Uganda Parliament Reduces Tax on Sugar and Fuel

Wednesday, 7th September, 2011

The Uganda Parliament on Tuesday passed a Bill exempting excise tax on paraffin, and reducing tax on sugar by Sh25.

The Excise tariff (Amendment) Bill, 2011, whose object is to amend the parent Excise Tariff Act to vary the rates of excise duty on cigarettes and sugar was passed without any amendments.

In this year’s budget, the Government removed excise duty on paraffin and halved that of sugar.

However, debating the finance committee report on the Bill Abdu Katuntu (FDC) argued that the Sh25 reduction on sugar had been overtaken by events and that he did not see its usefulness.

He said that the Government would be losing close to Sh8b in revenue as a result of passing the amendment and he proposed that the amendment be deleted so that the Government could raise additional Sh8b.

Alice Alaso (FDC) also wanted to know whether the minister of finance, Maria Kiwanuka was going to bring down the price of sugar in order for the proposed reduction to become meaningful.

The Leader of Opposition, Nandala Mafabi urged the Government to remove Value Added Tax on sugar for the benefit of consumers.

In its report the committee noted efforts by the government to collect more revenue from luxurious items like cigarettes, but called for increased tax on imported spirits and wines whose demand is price inelastic in order to increase the current narrow tax base.

The committee also urged the Government to consider increasing tax on beer progressively.

Minister Maria Kiwanuka defended the reduction on sugar saying the Government believes that every reduction counts.

She opposed increasing excise duty on spirits as doing so would force people to resort to illicit liquor. The committee chairman, Frank Tumwebaze conceded to her argument later.

Parliament on Tuesday passed the Finance (No.2) 2002 (Amendment) Bill, 2001, whose object is to amend the finance (No.2) 2002 (Amendment) Act, 2002 to increase the levy on export of raw hides and animal skins.

If the Bill is accented to by the President, Uganda Revenue Authority shall charge and collect a levy at the rate of US$0.80 per Kilogram on any person exporting raw hides and animal skins. Originally they were charging US0.4 per kilogram.

The finance committee had initially opposed the increase saying that increased tax over time has acted as a disincentive to the exporters, yet the leather tanning industries could not consume the supply of raw hides in the country.

The committee also argued that companies were not adding value to accepted standards adding that the country had no capacity to manage waste from processed hides and skins, but the minister promised to come back to the House in six months’ time with answers to their concerns.

By Joyce Namutebi and Catherine Bekunda : The New Vision Newspaper