Company gets Shs16b tax break to import rice
What you need to know:
- The ministry also worked to ensure that the firm got a tax waiver which allowed it to bring in the rice without paying VAT and withholding tax.
- Ms Mbabazi said the only way the situation in the sector can be normalised is by levying taxes on the rice.
A row is brewing between Trade minister Amelia Kyambadde and rice growers over allowing a single firm to import rice from Tanzania tax-free, a move other players say disadvantages them and frustrates the growing of rice in the country.
The Rice Association of Uganda (RAU), as a result, has sent a protest note to Ms Kyambadde, questioning the logic behind the ministry’s decision to allow a single firm to import 50,000 metric tonnes of rice from Tanzania without paying taxes.
The complainants argue that if the decision of the ministry was to allow importation of rice from Tanzania, it should have been open up to whoever is willing to engage in the business.
The importation of the cheap (tax-free) rice is hurting the rice growers, they say.
The ministry issued an import permit to Ms Gotovate Uganda Limited on July 15.
The ministry also worked to ensure that the firm got a tax waiver which allowed it to bring in the rice without paying VAT and withholding tax. The import permit is valid until December.
The rice farmers say Gotovate Uganda Limited and Mansoor Mohamed Kayondo, to whom some of the documents related to the rice imports are addressed, were not known as players in the rice sector until then. By press time, we were unable to reach Mr Kayondo, to whom the documents directed to Gotovate were addressed.
“I find it odd that (the Ministry of) Trade would be soliciting from (the Ministry of) Finance an exemption for an importer. It is the trader’s job to solicit and not the minister,” Ms Rachel Mbabazi, the chairperson of RAU, told Sunday Monitor on Thursday afternoon.
Ms Mbabazi also thinks the decision is a contradiction of the “Buy Uganda Build Uganda” (BUBU) policy that the Ministry of Trade has been promoting as a means of boosting local consumption and increasing household incomes.
She has now penned a letter demanding that Ms Kyambadde explains herself.
In the letter, dated September 3, a copy of which Sunday Monitor has seen, Ms Mbabazi questions why Ms Kyambadde took the unilateral decision to allow the importation of rice on concessional terms without first consulting other stakeholders.
“If we had been asked to offer an opinion, we would have surely explained the harm in such an action. I would, therefore, like to request for enlightenment regarding the conditions under which a single company was granted a stay of application on 18 per cent VAT,” Ms Mbabazi wrote.
The Commissioner of External Trade at the ministry, Mr Emmanuel Mutahunga, declined to discuss matters around the concessional permit.
“That is a high profile matter that would require the minister herself. Please get in touch with her,” Mr Mutahunga said.
By press time, our calls to minister Kyambadde’s known mobile telephone number went unanswered. She also did not respond to text messages. It is estimated that least $4.5m (approximately Shs16.72b) in taxes, which should have been collected by the Uganda Revenue Authority (URA), has been lost as a result of the tax waivers.
Ms Mbabazi says the rice, which was imported under the arrangement and clearly labelled “Islamic Relief Rice” ,has flooded the market, displacing locally produced rice.
Mr Venugopal Pookat, the managing director of Kibimba Limited, formerly Tilda Uganda, told Sunday Monitor that locally produced rice can hardly compete with imported rice because it comes in on the cheap.
“We have tried to reduce the prices as much as possible but we still cannot compete,” Mr Venugopal said.
This has placed actors in the sector in jeopardy at a time when they are struggling for markets due to the effects of the Covid-19 pandemic.
“Because of this (flooding of tax-free rice on the market) farmers are forced to store their paddy hoping for better prices in the future. It is not only our local farmers who have been affected,” Ms Mbabazi writes.
She hastens to add that it is not only farmers that have been affected by the cheap tax free rice.
“This has also led to a reduction in business for local millers. The entire rice industry and the livelihoods of nearly three million people who depend on smallholder production is in distress because of this decision,” she adds.
Long standing war with Tanzania
Mr Phillip Idro, the chairperson of the Rice Millers Council of Uganda, told Sunday Monitor that most rice farming communities, for example those in Nwoya and Bulambuli districts, have since opted to grow other crops, especially fruits and vegetables until rice from Tanzania stops coming in.
Mr Idro said this incident is the latest in a long standing fight that local business people have been having with their counterparts in Tanzania.
In 2018 Tanzania banned Ugandan sugar on its market on grounds that Ugandan sugar producers were importing cheap sugar from Kenya and Brazil and repackaging it for export to Tanzania. It then imposed a 25 per cent excise duty on sugar that had been exported by Kakira Sugar Limited. The sugar was later returned to Uganda.
Now Mr Idro says the fight over rice came up in around 2017, when Ugandan millers sought to import paddy rice from Tanzania, but the Tanzanians insisted on selling milled rice, which the local millers rejected opting to import from Pakistan.
“We proposed to have a quota slapped on imported rice from Tanzania, but Ugandan officials abandoned us. We are now on our own yet, the Tanzanians will not negotiate with us because we are not in government,” Mr Idro said.
Speaking to Sunday Monitor by phone on Thursday, Ms Mbabazi said the only way the situation in the sector can be normalised is by levying taxes on the rice.
“All that we are saying is that the tax should be levied on the rice. If they pay VAT and withholding tax, it will bring them back on a level playing field with the rest. They should pay tax for whatever had come in earlier,” Ms Mbabazi said.
She said this was drawn to the attention of URA during a September 18 meeting, but that the tax body is yet to respond.
On Thursday afternoon the manager of public and corporate affairs at URA, Mr Ian Muhimbise Rumanyika, promised to revert, saying he was yet to get clarification on the issues, but he had by press time not done so.