Manufacturers Contest Proposed Tax on Plastics

Uganda Manufacturers’ Association-UMA and Uganda Plastic Recyclers Association have asked the Finance Committee of Parliament to reject the government's proposed tax on plastics. 

The proposed tax was contained in the Excise Duty (Amendment) Bill, 2022, which was passed by parliament on May 18, 2022, shortly before the start of the current financial year.

In its proposal, the government wanted to impose a tax of 40 per cent of 40,000 Shillings per kilogram of sacks and bags of polymers of ethylene and other plastics. However, the government provided an exception on vacuum packaging bags for food, juices, tea and coffee sacks and bags for direct use in the manufacture of sanitary pads

But this was rejected by the Parliament, and as a result, President Yoweri Museveni did not assent to the bill and, instead, returned it to parliament for reconsideration. In his communication, the president said that the decision by parliament to reject the proposal undermines the objectives government intended to achieve through the excise duty amendment.

He explained that one of the government’s objectives was to streamline the provisions for taxation of plastic products with the view to ensuring that the targeting of excise duty is refocused away from sensitive sectors that utilize elements of plastics. Museveni also noted that this was to also address tax administration challenges associated with its implementation and incentivize owners of plastic recycling plants to enhance their efforts toward cleaning up the environment. 

Now, in their submission to the committee, Deo Kayemba, the UMA Chairman criticized the proposed tax on grounds that it has far-reaching consequences. He instead proposed that measures should be instituted to provide clarity on the management of the pollutant plastic products which are known and well documented.

However, Jane Pacuto, the Vice Chairperson of the Finance Committee said that it was the duty of everyone to pay tax after UMA complained of double taxation.

Committee Chairperson Keefa Kiwanuka said that the proposed levy by the government is intended to generate 60 billion Shillings in revenue. He wondered how the gap in revenue collection will be addressed if the proposal by the government is not considered. 

Besides the excise duty on plastics, President Museveni also in his letter to parliament questioned the re-introduction of a new clause in the Bill that provides for excise duty at 20 per cent on sugar confectioneries.

“Excise Duty on sugar confectioneries was first introduced in the financial year 2014/2015 at 10 per cent and was later increased to 20 per cent in 2018/2019. However, the government removed it in the financial year 2019/2020 following complaints from manufacturers that their products were being out-competed by cheaper smuggled imports,” Museveni notes.

He says that parliament’s decision to reintroduce the tax has implications since it goes against the government’s decision not to increase taxes in the current financial year 2022/2023 which was intended to support speedy economic recovery especially given the general increase in prices of goods and services.

The President requested parliament to delete the clause introducing the tax on sugar confectionaries and also approve a government proposal of imposing 40 per cent or 4,000 Shillings excise duty on each kilogram of sacks and bags of polymers and other plastics.