Kampala-Exorbitant taxes are not only taking a toll on British American Tobacco Uganda (BATU), a legally licensed tobacco firm, but are also among the reasons why the company’s shareholders will not be entitled to interim dividends.
According to unaudited results of BATU for the six months period ended June 30, the company registered a revenue decrease of six per cent, a dip attributed to among others, taxes on tobacco.
Equally affected are the profits from operations, which decreased by 50 per cent, as reflected in the half year BATU unaudited accounts.
According to BATU, the drop in revenue by six per cent is mainly as a result of timing in export leaf shipments while the decrease in operations profits by 50 percent primarily due to the impact of higher cigarette excise duties following the 43 per cent weighted average rate increase effective July 2013 coupled with the imposition of import duties.
On a positive note, profit before tax increased by 76 per cent due to the absence of exceptional costs in 2014 offset by lower profit from operations.
However, there will be no interim dividends for members because of the drop in operating profits.
“In view of the significant decline in operating profit, the directors do not recommend payment of an interim dividend,” said the company secretary, Mr Nicholas Ecimu.
On the other hand, foreign exchange losses significantly weakened the Shilling, eroding the profits that could have boosted the bottom line of the first half year results.
Uganda Revenue Authority statistics also showed a shortfall in excise duty of Shs104 billion in the just ended financial year, partly explaining why International Trade taxes came short of hitting its revenue collection targets.
Excise duty underperformance is linked to the decline in volumes of among others, imported cigarettes mainly due to increased tax rates of excise duty on these products.
For instance, the excise duty on cigarettes was increased from Shs22,000 for soft cup, Shs25,000 for other soft cup and Shs55,000 for Hinge lid to Shs32,000, Shs35,000 and Shs69,000 respectively,” a report presented by the URA Commissioner General, Allen Catherine Kagina, said.