Poverty stricken to suffer effect of tax increases

Minister of Trade Amelia Kyambadde

Surprisingly, the British Broadcasting Corporation gave feature coverage to a Naguru lawyer who has fallen foul of his profession. This was in a commentary at the announcement of the banning of the waragi plastic sachets. It is interesting that these aspects fascinated the British.

For the Naguru lawyer, the interest is to turn to sachet waragi to assuage the mess he is in. He is among some of the lumpens who will do anything to get the two thousand shillings necessary for at least a sachet. But obviously, a sachet is not enough.

It turns out that at the material time, the Ministry of Trade and Industry, is turning its focus on banning the plastic sachets, which the waragi is packaged in. True, the sachets are an environmental hazard that has incalculable effects on a range of climatic factors. As such, there is no defense for their continued use.

The alternative, the Ministry gives, is that those dealing in this business should instead turn to importing, or manufacturing glass bottle containers, in line with the handiness of the plastic sachets. But there are also unpalatable results to this decision.

Firstly, it portends the packaging of the illicit liquor going underground, with a greater amount of the liquor being impure. It poses a health problem for the drunkards like the Naguru lawyer. And they are not about to abandon the destructive addiction.

The misfortune of the plastic sachets is turning to imported/manufactured glass bottles. That means that the impact goes on to the so-called investors, to whom the onus of availing these bottles falls. Even if they do not manufacture the bottles here, they will claim that they are importing the raw materials for their manufacture. And for that they are assured of tax incentives and wavers.

But when they are making the bottles here, they will claim that they are being taxed; and so the price of their bottles and therefore the price of the illicit liquor goes up.  The effect on the addicts is multiplied and will affect more people at the lower scale of existence than only these drunkos. And so on and so forth.

In some instances, there are no substitutes for these imports. Take the example of pins, needles, razor blades, scissors, etc; there are no investors in the country to manufacture them. Consumers have to turn to cheap Chinese imports. Therefore, there will be a tax increase as stipulated.

Now, some of these “investors” have colluded with their Chinese partners, importing such items here, but because they claim to be investors, they get tax waivers while at the same time selling their foreign manufactured items here as locally produced. This is a double whammy for the consumers who have no idea that they are being bilked two or more times.

The spiral is that he local traders will cotton on to this to hike their own prices. The Kampala City Traders’ Association’s Issa Sekitto, has amply captured this when he said that, in actual fact, the local industry sector is being sacrificed at the altar of foreign manufacturers. He said that actually, the “local industries” are foreign-owned.

This flies in the face of the Uganda Manufacturers’ Association and the Uganda Revenue Authority, which have been at the forefront championing the tax increases on some of these goods that range from 35% to 60%. The idea is that the collection of this money into the Government Treasury will go towards pushing Uganda to the middle-income bracket by next year, the penultimate year of the decisive General Elections.

This is a dicey calculation, which could turn into a consumers’ nightmare. KACITA has already said that it is bound to increase their prices as well. The outcome of it is that all prices for all local items such as; food, transport fares, imported second-hand clothing, which Ugandans depend on, etc.,  will go up.

As much as the protection of local industries is desirable, the process of the tax increases is not well thought-out. It will be self-defeating for raising money as most of it will go to the  “investors”, either in eluding taxes or under-hand un-taxed imports.

No other than the Private Sector Foundation’s Executive Director, Gideon Badagawa, has sounded a warning on these tax increases, which by the way is no longer if, but next month. He said that, “It would be a good move as long as it does not work at the expense of the consumer”.

Actually, the tax increases will work to the disadvantage of the consumers.

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