Tobacco Firms Clash Over Proposed Tax Hike on Cigarettes

The British American Tobacco-Uganda (BAT) has urged Parliament to reconsider the Excise Duty Amendment Bill 2025, which proposes increasing taxes on cigarettes.

BAT officials argued that the tax hike would not only reduce their sales but also lead to a decline in government revenue.

"We believe that increasing excise duty on cigarettes will not only reduce our sales but also reduce government taxes," BAT officials said during their submission to the Finance Committee.

They emphasized that the existence of illicit trade in the country would further exacerbate the negative impact of the tax increase.

Instead of increasing taxes, BAT officials suggested that the government should focus on enforcing measures to combat illicit trade.

"If more resources are to be collected by the government, we advise focusing more on enforcing against illicit trade," they recommended.

On the other hand, Leaf Tobacco Uganda supported increasing taxes on cigarettes but proposed a lower rate of 5,000 shillings on every 1,000 sticks of cigarettes, instead of the proposed 10,000 shillings.

"We are in support of increasing taxes, but it should be 5,000 shillings on every 1,000 sticks of cigarettes," Leaf Tobacco Uganda officials said.

Some MPs dismissed BAT's concerns about consumers switching to cheaper alternatives like shisha and e-cigarettes.

The debate highlights the complexities of tax policy and the need for careful consideration of its impact on various stakeholders.

In a separate development, the Uganda Leather and Allied Industries Association (ULAIA) appeared before the committee in support of the Hides and Skins Export Amendment Bill 2025.

ULAIA Chairperson Abdul Hakiim Sekandi emphasized that the bill would redirect valuable raw materials towards local processing, fostering industrial growth and increasing the country's tax base.

Tannery Challenges

The Uganda Tanners Association also highlighted the challenges faced by the leather industry, including the closure of several tanneries due to a lack of raw materials.

"A number of tanneries have closed in Uganda due to a lack of raw materials," the association revealed.

The proposed amendment bill aims to address this issue and promote the growth of the leather industry.

British American Tobacco-Uganda has asked Parliament to reconsider a proposed tax hike on cigarettes, warning it could hurt sales and reduce government revenue, while rival Leaf Tobacco Uganda backs a smaller increase.