Last Thursday, during the Plenary, the Speaker of Parliament Anita Among suggested that rather than depending entirely on merchants, the government should look at other potential sources of tax revenue like putting taxes on cattle and other agricultural products.

Speaker Among emphasised her point of view by saying, “I own over 2,000 cows and I pay no taxes or have anyone ask me how much money I make from them. The tax base should be diversified rather than burdening traders. Many people own large numbers of cows, and the government ought to think about taxing them.”

Her comments followed last week’s protest store closures in several cities over a disagreement between the Uganda Revenue Authority (URA) and shopkeepers over the introduction of the Electronic Fiscal Receipting and Invoicing Solutions (EFRIS) system.

Although some leaders refuted the speaker’s claims alluding that they pay licences, in President Museveni’s statement released yesterday, he categorically revealed that some sectors are not taxed because the government wants to build a strong manufacturing force.

“Is it true that all sectors are taxed? The answer is “not at all”. When you buy bananas, live cattle, milk, coffee beans, etc., from the South West of Uganda and bring them to Kampala, do you pay tax? The answer is “no”,  other than the fees for the license to trade. When you buy maize from Mubende, sweet potatoes from Teso,  Irish potatoes from Sebei, Sim Sim from Kitgum,  Oranges from Teso, etc., do you pay tax? The answer is “no”. There are, therefore, no taxes on buying produce and selling it,” he said.

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The president also revealed that there are no taxes levied on processed or unprocessed because such taxes were abolished

“Is there tax when you export something – processed or unprocessed? The answer is “no”. We long ago abolished the export tax on coffee. Therefore, there is no tax on exports of any type. When you import machinery, medicine or raw materials, do you pay tax? The answer is “no”. Why are all these activities not taxed? It is because we want to kweziimba (build ourselves). We encourage all that bitambuza omusayi gwaffee (blood circulation.g. produce buying and selling of Ugandan products  or ebituzamu omusaayi (blood transfusion –machinery for production, raw materials, etc.),” he said.

Ugandan traders in a variety of industries have made no secret of the damaging effects that high taxes have on their companies. Many claim that they are finding it difficult to make ends meet due to the Uganda Revenue Authority’s (URA) ever-increasing tax burden.

These taxes frequently reduce their profit margins, which makes it challenging for them to pay for operating expenses and make expansion-related investments. As a result, there is a real risk that enterprises would close, which would increase unemployment and hinder economic growth.

Moreover, the problem of tax evasion, which is especially prevalent in the unorganised sector, makes it harder for the government to collect taxes. Numerous companies in the unofficial economy use different strategies to avoid paying taxes, like underreporting their income or running completely off the grid. This unfairly disadvantages conforming enterprises that pay the full cost of taxes, while simultaneously depriving the government of much-needed money.

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Uganda urgently needs substantial tax reforms due to the country’s high tax rate and pervasive tax evasion. There is a fine balance to be achieved, even as the government works to increase compliance and increase the tax base by implementing policies like tightening enforcement and decreasing exemptions. Overly harsh enforcement may lead more companies into the unofficial sector, further burdening already suffering businesses and extending the cycle of tax evasion. Conversely, excessive taxes may have the opposite effect.

In order to meet these problems, a multimodal strategy that includes outreach and education initiatives in addition to tax system simplification and company tax burden reduction is needed. Uganda may achieve sustainable growth and realise its full economic potential by establishing a business-friendly climate and implementing fair and equitable taxation policies across all industries.

The post Museveni clarifies why government is not taxing cattle, milk, maize and other agricultural produce appeared first on Watchdog Uganda.

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