In his letter, the President appealed to parliament to approve the tax proposals to together with others, saying failure to do so would exacerbate the already precarious situation arising from the poor revenue outlook.
Also rejected by Parliament is a proposal to increase excise duty on wines which the President expected to generate 130 million as well as a proposal to introduce excise duty on other fermented beverages including cider, perry, mead, spears and near beer. This was expected to generate 12 billion Shillings.
Speaker of Parliament Rebecca Kadaga. Photo by Parliament of Uganda.
Parliament has rejected a proposal by President Yoweri
Museveni to increase the excise duty on beer with the aim of generating
Shillings 52.5 billion in revenue. Also rejected are proposals to increase the
excise duty on wines to generate Shillings 130 million as well as other
fermented beverages including cider, perry, mead, spears and near beer to raise
Shillings 12 billion.
The decision was reached in plenary chaired by the Speaker
Rebecca Kadaga, where the MPs adopted a report by the Finance Committee in
regard to the reconsideration of the Excise Duty (Amendment) Bill, 2020, which
was returned by the president on June 1st, 2020.
In his letter, the President appealed to parliament to
approve the tax proposals to together with others, saying failure to do so
would exacerbate the already precarious situation arising from the poor revenue
“It is Government's key fiscal goal to raise revenue to GDP ratio to 18% by the
Financial Year 2023/2024 as envisaged in the Domestic Revenue Mobilization
Strategy (DRMS) in order to finance the Budget and enhance the delivery of public
services. The DRMS was developed after taking cognizance of our low revenue
effort compared to the East African Region and the Sub Saharan African
average,” reads part of the President’s letter.
He noted that Uganda’s revenue effort stands at 13.2% of GDP as of financial
year 2018/2019, which is below the Sub Saharan African average of 16%. Despite
the President’s appeal, the Finance Committee Chairperson, Henry Musasizi
recommended to Parliament that the proposed increase of taxes on beer will
generally result in higher prices for consumers and a reduction in the volume
of beer consumed, which affect the taxes collected by the government.
“If government prices formal beer or alcohol out of reach, the sector will
revert to a worse situation with people opting to drink the harmful illicit
brews that can result in death. This will have a negative effect on the locally
produced raw materials like sorghum, barely, maize and cassava with decreased
demand that will in turn affect household incomes negatively,” said Musasizi.
In regard to increase of Excise Duty on wine made from locally produced raw
materials to 20 Percent or Shillings 2300, Musasizi said that this would
discourage domestic production especially the small and medium enterprises,
discourage agro processing in the fruit and vegetable sectors and specifically
the processing of wine which is one sure way of fruit preservation and value
“The new proposed excise duty will reduce the number of those engaged in
processing fruits and vegetables hence reducing the returns to farmers and
exposing them to few processors who will pay low prices because of reduced
demand and lack of competition. This sector is still growing and needs to be
protected as Uganda is still exporting raw fruits especially pineapples. There
is need to maintain the current Excise Duty rates to encourage more investment
in this sector, boost production and generate more,” reads the committee
Parliament unanimously adopted the committee proposals. Parliament also
adopted the committee position on other tax measures recommended by the
President. The MPs approved the proposal by Museven to increase Excise
Duty on ready to drink spirits that will see the generation of Shillings 20 billion
in revenue. Parliament also increased Excise Duty on lubricants from 10 Percent
to 15% of their value.
But this will not apply to aircraft lubricants and those
used in manufacturing. The measure is estimated to generate Shillings 9
billion. “The main rationale for increasing excise duty on lubricants is to
raise revenue. Lubricants are an important component of usage of motor vehicles
as it is used by all vehicle owners, including the non-compliant taxpayers. The
increase takes into account the contribution of lubricants to pollution of the
environment,” said Musasizi.
Legislators also agreed with President Museveni and exempted from taxation the oil
used for power generation in West Nile Region, which isn’t connected to