By lubyayi ntale muhammad.
The Uganda government has an ambitious plan of raising about Shs14.5 trillion in the next financial year, with 90 per cent of that coming from tax revenues.
At a time of slowing economic growth due to low business performance, in the next financial year 2017/18, the ministry of Finance has made several tax proposals that will have implications on several businesses.
A closer look at the tax bills (Income Tax (amendment) Bill, 2017, Excise Duty (amendment) Bill, 2017 and VAT (amendment) Bill 2017) indicates the government is proposing some new tax measures and some exemptions on others.
The government recently launched the Buy Uganda Build Uganda (BUBU) Policy and the Local Content Bill is currently being drafted by a private member. The policy aims at encouraging Ugandans to purchase or use locally produced products. In the Excise Duty Bill, the government has made two proposals that tend to operationalise BUBU.
First, the government has proposed that fruit juice that has less than 30 per cent pulp made from Uganda will be subjected to 13 per cent or Shs300 per litre, depending on which one is higher.
Explaining the reason for this, Mr David Bahati, the State minister in the Finance ministry, noted that this was done in order to encourage local sourcing of raw materials, especially from fruit growing farmers. This is a new categorization in the Bill and is expected to boost agricultural production.
However, according to the preliminary research several processing companies that import pulp is the low productive capacity in the country and also, there have been concerns about the quality of the fruit processed. The fruit processing companies are expected to meet the Finance Committee of Parliament to express their views on the Bill.
In order to encourage local production and purchase of furniture, the government has offered more clarity that there will be no duty charged. In the Excise Duty (Amendment) Bill before Parliament, the government plans to impose a 20 per cent excise duty on furniture that is imported.
Additionally, the government has also offered some clarification that locally produced furniture does not include that which is assembled here. Uganda has seen a vast number of furniture shops that import and assemble their products in the country.
There is an expected backlash from these importers once they meet the Finance Committee in Parliament. However, for local carpenters, this is good news for them as they would now expect demand to shift to their side.
Insiders note the ministry of Finance and that of Trade have been particularly concerned about the flurry of furniture imports from China and Malaysia, yet the country has artisans that could benefit from this growing demand.
The government has also made a U-turn on the taxation of sugar confectioneries. The government has placed an excise duty of 20 per cent on these products that include chocolate, chewing gum, and sweets.
However, the concern here raised by the Tax Justice Alliance of Civil Society Organisations such as Oxfam, CSBAG, Uganda Debt Network, Action Aid International, among others, is that this reduction should only benefit companies that participate in the local confectionery production.
“…sugar confectioneries that are not locally produced should bear the previous 80 per cent excise duty whereas the locally produced confectionaries should benefit from the amendment, just like it has been done for furniture,” the position statement of the Tax Justice Alliance presented to Parliament, stated.