating
informally making it difficult to apply the normal income tax regime
on them. A presumptive tax system was developed for them but the
rates of tax on their income have not been revised since 1997. I
propose to increase the presumptive tax threshold from 1% to 3% to
raise revenue. This measure is expected to generate Shs.8 billion.
Imposition of 15% tax on Sports and Pool Betting winnings and
Designation of Gambling Houses to withhold the tax
118. Madam speaker, I propose to introduce a 15% tax on winnings on
sports and pool betting and designate gambling houses as agents to
withhold the tax. This measure is expected to generate Shs.8.0 billion.
Termination of exemption on Interest Income on Agricultural Loans
119. Madam Speaker, I propose to terminate the exemption on interest
income on agricultural loans to raise revenue. This measure is
expected to generate Shs.25.1 billion.
Capital Gains Tax on sale of Commercial Property
120. Madam speaker, I propose to introduce capital gains tax on the sale
of commercial property to raise revenue. This measure is expected to
generate Shs.52 billion.
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Income Tax Act Thin Capitalization Rules
121. Madam Speaker, I propose to limit deductions for interest paid to
non-associated persons not to exceed 50 percent of earnings before
interest and depreciation. This will ensure that it is effective in
limiting the avoidance of tax abuse through low taxed interest
payments.
Termination of exemption on Income derived from Educational
Institutions
122. Madam speaker, I propose to terminate the exemption on income
derived by a person from managing or running an educational
institution for commercial gain. This is consistent with the principle
of equity and transparency in tax regime, and broadening the tax base
by bringing more taxpayers into the tax net. This measure is expected
to generate Shs.15 billion.
Definition of Start-up Costs
123. Madam Speaker, currently, there is no definition of start-up of
costs in the Income Tax Act and this causes a risk of mixing start-up
costs with capital expenditure, thus getting a double benefit. I propose
to restrict start-up costs to only non-recurring preliminary costs,
which are associated with starting up a business.
Other Technical Amendments
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12th June 2014 Final Budget Speech FY 2014/15
124. Madam Speaker, I propose to other technical amendments Madam
Speaker, the details of the above proposals are contained in the
Income Tax (Amendment) Bill 2014.
B.VALUE ADDED TAX (VAT)
125. Madam Speaker, Value Added Tax (VAT) is a well-designed tax
and follows best international best practise. It is a tax designed for
generating revenue and is borne by the final consumer. However
since its introduction, changes have been introduced to address
perceived problems that have created complexity both in the
underlying tax structure and its administration. These include VAT
exemptions for intermediate inputs to various sectors. To restore its
credibility and enhance revenue mobilisation, I propose to restructure
the VAT Act to remove these distortions, with the objective of
promoting transparency, formalization of businesses, and
compliance in the management of VAT.
Termination of Exemptions under the Second Schedule of the VAT
Act
126. Madam Speaker, I propose to terminate the exemptions on the
following supply with effect from 1st July 2014:-
i. Supply of New Computers, Desktop Printers, Computer Parts
& Accessories and Computer Software Licenses;
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ii. Supply of hotel accommodation in tourist lodges and hotels
outside Kampala District;
iii. Supply of Liquefied Petroleum Gas;
iv. Supply of Feeds for Poultry and Livestock
v. Supply of Agriculture and Diary Machinery
vi. Supply of Packaging Materials to the Diary and Milling
Industries
vii. Supply of Salt
viii. Supply of Insurance Services except medical and life
ix. Supply of Specialized Vehicles, Plant and Machinery services
and civil works related to roads and bridges
construction,Agriculture, Water, Education and Health.
127. Madam Speaker, the above measures are projected to generate
Shs.215 billion and the details are contained in the VAT (Amendment
Bill) 2014.
Termination of Zero-rated Supplies under the Third Schedule of
VAT Act
128. Madam Speaker, I propose that the following VAT zero-rated
supplies be terminated with effect from 1st July 2014:-
i. Supply of Printing Services for Educational Materials
ii. Supply of cereals, grown, milled or produced in Uganda
iii. Supply of processed milk and milk products
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iv. Supply of Machinery and Tools for Agriculture
v. Supply of Seeds, Fertilizers, Pesticides and Hoes
129. Madam Speaker, the above measures are projected to yield
Shs.30.4 billion and the details are contained in the VAT
(Amendment Bill) 2014.
