By CPA Charity Akatukwasa
Member of the Institute of Certified Public Accountants.
Excise taxes are a well-established component of global tax policy. They are mainly used to generate government revenue while providing incentives for the population to consume and produce less harmful products. Excise taxes are also used to encourage the development of local industries by discouraging imports.
In Uganda, excise taxes aimed at discouraging consumption have been traditionally levied on tobacco products, various types of alcoholic and non-alcoholic drinks, cosmetics and to some extent on petroleum products. Over time however, the pressure of government to raise more revenue and widen the tax base has led the government to expand the excise tax regime to other products like sugar, cement, plastics, telecommunication services, financial services fees and other products.
The proposed excise tax amendments for the year July 2024 to June 2025, have affected a few items as in the below extract while most of the items have remained unchanged or reduced.
|
Item |
Previous rate |
Proposed rate |
|
Mineral water (purposely for drinking) |
10% |
10% or Shs 75 per litre whichever is higher |
|
Motor spirit (Gasoline) |
Shs 1450 per litre |
Shs 1550 per litre |
|
Gas oil |
Shs 1130 per litre |
Shs 1230 per litre |
|
Kerosene |
Shs 200 per litre |
Shs 500 per litre |
|
Un-denatured spirits made from locally produced raw materials (alcoholic strength by volume of 80% or more) |
60% or Shs 1500 per litre, whichever is higher |
0% or Shs 5000 per litre, whichever is higher |
|
Un- denatured spirits made from imported raw materials (alcoholic strength by volume of 80% or more) |
100% or Shs 2500/= per litre, whichever is higher |
100% or Shs 5000/= per litre, whichever is higher |
|
Other Wines |
80% or Shs 8,000, per litre, whichever is higher |
100% or Shs 10,000, per litre, whichever is higher |
|
Powder for reconstitution into beer (ready to mix alcohol) |
None |
Shs 2500 per kg |
|
Payment Services (Bank Agents) |
None |
0.5%of the value of the transaction |
Some tax increments per unit appear small, especially the ones on petroleum products. However, increments in fuel prices lead to increments in all other products as traders try to recover their operating costs leading to inflation.
Whereas the increase in excise taxes on alcoholic drinks may be justified by government as an attempt to control the consumption of these products, it is not justifiable to have the excise tax on the necessary goods such as petroleum products increased since these increases will have an inflationary effect on all sectors of the economy that are trying to recover from the effects of the COVID -19 lockdown effects.
Also the proposal to impose excise taxes on the payment services will discourage people from using the services of bank agents who have contributed a lot in popularizing banking services in the country.
