Heavy taxation killing uganda tobacco industry

By Nankwanga Eunice Kasirye-Tobacco-13^th-09-2013

The tobacco industry in Uganda wants government to consider the industry contribution to the house livelihoods rather than imposing duties and policies that cripple industry growth. The increased exercise duty on cigarettes and the unfair clauses in the proposed tobacco control legislation need sensitive and rational approach otherwise the entire economy and individual livelihoods will be affected.

The tobacco industry in Uganda loses up to 20 million shillings annually to illicit trade in cigarettes. The introduction of new tax reforms majorly to blame for the increased black market which does not only frustrate the compliant industry players but compromise regional competitiveness. There is need for government to strike a balance between its tax impositions and the industry competitiveness if its target collections must be realized.

The fact that the exercise duty increase comes with price increase implications, the black market will widen since the market would prefer cheaper products to heavily taxed products. The fact that the same cigarettes with imposed high exercise duty are also subject to value added tax makes the industry players uncompetitive.

 The British American Tobacco Uganda limited also wants equity in tax regimes. This is in reaction to allegations that government considers reducing tax rates and duties for other market players besides BAT.

Jonathan D’Souza, the Managing director BAT says the market is liberalized; therefore any policy reforms and adoptions must be none discriminative.

The tobacco legislation in the offing is another area of concerne,the industry players want the agitators to consider fairness and pass laws that can be enforced and complied to, otherwise bad legislation would only widen illicit trade which affects the industry market share hence affecting tax contributions.

 Paul Claude Sine, the finance director British American Tobacco says legislation is necessary since most of the contents of the proposed draft are already under practice by the players. But some clauses that are practically hard to be enforced must be revised for fairness.

Diana Apio the BAT-Uganda corporate and regulatory affairs manger wants all the industry players to be involved at every stage of the legislation process. This is to include all players’ interest to avoid resistance and distortions in the industry.

Some legislation critics say that if the proposed legislation is passed into law and fully implemented, it could negatively affect the industry’s contribution to the Gross Domestic Product since the industry contributes over Shs 80 billion in taxes annually. BAT alone supports over 18, ooo farmers in west Nile, Bunyoro , Northern Uganda and Kahihi.

The anti-tobacco activists however insist that if the government fails to come up with a tight regulatory framework, the tobacco industry would continue to degrade the environment and threaten lives.