C. EXCISE DUTY
Increase of Excise Duty of 50 shilling on Petrol and Diesel
130. Madam Speaker, I propose to increase excise duty on petrol and
diesel by 50 shillings to increase revenue collections. This measure is
expected to raise about Shs.60 billion.
Reinstate Excise Duty of 200 shillings on Kerosene
131. Madam Speaker, I propose to reinstate excise duty on kerosene at
200 shillings per litre to raise revenue. The removal of the duty in
2010 did not lead to reduction of the price as expected and the oil
dealers rather than the final consumers were the beneficiaries.
Findings from the industry suggest that the reason the price of
paraffin did not reduce is the fear that unscrupulous dealers use it to
adulterate diesel. This is very hazardous to all users in industry,
transport and households. This measure is expected to generate about
Shs.15 billion.
Increase Excise Duty on Sugar from 25 shillings to 50 shillings
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132. Madam Speaker, I propose to increase excise duty on sugar from
25 shillings to 50 shillings. This measure is expected to generate
about Shs.7 billion.
Introduction of 10% Excise Duty on Mobile Money Withdraw
Fees
133. Madam Speaker, in Financial Year 2013/14, I introduced a 10%
excise duty on mobile money transfer services but the estimated
revenues were not realized as the charges were transferred to
withdrawals. To correct this anomaly, I am proposing a 10% excise
duty on fees charged on withdrawals. This measure is expected to
generate about Shs.16 billion.
Excise Duty on Bank Charges and money transfer fees
134. Madam Speaker, I propose to introduce excise duty of 10 percent
on bank charges and money transfer fees to generate revenue. This
policy will yield Shs.22 billion.
135. Details of the above measures are contained in the Excise Duty
(Amendment) Bill 2014.
D.OTHER TAX MEASURES
Treatment of Government Taxes
136. Madam Speaker, the Ministry has embarked on the process of
integrating Government in the tax system and removing any
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distortions and loopholes that arise by not treating Government
transactions in the same way as those of private sector.
137. Madam Speaker, I am proposing that commencing next Financial
Year, all goods and services procured by Government, directly or
with the donor support will be tax inclusive. Funds have been
allocated in the budget to the relevant sectors. Accordingly the gross
tax payment system managed under my Ministry will cease.
138. In this respect, to provide for a smooth transition for the new
policy framework, I have decided to write off all outstanding taxes
owed to Uganda Revenue Authority by both the Central Government
and Local Governments. However, this excludes PAYE, Withholding
Tax and any other taxes withheld at source which must accounted for
by the responsible persons in accordance with the law.
E. NON TAX REVENUE, NEW TAX LAWS AND OTHER REFORMS
Implementation of the Revised Non Tax Revenue rates by
Government
139. Madam Speaker, last Financial Year I revised some Non Tax
Revenue rates through the Finance Bill 2014 to raise revenue. The
exercise will continue in Financial Year 2014/15 raising further
revenue of about Shs. 40 billion. Details will be contained in the
Finance Bill 2014.
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New Tax Laws and Other Reforms
140. Madam Speaker, Last Financial Year, my Ministry proposed new
Excise Duty, Stamps Duty, Lotteries and Gaming laws as well as the
Tax Procedures Code. I am happy to report that the Bills are now
before Parliament and I am hopeful that they will be considered,
enacted and implemented as part of the tax reforms and budget for the
Financial Year 2014/15. It is of necessity to expedite the enactment
of these laws as they are critical for enhancing compliance and the
overall objective of increasing revenue collection.
Tax Administration
141. Madam Speaker, modernization of the tax administration remain a
priority to enhance revenue collection. The e-tax system and other
information management systems to augment the capacity of tax
administration will be stepped up to improve taxpayer compliance.
The e-tax is to be linked with the IFMS system, and accessibility of
electronic services for small taxpayers enhanced.
