For many Ugandans, the thought of beer conjures warm memories, cheers with friends, or a cold drink at the end of a long day. However, they will in the next financial year dig deep into their pockets to have their favorite drink as the government slapped more taxes on beer.
Finance Minister, Matia Kasaija on Thursday announced taxation measures targeting the alcohol industry, particularly imported brands of beer and wine.
While some analysts had suggested that, the budget for the financial year 2024/25 was not too “tax laden” the Minister slapped a one thousand shilling on each kilogram of powdered bear.
This alcohol exercise tax is likely to affect the final price of this type of beer.
Powdered beer has recently been a beer of choice by some revelers in some of the top bars and clubs. Unlike the bottled beers on the market, the powder imported from countries like Germany instantly turns into beer once mixed with water.
The Minister also announced an increase in excise duty on imported wines from 80 percent or Shs 8,000 per litre to 100 percent or Shs 10,000 whichever is the highest.
Players in the breweries sector have in the past raised alarm about exercise duties on beer. Current beer made from malt has a 60% duty or UGX 2,050 per litre, whichever is higher, opaque beer, 12% or UGX 150 per litre, whichever is higher.
In March, Uganda Breweries Managing Director, Andrew Kilonzo said warned against the plans by the government to impose a 20 % tax increase on both locally manufactured and imported spirits.
He revealed that Uganda’s exercise duties on spirits were twice those in other East African countries. Kasaija did not mention new exercise duties on the spirits meaning that the old ones still stand.
Other Taxes
Bearing in mind that taxes form most of the collections to finance the budget, the minister announced 100 shillings on a litre of diesel and petrol. He also imposed excise duty on adhesives, grout, white cement, and lime. This according to the Minister was s to align the tax treatment of these products with that of cement.
Mobile Money Withdrawals
When the new budget comes into effect withdrawals of money from other platforms other than mobile, money will be subject to an excise duty at a rate of 0.5 percent of the value of withdrawals.
This will not apply to withdrawals from agent banking or banking halls. This measure is likely to hurt those who operate on electronic banking wallets.
Value Added Tax (VAT)
To facilitate the growth of e-mobility and affordability of electric cars and motorcycles and protect the environment. Kasaija announced that the supply of electric motorcycles, vehicles manufactured or fabricated in Uganda, and their respective charging stations and batteries for electric motorbikes, charging stations, and related services are exempt from tax.
Taxing gifts from employers
The Minister announced that starting next financial year, the provision of taxable goods/services by an employer to an employee would attract VAT. This issue had generated debate in parliament.
MPS reasoned that if a company for instance produces cement and donates bags to its employees of cement for self-development, the gift would be subject to VAT.
Income Tax
The government will with effect from the next financial year investors from tax capital gains arising from the sale of holdings in private equity or venture capital funds regulated by the Capital Markets Authority. According to Kasaija, the intention is to incentivize private equity or venture capital investments in Uganda.
Tax Holidays
The government will provide tax holidays on the income of a person who manufactures and fabricates electric motor vehicles, electric motorcycles, electric batteries, and electric vehicle charging equipment, as well as the income of a person who develops, establishes or operates a medical facility or hospital facility.
Some civil society actors have in the past warned the government against such blanket tax holidays saying they normally end up denying the country access to revenue.
Uganda Revenue Authority has indicated that the country loses about Shs160 billion annually due to foregone Corporate Income Tax mostly from multinational companies because of tax holidays.
”We have extended the waiver of penalties and interest on arrears outstanding by June 2023. This waiver will apply when the taxpayer pays between July and December 2024, and we have also introduced a 10 percent withholding tax on commission paid to the banking agents and fintech agents (payment service providers),” said Matia Kasaija.
Public Debt
The Minister reported that Uganda’s total public debt stood at Shs 93.38 trillion, equivalent to USD 24.69 billion. Of this amount, external debt was Shs 55.37 trillion equivalent to USD 14.64 billion while domestic debt was Shs 38.01 trillion equivalent to USD 10.05 billion. The public debt is projected at Shs 97.638 trillion, equivalent to USD 25.716 billion by 30th June 2024.
He reported that in nominal terms, Uganda’s public debt to GDP was estimated at 9 percent in June 2023, and is projected to end at 47.9 percent this financial year ending June 2024. “ This is below the52.4 percent threshold provided for in the Charter for Fiscal Responsibility for the financial year 2023/24, and less than 50 percent of GDP Government policy target for debt sustainability,” he said. Kasaija noted that although Uganda’s debt has increased, it is still sustainable and the Government is committed to keeping it sustainable. “Most importantly, the money we have borrowed has been invested well and these investments have started to give good returns,” said the Minister.