What you need to know:
- Uganda Revenue Authority’s decision to seize hundreds of inbound trucks transporting raw materials for making poultry and animal feeds over Shs18b tax arrears has ignited a meltdown in the businesses, leading to shortages and price hikes for dealers, farmers and consumers.
The fight between Uganda Revenue Authority (URA) and importers of concentrates and premixes for making poultry and animal feeds has worsened, leading to the seizure of 250 inbound trucks over unpaid taxes.
URA argues that it took a hardline after discovering that some importers were bringing into the country premixes, an inferior feed nutrient, instead of the then tax-exempt concentrate.
The manipulation of the incentive meant violators over the years are liable for tax assessment, said Mr Ibrahim Bbosa, the spokesman of the tax body.
Seizure of the raw materials has meant limited feeds supply, leading to stock-outs and scarcity on the market and rising prices for dealers and farmers alike. Some industry players such as Biyinzika Poultry Chief Executive Officer, Mr Henry Biyinzika, said farm gate and consumer prices will rise if the standoff at the Malaba border lasts longer.
“There will be a gap and farmers won’t be able to sustainably feed their birds; there will also be a shortage of chicken [and price rises],” he said.
Mr Biyinzika added that his company produces animal and poultry feed, including concentrates; however, currently, maize and soya is very expensive, which is making the production of the feeds and concentrates hard.
The border impasse is biting in more ways than one. The 250-plus drivers and their turn-men, some of whom have been stranded at the Malaba border for close to a month since URA announced the new tax policy, said they are running out of cash.
Since 2018, raw materials for animal and poultry feeds were exempted from paying taxes, until September 23 when the tax body started demanding Import Duty tax, Value Added Tax (VAT) and executed a tax levy on each consignment.
A levy tax refers to the seizure of property to ensure the fulfilment of tax obligations using administrative means rather than the court process. The actions of the tax body caught many importers and clearing agents by surprise, leading to widespread jitters.
Ms Josephine Nakimera, a clearing agent at the Malaba border, said URA was seeking to recover Shs18b in tax arrears.
“Ideally, URA was supposed to have officially communicated to us (clearing agents) and importers before implementing the policy, but they ambushed us calling for payment of Import Duty and VAT,” she said in an interview on Monday.
The drivers held up at the border are part of a crew for the more than 131 containers carrying raw materials from the port of Mombasa destined for Nalukolongo, a Kampala suburb, for processing animal and poultry feeds.
The trucks, each carrying a 40-feet container weighing between 25 and 27 tonnes of raw materials of animal and poultry feeds, has left more than 3,000 tonnes of animal and poultry feeds stuck at the border.
The implication is that animal and poultry animal feed manufacturers on the Ugandan side, which in this case is Nalukolongo, a Kampala outskirt, are running out of raw materials.
Input and feed importers as well as farmers, among them George William Kayongo, who imports feeds from The Netherlands, and poultry farmer Samuel Oyo, fear feeds will become more expensive, leading to higher farm gate and consumer prices.
“Our containers were impounded at the border [a month ago over the new taxes] and from then up to now, we are still incurring charges which are really high. A day a container spends at the border costs us $500 (Shs1.9m) and with those charges, I don’t know at what cost I’m going to have [and sell] these products in my stores,” Mr Kayongo told this newspaper yesterday.
According to Ms Nakimera, since 2018, the animal and poultry raw materials were exempted from paying taxes and she wondered why URA moved “haphazardly [to] implement a very unpopular policy”.
The biggest challenge, she said, was for the tax body to demand that importers of the raw materials pay taxes for all the raw materials brought into the country since 2018 when they started importing feed.
She added: “They are telling our clients to pay all the taxes for the goods imported into the country from 2018 and we feel this is outrageous.”
Mr Biyizinka said URA requires to conduct more consultations to enable stakeholders to understand whether its priority is just increasing tax collections or promoting local production.
“Unfortunately, Uganda Revenue Authority (URA) has imposed the tax on ingredients for food manufacturing and it has even imposed the tax on the basic ingredients. So right now, the way things stand everybody is subject to that tax,” he said, adding, “In the process, even the manufacturers are subjected to the same tax…the prices of everything is going to become higher and we are going to pass on that cost to the farmer and eventually to the consumer”.
This newspaper understands that some containers started a snail-paced clearance at the border, giving flickering hope the impasse may be nearing an end.
Mr Suleiman Siudu, a truck driver stuck at the border, said he was stopped from proceeding to Kampala by officials from the tax body on September 23 “without any proper explanation”.
“As usual, I arrived at the Malaba border with all my documents and hoped to be cleared in a short time to proceed to Kampala, but since last month, I have been kept waiting,” he said.
He added that the most unfortunate part of his ordeal was allegedly never being given an explanation as to why he was not proceeding to Kampala.
Mr Siudu, who was flanked by other distressed colleagues, said the truck owner has been calling him to drive back to Kenya which he thinks is not possible.
All the impounded trucks are Kenyan-registered, leading some of the disaffected drivers to question if they were intentionally targeted.
Mr Paul Chopa, another driver, said: “As a Kenyan truck driver, I am suspicious of this new tax policy by URA because I have been passing here without being subjected to all these (tax) demands.”
