Govt Eyes Billions in New Taxes on Beer, Cigarettes

Henry Musasizi, Minister of State for Finance, presented the seven Tax Bills to Parliament’s Finance Committee, outlining the government’s strategies to boost revenue amidst economic pressures.

The Ugandan Ministry of Finance has proposed significant tax hikes on cigarettes, locally brewed beer, and imported goods, aiming to generate billions of shillings for infrastructure development and public health initiatives.

Henry Musasizi, Minister of State for Finance, presented the seven Tax Bills to Parliament’s Finance Committee, outlining the government’s strategies to boost revenue amidst economic pressures.

A key proposal involves increasing the excise duty on beer manufactured from local raw materials from Shs650 to Shs900.

Musasizi explained that this adjustment is necessary to reflect current economic conditions and inflation.

Additionally, the government plans to raise taxes on cigarettes, citing pressure from the health sector to mitigate the adverse health effects of smoking.

"Modest increase in excise duty on cigarettes and beer to generate Shs19.40 billion. The primary objective of this amendment is to generate additional revenue while accounting for inflation, especially, on cigarettes.

The excise duty on cigarettes in Uganda has not been adjusted since Financial Year 2017-18, yet inflation has risen by 28.8% over the period.

We have also been under pressure from the health sector to increase the excise rates on tobacco products much higher to reduce the health-related risks," Musasizi stated.

He further defended the government's position, saying, "Increasing the duty will not only align with inflationary trends but also serve as a public health objective by discouraging tobacco consumption, which imposes significant health costs on the economy.

To increase the excise duty on beer manufactured from local raw materials from Shs650 to Shs900 to reflect the current economic conditions and inflation.

This will ensure that the taxation of beer remains fair and that government revenue keeps pace with the economic realities."

In a move to fund the construction of the Standard Gauge Railway, a critical infrastructure project for Uganda’s trade competitiveness, the government also proposed the introduction of an import declaration fee on goods imported for home use.

This measure is expected to generate Shs79 billion.

"This measure seeks to raise revenue for infrastructure investment, particularly for the standard gauge railway, which is critical for Uganda's trade competitiveness.

In addition, it will render imports more expensive, hence promoting import substitution and supporting local industries.

Furthermore, this proposal aligns with Uganda's policy and other East African community partner states where similar fees are already imposed.

For instance, Kenya apprised a 2% CIF charge, while Tanzania apprised a 0.6 customs processing fee," Musasizi explained.

Addressing concerns regarding the Electronic Fiscal Receipting and Invoicing System (EFRIS), the government has moved to streamline penalties for non-compliance. The previously imposed Shs6M fine, which was criticized for disproportionately burdening taxpayers, will be replaced with a penalty of twice the amount of tax owed.

"Concerns have been raised regarding the high penalties of Shs6M per invoice, regardless of the value of the transaction, which disproportionately burden the taxpayers. To address this issue, we propose to amend the penalty structure so that the penalty for non-compliance will instead be twice the tax owed by the taxpayer," Musasizi noted.

The proposed tax changes are currently under review by Parliament’s Finance Committee, and their implementation will depend on legislative approval.