Agriculture is Uganda’s global comparative advantage, it is a primary economic growth driver and it is key in ensuring food and nutrition security for Ugandans. The budget 2014/2015 plans to increase food production costs through increased taxation – agricultural inputs will be heavily taxed.
The taxes on hoes are reinstated. The costs of procuring agricultural loans is going to increase since the exemption of tax on interest income from agricultural loans has been removed. The costs for farmers’ transactions has increased since there is a planned 10 percent tax on mobile phone money withdrawals. The NRM administration has also planned to increase taxes on basic food items, salt, sugar, diary products.
Comparatively, administrations of other East African nations are subsidising or ensuring no or low taxation of agricultural inputs. Kenya has exempted taxes on importation of farm inputs for processing and preservation of seed. Tanzania has removed excise duty on money transfers. Rwanda has lowered import duty on sugar.
The Government of Uganda’s (GOU’s) decision to increase taxes on basic food items for Uganda, a country with poor nutrition indicators, is mind boggling. Increased taxes on basic food items, accompanied with increased food production costs will no doubt increase food prices and automatically the GOU’s planned salary increments for low paid civil servants are rendered meaningless.
The 2014/2015 proposed national budget for Uganda is as meaningless as is its predecessors and perhaps it is worse.