Mr Chopa, who has been held up at the border for a month while waiting for his cargo to be cleared, said he has run out of money and was having challenges accessing food, accommodation and water.
He revealed that at the DOJ and JOJ inland container depot where cargo trucks are parked, he paid Shs16,500 on the first day and since then, he pays Shs23,500 in daily parking fees, bringing the total amount spent on parking to close to Shs1m.
Mr Peter Sireka Namalwa, the chairman Uganda Clearing Agents and Forwarders Association, said 86 trucks were still stuck at the border, 46 had offloaded the containers and returned to Kenya.
He said about 400 trucks carrying raw materials for animal and poultry feeds had either left Mombasa or were still waiting to be cleared to proceed to Uganda through Malaba border.
Fearing for the worst, Mr Namalwa added: “Soon we are going to experience congestion here; the inland container depot is full to capacity and many trucks carrying the feed are now parked by the road side.”
URA speaks out
Mr Ibrahim Bbosa, the Assistant Commissioner Public and Corporate Affairs at URA, said the VAT Act was amended in 2017 and it had zero VAT on premixes, including zero import duty on premixes.
But moving along, he said, people started bringing concentrates. “There is a difference between premixes and concentrates, and that is where the whole war is beginning,” Mr Bbosa said, adding that the difference between the two are “obvious”.
Premixes, Mr Bbosa says, are usually the inferior type of a nutrient (about 4 percent of an entire animal feed); while concentrates are an improved version of what is added in the animal feed.
“While the law was protecting premixes, it says any other items that aren’t a premix have to pay import duty, and when something is paying import duty, in the VAT Act, it has to pay 18 percent. And that’s where the battle is,” he said, adding, “What our traders are doing is bringing concentrates and declaring them as premixes, and many of them are big traders.”
Mr Bbossa acknowledges that there was a hiccup, but adds that it was as a result of the traders’ alleged refusal to sign an indemnity.
He said: “We just can’t clear goods especially where there is an implication of a tax. Since we are still in a dispute, we have provided a 30-day window (starting on October 17), to clear goods but sign a letter of indemnity.”
A letter of indemnity is a legal document that binds parties to fulfil commitment in an agreement.
According to Mr Bbossa, the indemnity states that at the end of the day, when a verdict comes out that the traders are supposed to pay a tax, they shall go back to them because the law allows URA to do so.
Malaba border lies along the Northern corridor route and registers close to 2,500 trucks on a daily basis, meaning delays will create secondary problems of traffic gridlock and customs clearance backlogs.
Such problems are not new at Uganda’s border points with Kenya. In October last year, Kenyan fish exporters blocked the border point at Busia in protest after the Uganda Fisheries Protection Unit (FPU) seized five of their trucks carrying fish worth Shs1.5b.
The trucks, with fish destined for the Democratic Republic of Congo, were intercepted at Mpondwe border in Kasese District, prompting the traders to close the Busia border and paralyse the flow of trucks between Uganda and Kenya.
What challenges do you face as a livestock farmer, trader?
Samuel Oyo, poultry farmer
When I started farming chicken in Fort Portal many years ago, it was a total gamble because we had no information and we depended on feeds which were available in Kisenyi. At one time I bought feeds which had sand.
Richard Kirabira, poultry farmer.
We are struggling with standardising chicken products. There are good quality raw materials for feeds and parent stock from Kenya and that is why the Kenyan farmers out-compete us.
Christopher Mulindwa, pig farmer
We are a group of 20,000 pig farmers, rearing five million pigs but our biggest challenge is with feeds. That is why the pork products imported from Kenya are beating the ones locally produced.
Isaiah Nuwagaba, rolex dealer
The price of eggs has gone up we used to buy a tray between Shs9,000 and 11,000 but now a tray is Shs12,000 and they are not even available in the market.
Osbert Gumisiriza, butcher
The price of pork has increased to Shs12,000 or Shs13,000 a kilogramme. It used to be between Shs8,500 and Shs9,500 a kilogramme. They are attributing the hike to high fuel prices.
Collins Odokodit, roadside pork vendor
I have had to reduce the number of kilos I buy because even at the butcher the pork is scarce. They are saying they cannot increase the price because even the little which is there is not being bought.
Becky Mawombi, Yo Kuku agent
I used to get between 150kgs and 200kgs of chicken a week but now I get between 95kgs and 100kgs. For the last one month, they are saying the cost of feeds is high. I have also increase the price.
Medie Bolomeya, chicken vendor
We used to buy a bird between Shs10,000 and Shs12,000 but the birds now cost Shs20,000 and we cannot afford to buy many birds. I used to buy 100 for a week but I can’t afford 50 these days.
Dan Katisa, chicken dealer
Chicken used to range between Shs12,000 and Shs13,000 but now the price is between Shs18,500 and Shs20,000. This is because of the high cost of feeds. Maize bran now costs Shs1,600 a kilogramme.
Ahmed Kamere, roadside chickenvendor.
Chicken in Nakawa now costs Shs15,000 up from Shs12,000 and we have also been forced to sell a piece between Shs5,000 and Shs5,500 up from Shs 3,500 and Shs4,000