The Institute of Certified Public Accountants of Uganda (ICPAU) has asked the government to consider directing the postponement of deductions for the Pay as you Earn (PAYE) tax and deductions for the National Social Security Fund (NSSF) for an initial period of 3 months. This, as an intervention to provide more disposable income to employees and cushion them from the impact of the pandemic.
CPA Charles Lutimba, the ICPAU Manager – Standards and Technical Support said this reprieve should be considered especially for the most affected sectors like industry, tourism, and hospitality. However, he cautioned that if implemented, beneficiaries should not lay off their employees. “There should be a condition for the beneficiaries not to render redundant their current employees and during this period, the deferred payments must not incur any penalty,” CPA Lutimba said.
Accountants have also proposed: payment of PAYE only on actual salaries paid and not on accrued salaries, a reduction of the PAYE tax rate from 30 to 25 percent, and revisions of the PAYE thresholds to benefit the most vulnerable households in the formal employment sector:
- Increase the PAYE threshold to at least UGX 410,000 per month which is just about USD 1.79 (the international poverty line).
- The second band to start at about UGX 710,000
- The third band to start at UGX 1,010,000
- The 40% highest rate to start at UGX 7,000,000 per month.
To cushion borrowers facing financial challenges, ICPAU has proposed that the Central Bank directly engages the Uganda Bankers Association and other stakeholders regarding issues of loan repayments rather than leaving the restructuring of loans at the discretion of the commercial banks.
Small and Medium Enterprises (SMEs) contribute over 70% towards Uganda’s Gross Domestic Product (GDP) and over 90% employment opportunities. Many of them are currently in distress and in dire need of interventions to support a safe landing.
To support SMEs, ICPAU proposes compensation plans for loss of business, guidance to financial institutions to provide affordable credit or interest free loans, expediting the settlement of amounts owed by the government to SMEs and individuals (for example, directing that all government suppliers be paid pending bills in 21 days), reduction of domestic borrowing by the government, and the institution of a mechanism to minimise the likelihood of sound businesses going into insolvency due to lack of credit.
To support the trade and retail sectors, ICPAU has also proposed that the government should expedite measures to recapitalize the Uganda Development Bank so it can provide financing for manufacturing and import substitution, and institute measures, incentives and tax relief for sustaining production of essential locally-made goods and support other import-substitution initiatives.
The above proposals and other policy recommendations have been submitted to the Ministry of Finance, Planning and Economic Development. ICPAU is mandated by the Accountants Act, 2013 [Section 12(r)] to advise Government on matters of financial accountability and management in all sectors of the economy.Read full policy recommendations