New Budget process and how it will work

It may appear unusual, but it isn’t. By the time the minister of Finance reads the Budget on June 15, it will have been approved by Parliament, which is contrary to the usual.

“The Public Finance Management Act 2015, which was gazetted on March 6 has significantly changed the process and timelines for the formulation, approval and execution of the budget,” Finance state minister Aston Kajara said while tabling the Budget Framework Paper for 201516 last week.

It requires the Finance minister to present the proposed annual budget to Parliament by April 1, instead of June15.

Contrary to previous budgets Ugandans will not have to wait until June to know about new taxes, budget allocations and the resource envelope.

The reason for this change, according to Lawrence Kiiza, the director economics in the Ministry of Finance, is to have the proposals debated, approved or even rejected before the start of a new financial year.

“Unlike the past, tax proposals and allocations were debated well into the start of the financial year. This would disrupt planning and revenue collection targets,” he says.
This time, MPs will have to approve the budget proposals made including new tax measures by March 31.

Initially, MPs would debate proposals after June 15, which they would have to approve by October of the new financial year.

But this would cause disruptions, especially to the tax collector – Uganda Revenue Authority (URA), as they would wait for the approvals to implement any standing order.

According to Kiiza, URA now does not have to collect taxes on proposed measures before they are approved.

URA has been using an Interim Collection Order every July 1 of the financial years as stipulated in the Tax and Duties Act 1963, to start collecting proposed tax measures – albeit that Parliament approves the proposals.

If Parliament refuses the measure, URA halts the collections but the tax payer is not entitled to a refund.

In this upcoming financial year, revenue collections are expected to rise by Shs1.5 trillion to Shs11 trillion.

The proposed new tax measures such as increment on passport fees and the introduction of an annual licence fee for all commercial vehicles are expected to raise Shs460b.

The minister of Finance tabled the proposals together with the Budget Framework Paper last week.

According to the new Act, the Budget Framework Paper for the next financial year has to be tabled by December 31, which is contrary to the April 1 deadline as stipulated in the now repealed Budget Act.

Tabled in 2011, the Public Finance Management Act was in and out of Parliament with the ministry of Finance officials often making some amendments.

There had been stiff opposition to the Act during the process, especially from people like Cecilia Ogwal, the Woman MP for Dokolo District.
Ogwal’s opposition was that the Act would reduce the power of Parliament over the budget but it was eventually passed in November 2014 with President Museveni accenting to it in February.
Parliament will now start discussing the budget proposals and have till May 31 to have approved it.

No more supplementary requests

Notably, the new Act is also meant to do away with unplanned supplementary budgets that have been the norm.
“Supplementary requests did not have a source of funding and the current practice has been a bad one. In the new law, we have catered for it,” says Patrick Ocailap, deputy secretary to the Treasury.

Ocailap says the new law provides for the 3.5 per cent of the national Budget to be placed into a Contingency Fund with 85 per cent of that money meant to finance supplementary expenditure and the rest set aside for emergencies, such as disasters.

He also plays down suggestions that the new law will derail the regional integration process, emphasising that June 15 remains the day set for budget speeches.

Additionally, he says the East African Community Finance ministers’ Pre-Budget Meetings will be held before the budget speeches are read.

A stitch in time
International organisations such as the World Bank and International Monetary Fund had been recommending that Uganda passes this law because it guarantees a proper budgeting process and execution.

Additionally, civil society organisations welcomed the Act, saying effective implementation should be achieved.

“We strongly believe that once this law is operationalised and implemented accordingly, public finance management and practices will be enhanced, value for money promoted and there will be enhanced oversight function from Parliament,” reads a statement from the Civil Society Budget Aocacy Group.

Key changes in budget process dates
Item OLD PROCESS NEW PROCESS
Budget Framework tabled – April 1 December 31
Proposed Budget tabled at Parliament June 15 April 1
Considering and Approval of Budget October 30 May 31
Ministerial Policy Statements Submission June 31 March 15
Budget Speech June 15 June 15

SOURCE: Daily Monitor

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