Uganda imposes 60% import duty on agricultural products

By Martin Oketch, Kampala UGANDA

Uganda Finance minister, Matia Kasaija has said the government has introduced some taxes to raise revenue and announced that the import duty on agricultural products have been increased to 60 per cent and other products to 35 per cent.

Finance minister Matia Kasaija arrives for the 2020/2021 budget reading at Parliament on June 11, 2020.

Uganda’s total import bill is $7 billion per year, which leads to outflow of foreign exchange.

Presenting his budget speech for 2020/21 financial year at Parliament on Thursday, Mr Kasaija said: “In order to promote import substitution and the development of local industries, we have increased import duties on goods that are produced or can be produced locally.”

Kasaija said the import duty on agricultural products has been increased to 60 per cent and other products to 35 per cent.

“Hitherto, we have been importing refined industrial sugar yet we are a surplus producer of sugar. We have agreed with sugar manufacturers to produce refined industrial sugar locally and we shall protect them from imports,” he said.

The minister further said modest adjustments to tax rates that have been made include the excise duty rate on fuel; and adjustments to improve competitiveness in the region, support compliance, remove ambiguities in the legislations as well as close loopholes that may lead to revenue leakage.

Kasaija said in view of the recent emergencies the economy has faced, government introduced modest adjustments in some taxes to raise revenue, saying this will support enhanced economic recovery, as well as maintain an acceptable level of social welfare.

“The modest adjustments to tax rates that have been made include the excise duty rate on fuel; and adjustments to improve competitiveness in the region, support compliance, remove ambiguities in the legislations as well as close loopholes that may lead to revenue leakage,” he said.

Kasaija explained that in order to support agriculture, VAT on the supply of agricultural equipment will be exempted, adding that the supply of processed milk will also be exempted from VAT to enhance the price competitiveness of milk produced in Uganda. In order to respond effectively to the COVID-19 pandemic, taxes on supplies for diagnosis, prevention, treatment, and management of the epidemics, pandemics and health hazards, will be exempt from customs duties.

Kasaija appealed to Ugandans not to look at paying tax as a burden before explaining that tax administration will be strengthened to improve efficiency in revenue collection, pointing out that the capacity of local governments, including the roll-out of the digital collection of fees and rates, will also be enhanced to improve local revenue generation.

He said in the next financial year's revenue target is Shs21.810 trillion comprised of tax revenue amounting to Shs20.219 trillion and nontax revenue of Shs1.591 trillion.

“This target translates into a revenue effort of 14.3 per cent of GDP. To achieve this target, we will implement the following new interventions: - Further roll-out use of digital tax stamps and expand the range of products covered in order to deter under-declaration of production 26 and importation,” he said.

Kasaija said digital stamps will also ensure that goods on the market meet the required health and safety standards; Widen the scope of the income tax withholding agents across all sectors in order to broaden the tax base; Enhance rental income tax collection and compliance by implementing a digital collection solution, as well as gazette rental income tax chargeable in different geographical areas for taxpayers who do not voluntarily declare their rental income.

The other measures he said are Gazette VAT withholding agents with an applicable VAT rate of 6 per cent, and provide for penalties for failure to withhold; and Rollout the use of Electronic Fiscal Devices (EFDs), which are - cash registers interconnected to the Uganda Revenue Authority, to improve record-keeping and tax compliance.

On public debt, Kasaija said total public debt as at December 2019 amounted to $13.3 billion, with external debt accounting for $8.59 Billion or 64.4 per cent while domestic debt amounted to $4.74 Billion or 35.6 per cent of total debt stock.

He said Government’s approach to public debt financing is elaborated in the Medium Term Debt Strategy for the five- year period commencing next financial year. The Strategy seeks to contract only affordable external debt in preference to domestic debt.

“The approach to reduce domestic debt in preference to external debt is intended to lower the cost of interest payments to 2.2 per cent of GDP compared to 2.6 per cent of GDP, if we were to continue borrowing significantly from domestic sources,” he said.