KACITA Uganda has today in a press conference decried the unfair government increase on Taxation of various imported goods with emphasis on Textiles.
Government recently increased tax rates inform of import duty on textile goods from 25% to 35% and also charged 5 US Dollars per kilo which was high, unjust and uncalled for.
The country is still recovering from the COVID-19 19 lockdown that negatively affected almost all aspects of life in Uganda but was worse for traders given the fact that they were forced to close shops for months, were forced to pay for accumulated rent for those closed months and those who had imported goods prior to the lockdown had to incur additional expenses brought about by shipping delays.
As a result of the tax increment, taxation on imports has multiplied. For example a 20feet container which was cleared at about 30 to 40 million Uganda shillings now clears at an oscillating tax of between 300 to 400 million Uganda shillings.
This has forced many importers to abandon their merchandise as if they are not interested in clearing them.
KACITA Uganda has therefore petitioned the government to recall that unjust tax increment based on a number of factors with some listed below:
- Uganda is a signatory of the World Trade Center where imports are valued on the basis of GATT Valuation ( General Agreement of Taxes and Tariffs) where goods valuations is based on transaction value as opposed to the Brussels definition of Values. In all provisions of the GATT valuation, there is no where it is provided that good will be valued on the basis of weights, except for used items, whose transaction value cannot be readily established.
- There is an argument that, the newly introduced tax is meant to protect the local industries. This doesn’t hold water: firstly, the locally manufactured materials ca only supply about 3% of the total local market demand; let alone the fact that some of these materials are re-exported. This therefore means that about 97% of the local demand will not be satisfied.
- Besides, even the local manufacturers do not produce the various materials which are demanded by the market. Some materials for curtains, polyester and materials for sofa sets, are for examples of materials which are not part of what is produced locally, but again they are part of the merchandise which has been technically locked out because of taxations;
- These materials which are imported are not brought into the country as final products; they are used as raw materials for further production. They are used to make suiting garments, garments for brides, dresses, school uniforms, sofa sets and a variety of other products. A lot of Ugandans are employed in these different value addition jobs. This therefore means that when you stop the importation of these materials, you inevitably fail the related jobs; there fore the tailors, carpenters and so many other related jobs will have been rendered jobless.
- The above point of rendering some people jobless, has other social implications; those who end up frictionally unemployed, become the restless lot in the society. And hence exacerbating the already bad situation in the county of unemployment.
Unemployment in the country has its own attendant economic as well as social implications and we need not divulge into the details.
- On the other hand, protecting producers who can only supply about 3% of the market demands will also have adverse repercussions. Firstly, the few products on the market will be scrambled for and as a result, the prices will shoot through the roof.
- Related to the above, it will create a monopoly or an oligopoly and neither of them is healthy for the economy. A monopoly has its own disadvantages as it will decide on the quantities to supply, the price at which to supply and might even compromise quality, as there will be no competitor. And with an oligopoly, the few suppliers will create curtails which will create supply chain constraints.
- Finally, where the result of the newly introduced tax ends up with a monopoly or an oligopoly, it can encourage smuggling.
With all the above mentioned, KACITA Uganda strongly calls for the Government:
- To stop the implementation of the new tax policy and allow our members to clear their goods based on the transaction value as opposed to the weights, this will be in line with GATT Valuation, as signatories of WTO.
- To cause research into the demand and supply of materials and compare this with the supply of the local manufacturers in endeavor to establish the different types of materials demanded for in the market and compare the same with what can be supplied by our local manufacturers.
- Again in the research, establish the number of jobs which are created by the importation of these materials and hence those who will be rendered jobless.
- It is also important for research findings to establish the revenue which was being earned by government from these very items before and after the establishment of the tax policy.
The above findings, among other variables should be able to feed into the policy for the good of our country