142. In order to improve tax administration, a list of key performance
indictors has been developed between the Ministry and URA to
monitor efficiency gains by tax administration and ensure that URA
can deliver the set targets.
East African Community and Regional Initiatives
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143. Under EAC Northern Corridor, initiatives have been implemented
to improve efficiency in the clearance of goods at Mombasa port and
along the Corridor. The focus has been on addressing the perennial
bottlenecks that increase the cost of doing business in the region.
144. Madam Speaker, I wish to report the time taken to transport cargo
from Mombasa to Kampala has been reduced from 18 to 4 days while
the time taken to load and transport fuel from Kisumu and Eldoret to
Uganda has been reduced from 3 days to 8 hours.
145. Transit bonds which have been a major complaint by the business
community have been eliminated and multiple customs
documentation substantially reduced. These improvements are
resulting into reduction in costs of transport for Uganda's cargo and
also deepening the EAC integration process.
EAC Pre-Budget Consultations
146. Madam Speaker, the East African Community Ministers of
Finance agreed on a number of decisions during the Pre-Budget
meeting, including introduction of a 1.5% infrastructure levy on
selected imports into EAC to finance railway infrastructure
development.
147. Details of the decisions will be contained in the East African
Community (EAC) Gazette.
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F. REPORT OF TAX EXPENDITURES FOR FY 2013/14
148. Madam Speaker, Article 152 (2) of the Constitution requires me to
periodically report to Parliament on the exercise of powers conferred
upon me by any law to waive or vary a tax imposed by that law. This
is to report that this Financial Year, I waived Stamp duty of Shs 200
million payable by Pride Micro Finance Limited and Shs 2 billion
payable by Uganda Development Bank Limited on increase in share
capital. I also waived PAYE liability of shs 332,252,158/=for Gulu
Independent Hospital for the period July 2002 to October 2005. This
is in line with the tax waiver granted to the Northern Uganda business
community in 2006 due to hardship in the aftermath of the war.
149. Madam Speaker, Government has, as of 26th May 2014, also paid
Shillings Eleven billion, Five Hundred Three Million, Two Hundred
Fifteen Thousand, One Seven Hundred Fifty Shillings only
(Shs.11,503,215,750/=) in respect of Hotels, Textile Manufacturers,
Hospitals and Tertiary Institutions, and Non-Government
Organizations with tax exemption clauses in their agreement.
VIII. SCHEDULE OF INDEBTEDNESS
150. Madam Speaker, in accordance with the provision of Article 159
(4), Section 13 (1) and (2) of the Budget Act 2001, I hereby lay before
the House a report on Government's total indebtedness as at 31st March
2014 and all the loans contracted the grants that Government received
during financial year 2013/14. I wish to call upon Colleagues to spare
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some time read and discuss the report and provide insights, comments
and guidance.
IX. CONCLUSION
151. Madam Speaker, the budget for the FY 2014/15 has been
prepared to create a better Uganda. Having a shared vision requires
working for the common good as a team. With this common
understanding, we shall transform Uganda. We shall build modern
and lasting infrastructure, we shall deliver services, create jobs,
eliminate poverty, increase incomes and ultimately improve the
overall quality of life of Ugandans.
152. The budget has prioritised implementation of actions that have
impact on livelihoods of a majority of Uganda such as education,
health, water and agriculture, among others. For rural farmers and
the business community, the budget aims at enhancing the
availability of electricity and transport infrastructure to enable in
order to reduce the cost of doing business. For potential
entrepreneurs and job seekers, especially the youth, the budget
provides opportunity for appropriate skills development for the
market, and access to investment finance. For the Uganda worker,
pension sector reforms are aimed at securing incomes in retirement,
and also ensure efficient savings mobilization for sustainable and
long term development, without compromising social security
protection of the workers.
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153. Therefore, the budget proposals I have presented today are not
only a contract among a selected few. The budget proposals reflect a
shared vision and common agenda of all citizens of Uganda.
154. Madam Speaker, as I commend this budget to the people of
Uganda, I wish to urge my colleagues, Members of Parliament and
Government technocrats to play their respective roles and implement
the proposals for a better Uganda.
I beg to move.
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