By Joshua Kato
Livestock farmers have made a sigh of relief after the government agreed to scrap the new VAT and Import duty taxes that the Uganda Revenue Authority (URA) had re-introduced on imported feeds.
The taxes had been scrapped in 2017.
However, in September 2022 the tax watchdog, URA sent out tax bills to all importers of animal feeds. Even tax exempted feeds were added to the demand notes.
According to a report from Parliament that was mandated to scrutinize the new tax proposals, the Ministry of Finance says that the taxes must not go ahead.
“We have got assurance that the taxes will not go ahead because they are retrogressive to the sector,” MP Gilbert Mwijukye, a member of the committee said on Friday, November 05.
After the URA declaration, the importers were in disarray and panic. Many faced the likelihood of going bankrupt.
Retrospective taxation is an effective tool for the termination of business. Sources indicate that some of the players were billed with over sh200bn, far above their operating budgets.
“It was a prohibitive tax against a product on which the fast growth of the poultry sector stands,” says Chris Magezi, the Director of Champrisa International.
For the last seven years, the poultry sector has been growing at a plausible 3.2%.
According to the Uganda Bureau of Statistics (UBOS), there is an estimated 47 million chicken in Uganda. Out of these, about 6 million are hybrids, mainly owned by commercial farmers.
These provide most of the eggs and meat that Ugandans consume.
Production of eggs is estimated at nearly 1 billion eggs, compared to bout 400 million eggs 10 years ago. The poultry sector contributes about 4.3% of the total Agricultural sector contribution to GDP. The actual value of feeds produced is US$300m.
“It is a sub-sector that employs a different array of people,” Stephen Kasule, an agri-economist, says.
He argues that prohibitively taxing a sector that is just recovering from bird flu-related bans, pandemic closures and dampened aggregate demand is a sure way of grinding its recovery to a halt!
Most important though, is the dismissible fact that this value chain employs many Ugandans.
It also earns the country significant amounts of revenue from exports. Both poultry meat, eggs and dairy products (milk, yoghurts, casein etc) are big exports.
“It is good that the government has listened to the cries of the farmers and stopped this tax otherwise the sector was going to die,” says Ben Muwanga, a poultry farmer.