Tobacco firms reject proposed tax hike
What you need to know:
While appearing before Parliament’s Finance Committee, officials from Leaf Tobacco Company opposed the proposal to increase excise duty by Shs10,000 on every 1,000 sticks of cigarettes.
Tobacco manufacturers have rejected the government’s proposed tax increase, warning that the move will result in significant losses for companies and the state. The Government proposed to increase taxes on cigarettes and beer, among others, which are slated to take effect on July 1st. While appearing before Parliament’s Finance Committee, officials from Leaf Tobacco Company opposed the proposal to increase Excise Duty Tax by Shs10,000 on every 1,000 sticks of cigarettes.
They argued that the tax hike would lead to an increase in retail prices, reduce consumption, and ultimately lower sales and revenue. Under the new bill, with the 10 percent increase, locally manufactured soft cap cigarettes will increase from sh55,000 to sh65,000 per 1,000 sticks, while the hinge lid variants will increase from sh80,000 to sh90,000 per 1,000 sticks.
The government hopes to generate an additional sh19.4 billion. Dr David Kamukama, the head of Corporate and Public Relations at Leaf Tobacco and Commodity, said they are the only company producing cigarettes locally and proposed a more modest increase of Shs5,000 per 1,000 sticks instead of the Shs10,000 being considered. “The overall impact of the extreme cigarette taxes as proposed results in promoting the illegal market, reducing sales and taxes from regulated businesses, and promoting toxic, unregulated products in the country,” he said.
He revealed that their annual tax contributions have declined from Shs40 billion in 2020 to Shs17 billion, warning that the new tax measures would worsen the situation. Meanwhile, Charles Nsamba, the Corporate and Regulatory Affairs Manager at British American Tobacco (BAT), urged the government to first tackle illicit trade before implementing any tax hikes. “We recommend that the government implement source-based enforcement.
We strongly believe the government has visibility at various warehouses,” Mr Nsamba told the Finance Committee. He added: “The government has control over the airspace because we have had engagements with URA, and they said products like Oris, which is not made locally, are brought in by high-ranking officials.
Those are the challenges they face.” He explained that some traders are smuggling cigarettes into the country and selling them at lower prices, putting legal manufacturers at a disadvantage. Nsamba said instead of increasing taxes on imported cigarettes by Shs10,000 per 1,000 sticks, the government should prioritise curbing illegal trade in the sector. The Finance Committee Chairperson, Amos Kankunda, said they are getting proposals from all the affected entities before forging a way forward.
Tax on skins and hides.
On the other hand, the Uganda Leather and Allied Industries Association (ULAIA) strongly supports the Hides and Skins (Export Duty) (Amendment) Bill, 2025. The suggestion in the Bill seeks to introduce an export levy of $0.80 per 100 kilogrammes of glue stock, inter Alia. The Board chairperson of the ULAIA, Abdul Hakiim Sekandi, said the enactment of the new tax “will direct valuable raw materials towards local processing, fostering industrial growth, creating jobs and contributing more substantially to the Ugandan economy.” In a supportive tone, the Secretary General of the Uganda Tanners Association, Mr Yasiin Mugabe, said the “passing of the said Bill into law is a critical and overdue step to ensure Uganda’s hides and skins sources contribute to the local industrialisation, job creation, and value addition.”
ICPAU backs proposed tax exemption for small businesses
The Institute of Certified Public Accountants of Uganda (ICPAU) welcomed the government’s proposed amendment to the Income Tax Act, which seeks to exempt newly established businesses valued at Shs500 million or less from paying income tax. While appearing before the Parliament’s Finance Committee, ICPAU’s Managing Partner, Mr Sillajji Baguma, stated that the proposal is a step in the right direction as it promotes entrepreneurship and supports the growth of small businesses by reducing the initial tax burden that has long hindered start-ups.
However, the body proposed that the tax exemption period be extended from the current proposal of three years to a five-year window and that businesses be allowed to carry forward any losses incurred during this tax-free period. ICPAU also urged lawmakers to clarify how assessed losses should be treated once the exemption period ends. They proposed adding another clause to the bill.
