Govt exempts taxes on inputs, hikes taxes on agric imports
Coffee beans on a farm. Investing in agriculture is considered the safest way to jumpstart the economy as it emerges from lockdown. PHOTO | RACHEL MABALA
Government has exempted taxes on inputs and increased taxes on imported agriculture products to promote import substitution and develop local industries.
Investing in agriculture is considered the safest way to jumpstart the economy as it emerges from lockdown.
While presenting the National Budget on Thursday, Finance Minister Matia Kasaija among the measures, slapped a 60 per cent import duty on agricultural products.
The interventions under agriculture are aimed at increasing agricultural production to ensure food security and expand regional food exports.
“These actions ensure the recovery of aggregate demand for domestic products while booting incomes for the majority of households both rural and urban,” Kasaija said.
“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,” Kasaija said.
In Uganda, the resource envelope for the financial year 2020/21 has been increased to Shs45.5 trillion, up from Shs40.6 trillion that in the 2019/20 financial year, indicating a 19.6 per cent increase.
According to the Budget estimates, agriculture has been allocated over Shs1.3 trillion slightly higher than Shs1.0 trillion allocated in the financial year 2019/20.
To promote import substitution and the development of local industries, Kasaija said: “We have increased import duties on goods that are produced or can be produced locally.”
60 % import duty
Kasaija also said the import duty on agricultural products will now increase to 60 per cent and other products to 35 per cent.
The supply of processed milk will also be VAT exempt to enhance the price competitiveness of milk produced in Uganda.
Mr Bijoy Varghese, general manager, Pearl Dairy Farm Limited (manufacturers of Lato Milk) responding to the tax exemption, said this is a tremendous incentive from the government.
“We believe the incentive will increase the production of pasteurised milk and facilitate value addition in support of the principles set out by Buy Uganda Build Uganda,” Varghese said.
He added that although the VAT concession will help push up farm-gate prices for raw milk and enable dairy farmers to benefit from higher incomes due to increased production, the expected incremental volume within the Ugandan market won’t be a substitute for the loss of export market such as our main trading partner Kenya.
“It is imperative that the trade issues with Kenya are resolved as soon as possible,” he noted.
He added that the consumption of raw milk exposes consumers to numerous infections and the substandard boiling of milk damages the essential nutrients.
“Our youth, pregnant mothers and the community in general will now be able to afford safe pasteurised milk as a great supplement to their daily diet,” he added.
Ms Victoria Ssekitoleko, the President of International Women in Coffee Uganda Chapter, said: “For us to add value, we need a quality product but in order to produce quality products, we need human resources who know what they are doing.”
Ssekitoleko believes the country should training experts in the Ministry of agriculture because 60 per cent of the available staff will soon retire.
She further said the ministry of agriculture should be facilitated to hire the people they need in order to deliver.
“So, facilitate them, hire more workers for MAIF, train them, and equip them so that they can do their work. Part of their work is to supervise and regulate what goes on in agriculture,” she added.
On value addition Ssekitoleko said that there are some companies that have set up in order to be able to do their work, companies like Mandela Millers.
“My suggestion is that the government of Uganda should buy some silos and go into Public Private Partnership (PPP) arrangement with those people who already own silos because they know how to manage,” she suggested.
According to Ms Agnes Kirabo, the executive director of Food Rights Alliance, the Shs300 billion will be given to the 14 production areas that the president identified.
“It is quite unfortunate because the minister is giving us quite a lot of promises that we don’t know in which framework they are going to be implemented,” Ms Kirabo said.
But one wonders whether these are enforcement interventions.
“What has been written here is nothing new. these are the things government has been promising to do in the Agriculture sector apart from the Shs300b. If we are to distribute it equally among the 14 production areas, they are going to invest around Shs214m in each. But how much can that do?” Ms Kirabo explains.
In terms of the VAT exemptions on the supply of agricultural equipment, Ms Kirabo says it is a raw deal.
“When you say you are going to remove VAT on the supply of agricultural equipment, what does supply mean when actually the bulk of the equipment is imported. If you remove VAT which is 18 per cent but leave excise duty that is negotiated between 10 and 25%, there is hardly anything you have done,” she said.
Ms Kirabo suggests that government uses part of hte money given to Uganda Development Corporation (UDC) and Uganda Development Bank (UDB) to boost local production.
“It would have been good to develop our Research Institute. What if government uses part of the money they are proposing to put in UDB, UDC and we capitalise our research institution which is capable of manufacturing products here. It can even fabricate these equipment.
The Import duty on imported agricultural products is only possible with government’s intervention.
“The 60% tax on imported products that can be produced here, can only benefit the actors within the sector only if we move fast like we did to support people who are making masks and sanitisers,”Ms Kirabo says.
Other measures
In order to immediate adverse impact on household incomes and jobs of the emergencies we have recently faced as a result of Covid-19 pandemic.
Minister Kasaija said government will be implementing the provision of improved agricultural inputs using NAADS e-Voucher scheme to farmers.
“We will also upscale agriculture extension services to boost production of key agricultural commodities, for which an allocation of Shs300b has been made,” Kasaija noted.
He said in order to create jobs for the vulnerable but able bodied persons affected by Corona Virus, government will expand labour intensive public works in urban and peri-urban areas.
In order to achieve this, government has allocated Shs130b.
The other measures include the provide rainwater harvesting technologies in rural communities, implementation of solar irrigation schemes and investment in the construction of multi-purpose water reservoirs.
Government intends to roll-out regional and community based storage facilities to store increased agricultural products and reduce post-harvest losses.
It will also provide seed capital to organised special interest groups under the Youth Fund, Women Entrepreneurship Fund and the ‘Emyooga’ Talent Support scheme; for which an allocation of Shs256b has been made.
Uganda Development Corporation will get additional funding of Shs138 billion for public-private partnership investments to facilitate import substitution and export promotion strategy.
Proposed supplies to be exempt from VAT
Trailers for agricultural purposes
Combine harvesters
Tractor mounted hay mowers, slasher, rakes & tedders; Crop Sprayers; hay and straw baler; Tractor mounted; Scrapers, levelling blades & Dam scoops; Root or tuber harvesting machinery; tractor Mounted loaders; irrigation equipment; Drinkers & feeders for all farm animals; Tuber harvesting machinery
Supply of processed milk
Supply of services to conduct a feasibility study, design and construction; the supply of locally produced material for construction of premises, infrastructure machinery and equipment or furniture and fittings not available on the local market to a hotel or tourism facility developer ($8m investment capital, 30 room capacity) or to a meeting incentives, conferences and exhibitions facility developer (over $1m investment capital)
