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Proposed tax on exports may hurt economy - MPs

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By Francis Mugerwa

Posted  Tuesday, March 18  2014 at  02:00
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A section of MPs on the Budget, Finance and Natural Resources Committees have expressed fear that some of the recently proposed new taxes, especially on exports, could hurt the economy.

While meeting tobacco farmers and companies in Hoima District last week, the lawmakers claimed the proposed tax on unprocessed tobacco exports could kill the lucrative tobacco industry.

“We should be looking at how to maximise exports because that is the only way we can increase foreign exchange earnings. This tax could hurt our exports yet as Ugandans we need more exports,” Mityana North MP Godfrey Kiwanda Ssubi said.

Last week, the NRM budget advisory committee chaired by the Kyamuswa MP, Mr Tim Lwanga, reportedly recommended a $0.5 (Shs1,262) export levy on every kilogramme of unprocessed tobacco leaf that is exported, a move the committee hopes will raise at least Shs25 billion.

More proposals
The committee also proposed a tax on private schools and tertiary institutions, a 3 per cent stamp duty on sale of land and buildings, a 1.5 per cent railway development levy and the revival of the Co-operative Bank.

If adopted by Cabinet, the committee proposals could be included in the 2014/15 budget which will be read in July. The Rubanda County East MP, Mr Henry Musasizi Ariganyira, said the planned levy would worsen Uganda’s trade deficit and have long-lasting negative impact on economic growth.

“Any tax that attracts a negative impact on our balance of trade position is not welcome. We cannot be seen to enact a law that affects the competitiveness of our exports and curtails the growth of household incomes and the economy,” he said.

Balance of trade is the relationship between a nation’s imports and exports. The Ntenjeru County North MP, Mr Amos Lugoloobi, said despite the negative impact of smoking, the country should encourage growing of tobacco for export.

“We gain a lot of value in growing tobacco and exporting it. Other people can consume that tobacco,” Mr Lugoloobi said. He appealed to tobacco companies to come to Kayunga and teach farmers how to grow the crop.

The spokesperson for West Nile Farmers Association, Mr Morris Candia, told MPs farmers were concerned that the proposed levy could reduce the demand for tobacco and affect their income.
“For our tobacco to remain competitive, the tobacco companies may be forced to cut the final price they pay to the farmers as well as the support that they have been giving to us in form of loans, inputs and planting seeds,” Mr Candia said.

The farmers appealed to MPs not to make laws that will negatively affect the livelihoods of more than three million people in the tobacco growing areas.