Heavy taxes slapped on unprocessed tobacco export as Parliament passes new Bill

Kampala – The Parliament of Uganda has passed the Tobacco Control (Amendment) Bill, 2020 scrapping taxation on processed tobacco restricting it on the unprocessed leaf for export.

The development was a result of a report presented by Chairperson of the Committee on Finance, Hon. Henry Musasizi, a move that he described to promote value addition in Uganda

Hon. Musasizi (Rubanda East) further disclosed that the tax measures were meant to restrict the export of raw tobacco leave by foreign companies that process it in neighbouring companies late and later bring it back to Uganda for sell.

“In its current form, the bill encourages manufacturers to relocate their industries within East Africa where tax rates for processed tobacco are lower yet creating a revenue gap for the government and affecting the local manufacturers who lack the luxury to relocate,” he said.

Chairperson of the Committee on Finance in Parliament, Hon. Henry Musasizi (PHOTO: Parliament)

Musasizi added that removing export levy on processed tobacco will promote local value addition and improve revenue.

He added that levying tax on both processed and unprocessed leaf will undermine the efforts of companies that have set up plants to process it locally and justify the efforts of those companies that moved out of Uganda.

“We shall also experience an increase in contraband and smuggling of cigarettes into Uganda, loss of jobs to Ugandans working in the processing plants and stifle agri-industrialization,” Musasizi said.

The Bill’s object as presented to Parliament by the government was to impose an export levy on both processed and unprocessed tobacco leaf of US$ 0.8 per kilogramme.

Hon. Syda Bbumba (Nakaseke County North) said that an export levy on unprocessed tobacco should be charged to discourage its exportation and encourage local processing of the product.

“Tobacco growing is already exploitive on our farmers and therefore, we should encourage value addition. We also need to increase the levy on imported cigarettes to encourage that processing tobacco to manufacture it locally,” said former Energy Minister (2002 to 2006).

Hon Solomon Silwany (Bukooli Central MP) added a voice to the Bill revealing that the government should focus on the unprocessed leaf and tax it at a rate of US$ 1 per kilogramme.

“We have local companies that are struggling to process and employing people; this should be our opportunity to support and encourage them to produce cigarettes as a finished product,” he added.

The Minister of State for Finance, Hon. David Bahati, however, challenged local companies to desist from double standards and ensure that the tobacco leaf is dried and manufactured into cigarettes and not just dried leaf.

“We do not want to be confused by these people simply drying the tobacco leaf to skip taxes instead of the more worthwhile process of manufacturing cigarettes,” he said.

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