Local textile firms ask govt to stop paying competitors’ taxes
Government says that the new tax measures are aimed at protecting local manufactures. PHOTO/FILE
What you need to know:
- The government shoulders taxes for some of the textile companies in industrial parks.
Local textile manufacturers have asked the government to stop paying taxes for their competitors operating in industrial parks, who are importing what they described as already-made products, and selling them in the same market.
Textile manufacturers, including Sino Textile Industry Co Ltd based in Mukono District and Sunbelt Textiles Company in Jinja City, have written separate appeals to the Minister of Finance, Planning and Economic Development seeking his intervention to stop tax incentives to companies in industrial parks, especially Tangshan Mbale Industrial Park Co Limited.
In a February 28 letter to the Uganda Revenue Authority, Mr Liao Weining, the Director of Sino Textile Industry Co Ltd, said his company is subject to paying taxes while their competitor is allowed to import blankets and then package them in the trade-free zone in Mbale City.
“Sino Textile has always been committed to fulfilling its tax obligations promptly and transparently. However, it has come to our notice that some companies involved in importing the finished blankets are not subjected to the same tax regulation that we adhere to since they import already finished blankets,” Mr Weining’s letter reads in part.
Tangshan Mbale Industrial Park Co Limited is a trade free zone that enjoys several tax incentives. However, once their products are to be sold in Uganda, they are supposedly subject to import taxes. The government has been shouldering the taxes of some of the textile companies operating in the industrial parks. Mr Weining said the unfair tax regime has created an uneven playing field that has put his company at a competitive disadvantage.
“We believe in the level playing field that encourages healthy competition and ensures that all businesses contribute equitably to the national revenue. We kindly request a thorough review of the tax policies related to the importation of finished blankets to ensure that all the companies are treated fairly and pay their due taxes,” he said.
Another June 13, 2024 complaint written by Kampala Associated Advocates (KAA) on behalf of Sunbelt Textiles Company to Minister Kasaija, indicated that the government initiative to pay taxes for companies in Mbale Industrial Park should end.
“We note that the government initiative to pay taxes for Mbale Industrial Park ends in June this year, and during one of the engagements at State House, there was an indication that there would be no extension of this unfair scheme,” reads the letter from KAA to Mr Kasaija.
After appeals from the local textile manufacturers to Mr Matia Kasaija, the latter wrote to the URA, indicating that the government would stop paying taxes for Tangshan Mbale Industrial Park Co Limited at the end of June 2023.
However, the textile investors in Mbale Industrial Park appealed to Mr Kasaija and he rescinded his decision.
“Following an appeal from the investors, I hereby rescind the above-referenced letter, to enable this ministry to undertake further consultations on the matter.
Accordingly, this is to inform you that this Ministry will pay taxes on intermediate textile inputs imported for use in Tangshan Mbale Industrial Park Co. Limited, specifically for M/S Grace Foam Limited for the period up to June 30, 2024,” reads Mr Kasaija’s letter to the URA Commissioner General.
Mr Kasaija directed the URA Commissioner General to send tax invoices for M/S Grace Foam to his ministry to pay.
On September 4, 2024, Mr Asadu Kigozi Kisitu, the URA Commissioner of Customs, wrote to the Managing Director of Grace Foam demanding the payment of Shs17.6b in taxes on intermediate textiles inputs that were accumulated between July 1, 2024 and September 4, 2024.
However, the Finance Ministry has been extending the tax waiver period whenever it expires. When the Monitor newspaper contacted Mr Laurent Zhang, the administrator of Mbale Industrial Park, he said all accusations levied against companies operating in the park were untrue. He added that their competitors should understand the government policies.
“They (companies) set up their factory wherever they want. That isn’t in our control. The policies of incentives were met to attract investors. It isn’t determined by us, but by the government,” he said.
