The government of Uganda introduced a raft of tax measures for the financial year 2021/2022, some drawing negative reactions especially from the taxpayers.
Some of the tax measures that were made in regard to this included amendments to the Income Tax Act, the Excise Duty Act and the VAT Act, among others, touching on areas like rental income tax, tax of fuel, taxes on internet data, among others.
These were mainly aimed at increasing revenues, as well as making tax administration easier, according to the Ministry of Finance, Planning and Economic Development.
But some, according to the ministry are a response to the provisions of the third National Development Plan (NDPIII), which is in its second year. The theme of the NDP III focuses on import substitution, export promotion, industrialization, promotion of agriculture, regional integration, transport and protection of the environment, among others.
The Uganda Revenue Authority says some taxes are prohibitive, or are meant to reduce the reliance of the country on some products, especially the imported ones, so that local products are supported.
URA Supervisor, Tariff, Elinathan Masiko says in this way, this will boost industrialization, promote import substitution and increase exports.
One of the sectors to benefit from these taxes measures is agriculture, where more agricultural imports have been slapped with new or higher taxes to reduce their competitiveness in Uganda, and therefore, boost local production.
These include beef imports which will now have a duty rate of 60 percent, which will; replace the 35% Common External Tariff of 35% for the next year.
This is aimed at protecting the growing capacity in beef processing by discouraging imports.
The growing export trade of fish maw especially to the far east has recently attracted discomfort as it increases the pressure on fisheries resources, but also the fact that it was earning the government little, since there was no specific tax on it.
Now, it will attract a tax of 8% of the value of the product as it leaves the country.
There is a double benefit for the cotton industry where textile products will now incur import duty rate which is higher than the common external tariffs that ranged from 0 to 25%, to 35% for both textile materials and finished garments. This one-year measure will, according to Masiko will encourage local industries to come up and grow.
On the promotion of the coffee industry, the tax on the coffee packaging bags has been reduced from 20 to 10% so as to reduce the cost of value addition on coffee. This is in response to President Yoweri Kaguta Museveni’s directive to government to ensure that export of raw coffee is discouraged by policy.
Tomato paste, juice and juice concentrates, pineapple pulp, tea, ginger, jams, butter and such other products will incur increased import duties of 35%, because Uganda is increasing production and they will need market.
The government also asked that Uganda be granted suspension of the duty of on mechanically deboned chicken, to apply a duty rate of 35% for one year. Import duty applicable on bee honey has been increased at a rate of 60% instead of 25% for one year, to promote local production.
This should see imported processed chicken become less price competitive in Uganda. Refined cotton seed oil, sunflower oil and chocolates will also incur import duty at 65% to protect local production.
Other sectors that are being promoted include pneumatic rubbers for motorcycle tyres, steel blanks for making spoons and forks, insecticides, tarpaulins, ceramic toilet seats and related product will also incur increased duties to discourage their importation.
Beverages from artificial extracts like Red bull, Rock Boom, Canned Colas and such others which can me locally produced will incur Import Duty at a rate of 60% up from 25% for one year, as part of the import substitution drive and promote local manufacturing.
In the same way, beauty or other makeup preparations will meet import duty of 35% up from 25, to protect local industries. The government decided to stay the application of the EAC Common External Tariff of 0% on imports of mobile phones and instead apply a duty rate of 10% for one year, to support local production. The new changes also apply to import of electric transformers at a tax rate of 25% instead of 0%, for one year.
Other electric and electronic appliances assembled locally, will see excise duty reduced to 0% for one year, and they include inputs for assembly of speakers, LED bulbs, DVD players, blenders and hot water kettles.
This is aimed at attracting more investment in the assembling of electronics and make those assembled locally cheaper. Import duty on television sets has also been increased from 25 to 35% to support local industries like Gayaza Electronics.