The government will announce Thursday the removal of Value Added taxes on various products including liquefied petroleum gas (LPG) and processed milk.
The announcement is one of the measures contained in the 2020/21 financial year budget aimed at boosting the economy battered by coronavirus disease pandemic.
In a presentation on Monday, auditors at Ernst and Young said removal of these taxes will make cooking gas and milk cheaper, enabling more Ugandans to consume these products. Allan Mugisha, the executive director at Ernst and Young, said there is an expected celebration from environmentalists as no taxes on gas means more Ugandans will likely cook with it eventually leading to a reduction in the number of trees cut for firewood and charcoal.
Processed milk and LPG gas have been paying 18 per cent VAT, meaning their sellers have been factoring that percentage while setting prices, effectively making it more expensive for a lot of Ugandans. Processors of milk in the country have for long complained about VAT on processed milk. They argued it made milk expensive and appeared to be discriminating them since those that sold unprocessed milk attracted zero tax.
Also exempted will be 18 per cent VAT on upcountry hotels, meant to make hotels cheaper and encourage tourism especially at a time when the coronavirus disease pandemic has hit the sector in an unprecedented scale.
On tourism, still, Ernst and Young says the government should allocate more money to the tourism sector than has been indicated in the 2020/21 financial year budget. In the budget provisions, which will be read on Thursday, the sector has been allocated Shs 198 billion, a slight improvement from the Shs 193.7 billion that the sector got in the 2019/20 financial year.
Mugisha said the sector has been battered the most by the coronavirus crisis and this calls for special attention. He said it needs much more given that when it is fully functioning, the sector can earn the country up to $1.6 billion a year, the amount the sector brought in 2019.
Hotels are still not fully operational. Uganda Wildlife Authority has opened up national parks to tourists but only those without primates. Tourists' numbers are expected to remain low until travel restrictions have been removed – a move not expected soon.
In a presentation on Tuesday on the Impact of COVID-19 on Key Economic Activities in Uganda and Suggested Policy Interventions, Chris Ndatira Mukisa of Uganda Bureau of Statistics said the bureau got a number of feedback particularly from the private sector on possible interventions government could undertake to stimulate economic growth in the short – to medium term and consequently maximise social welfare (consumer surplus) in long term.
The proposed policy interventions include; supporting crop and livestock farming activities by extending affordable credit facilities to organised rural households (women, youth, cooperative societies), providing improved farm inputs and quality extension services to households and commercial farmers, making available water for production, strengthening storage facilities and minimising post-harvest loses, storage and transportation to improve supply chain of food crops, cash crops and livestock products,
2 - Need to support agro processing industries to increase production of what is being imported that can be produced locally. For example; (a) with milk, the country can produce pasteurized milk and powdered milk to substitute the imported ones; (b) manufacture of animal and vegetable cooking oils; (c) textile manufacturing from cotton lint, (d) further processing of coffee, tea (for beverages), maize, cassava (for raw materials in manufacture of pharmaceuticals, and starch), Irish potatoes, sorghum, fish, to mention but a few.
3 - Accelerated support to science and innovation hubs in the geographic regions using higher institutions of learning to research in areas of for chemical, electrical and electronic products given the abundance of raw materials, base and other metals in the country,
4 - Provide tax incentives to SMEs and large enterprises for at least two years.
5 - Avoid increasing import tariff of intermediate products, reduce the non-tariff barriers and the cost of doing business to promote final-goods industries relying on imported intermediate products
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