SAVE US! 75,000 Youth Lose Jobs As Investors Close  70 Factories

The manufacturers behind the recycling plastic waste factories have petitioned President Museveni over the unfair excise duty (amendment bill 2022) passed by parliament early this week.

The investors under their umbrella (Uganda Plastic Manufacturers and Recyclers Association (UPMRA) are concerned that Parliament has not addressed their problem since the proposed Tax of 40% or Shs4,000 per kg on sacks and bags of polymers of ethylene and other plastics under HS codes 3923.21.00 and 3923.29.00 is very high.

They implore the president to look into the matter and give it urgent attention and if possible reconsider it to avoid serious adverse effects that may lead into immediate closure of more than 70 recycling industries across the country.

“This tax is very punitive, unfair and discriminatory. It is only targeting 7% factories of the recyclable plastic products produced in the country as opposed to 93% plastic factories which produce non-recyclable products,” the letter to the president which this newspaper has accessed reads in part.

The 2021 Excise duty Tax of 2.5% or USD70 per tonne was proposed to ensure collection of Shs75bn to ensure that all plastic product manufacturers and importers would directly lend a hand to the government to ensure a clean and healthy environment. However, in this current state of levying the Tax on one sector may lead to zero revenue after the factories have closed down.

In the letter, the manufacturers have notified the president that with the closure of over 70 recycling factories across the country, more than 75.000 youth and women who have been employed directly and indirectly are going to lose jobs.

Many Ugandans who have been connected to the industries as distributors, wholesalers, retailers as well as youths who are currently engaged in collecting plastic waste mainly related to HS codes 3923.21.00 and 3923.29.00 delivering to various Recycling Plants that convert them into egg trays, irrigation pipes, shoe soles, construction sheet rolls, electric conduits and garbage bags will be rendered jobless.

The investors also reveal to the president that taxation is not about collection of revenue only but also allowing factories to recover from the COVID-19 period that devastated businesses across the world.

Besides employing a big number of Ugandans, the members of UPMRA are in dismay and utter shock that even before the end of the year where the government levied a high cost, the law is being revised from 2.5% or USD70 per tonne to 40% or USD1150 per tonne.

This is detrimental to the government since it will ultimately result in the loss of government revenue from taxation, loss of employment and underdevelopment due to closure of industries. Once the closure of the industries attracts compensation, the government is likely to lose Shs850bn.

It should be noted that the existing law that provided for a rebate to Recyclers has never been enforced for the last one year. Recyclers have not been given any refund or incentive but rather the cost has been passed on to them and the consumer and the cost of their goods has only gone higher and led to a stagnation and inflation of their goods.

The investors are worried that having taken all the above steps and measures to improve the manufacturing and recycling machinery and technology and the support given by Government in the amendment of the law in Excise duty 2021, their factories are facing extinction since no business that can shoulder a tax burden of 40% on its products excluding other taxes like VAT, PAYE, NSSF and all utility bills and salaries.

The UPMRA members want the president to halt the signing of this bill into law so that the much needed consultations with the stakeholders are weighed before developing policy which may lead to the closure of factories.

It is against this background that they request for the president’s intervention and direction on the matter so that they are consulted before he assents to this bill that was passed by parliament on August 30, 2022.

UNDERSTANDING THE TAX SCIENCE

Earlier the Ministry of Finance officials proposed a 120% excise duty on polyethylene while targeting kaveera and bread packs.

Following the calculation, the government would collect only Shs1.8bn to use towards environmental protection.

UPMRA raised concerns that 120% may lead to the closure of the plastic industries and cause a loss to the government in form of taxation since there would not be any collection.

UPMRA then proposed that if 20% per tonne on all polymers (all plastic raw materials including bottles, biscuit packs, PP, polypropylene, PCT and polyester would be levied, this would automatically lead to the collection of Shs30bn per annum since 24000 tonnes of polymers (according to URA records) would be taxed. UPMRA clearly indicated that Kaveera is not only the product that litters, bottles also do.

Following UPMRA’s proposal, the Ministry of finance decided to slam 2.5% or USD70 per tonne on polymers to realize Shs75bn and this was collected between June 2021 and June 2022.

However with the new excise duty (amendment bill 2022) which is exempting the 93% and slapping the tax on only 7% being polyethylene from 2.5% or USD70 to 40% or USD1050, it puts the manufacturers out of business by closing all the factories.

As the president always puts it in his speeches that opportunists always pull towards their side, the new excise duty is benefiting some investors and discriminating others.

Lately, in his speeches, the president refers to opportunism (obunyunyusi) lying (obulimba) not focused (obutalengela wala). It should be noted that in this scenario, there are opportunists and influencers who misled the president to write to the Speaker of Parliament on July 5, 2022 about the excise duty (amendment bill) 2022. The bill once signed into law will only leave few dealers and investors smiling since it only scrapped taxes on sugar confectionery, sweets, gums, and chocolates. The bill was earlier passed in March 2022 but returned to Parliament for reconsideration by President Museveni. The parliament committee on Finance, Planning and Economic Development reconsidered the bill and presented it before the House during plenary on Tuesday. However the Speaker guided following the letter from the president.

In the letter, the president asked Parliament to reconsider its decision to introduce an excise duty of 20 percent on sugar confectionery, gums, chocolates, and sweets against the government decision not to do so in the current financial year.

Museveni was concerned that the decision was detrimental to local manufacturers because their products were being outcompeted by imported low quality products and that the move was further working against government’s initiative to allow for the economy to recover from the devastating effects of Covid-19. This however sounded well on paper but the rationale of waiving tax from the majority 93 per cent and then slamming it on a minority seven per cent was very sensible. Though the chairperson of the committee on Finance, Planning and Economic Development Keefa Kiwanuka expressed his concern about the proposed tax but said the committee members had met with key stakeholders including the Uganda Manufacturers Association, who said that the existing tax had led to several undesirable consequences.

Kiwanuka however stated that the proposed tax is arbitrary and would be disastrous to the economy.

Parliament considered the committee recommendations and passed the bill upholding the president’s proposals to do away with taxation on sugar confectionery, and on the introduction of targeted tax of Shs4,000 per kilogramme on plastics and plastic granules.

It should be noted that some elements within Uganda Manufacturers Association (UMA) and some giant industries that influenced the change from this collected 2.5% or USD70 per tonne are not engaged in kaveera recycling industries yet they are equally packaging, producing 93% of wastes which are non-recyclable.

UMA and some industries ganged up against UPMRA and proposed the exemption on their products by slamming the burden to a smaller group hence denting the government in form of taxation. With the new bill, once it is passed into law the government will collect only Shs700m in taxes instead of Shs75bn. Unfortunately the Shs700m may also not be collected since the factories are likely to close down.

President Museveni is already aware that plastic industries cash in for the government, the very reason he on February 24, 2019 assented to the National Environment bill into law which among other things provides for manufacturers of polythene bags and plastics to recycle plastic waste and also label the polythene bags in a bid to minimize effects to the environment.

The law also bans polythene of below 30 microns and forces the investors to set up recycling plants which they have already done.

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Brian Musaasizi | Editor

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