Retrogressive Taxation; How URA Has Destroyed The Poultry Industry Through Its Negative Taxation Policy

 

Retrogressive Taxation; How URA Has Destroyed The Poultry Industry Through Its Negative Taxation Policy

·        It’s a pity that the Ugandan government is pushing for an import substitution strategy before it fulfills its production potential 

Early  this year , the secretary to the national treasury Mr. Ramathan Goobi wrote to all the concerned government agencies a letter in which he implored them to emphasize the BUBU concept of buy Uganda build Uganda.

He was drawing the idea from the national development plan which had insisted that in order to industrialize and build a self sustaining economy, government needed to adopt an import substitution strategy in which goods which were previously imported could be produced from within Uganda.

They pushed this suggestion on sectors like the cotton sector but failed because Uganda couldn’t produce enough cotton that can result into import substitution that would result into eliminating second hand clothes.

Then they staggered onto the idea of eliminating second had cars but they had no industry to produce new cars.

Now they switched to the poultry sector and insisted that most of the chicken feeds consist of ingredients that can be made from within Uganda should be pay taxes with the view of enticing locals to produce them from here.

Some of those feeds include chicken feeds like CONCETRATE and PREMIX..

They argue that since feeds known as CONCETRATE couldn’t be produced from within the country, then they should be exempted from taxation.

 But since PREMIX has elements like soya and maize which were deemed to be abundantly found in the country, then they should be subjected to a tax.

In their wisdom the economic planners argued that there was no reason why they continued to exempt PREMIX feeds from taxation because it could be produced from within the country since the material mentioned are available within the country.

After making their observations, the economic planners crafted a tax on the animal feeds and tasked Uganda revenue authority to start collecting them with immediate effect. The consequence was immediate as the farmers stopped importing the feeds which were essential in mixing poultry feeds.

Chicken farmers who fed tones of this food to chicken that lay eggs and meat immediately got stuck as there was no poultry feeds on the market because the importers had gone on a sit-down strike. They wanted government to reconsider the decision but URA was not relenting.

To make matters even worse, revenue made a silly mistake of calculating how much the importers had made in the previous past years of not paying taxes, so they decided that the importers should pay those taxes as well, jeez! Can you imagine that? They never took into consideration the fact that with the passing of time the economic realities change. In any case, we all know that the law does not work retrospectively but works proactively. This means that you cannot use the law which has just been enacted to a situation that happened in the past.

Now what has comically transpired is that the Uganda revenue authority itself has failed to make the distinction between the PREMIX CHEIKCN FEEDS and the CONCETRATE CHICKEN FEEDS.

They insist that these components are different yet the farmers insist that these are the same things serving the same purpose.

Now the mother of all confusions is that URA seemed to have realized their mistake and made the decision to consult with the experts from the ministry of agriculture which is the mother ministry concerned with these feeds, the ministry of finance which tasked them and the research institutes like Namulonge to assist them in making an informed decision about the fundamental difference between the PREMIX chicken feeds and the CONCETRATE chicken feeds,

By trying to make consultations, URA is exposing its ignorance about what they were rushing to tax.

Their haphazard tax system has had an immediate consequence of hiking the prices of eggs and chicken meat on the market and put the poultry sector into an absolute jeopardy.

What is frustrating is that while URA is hell-bent on taxing the Ugandan farmer, their counterpart neighbors in the region like Kenya and Tanzania have exempted their farmers from paying those taxes to incentivize their poultry industry.

The figures show that while Uganda was the leading exporter of eggs in the region, the negative tax has had the immediate impact of reducing that egg out put to one of the worst in the region.  

First of all they envisaged that since these animal feeds contain maize and soya then it was obviously easy to produce those feeds in the country which was totally wrong. The reality is that Ugandans couldn’t produce those feeds in the exact nature as they were being imported.

For instance take the example of maize. Ugandan famers produced 14 million tones of maize in 2018 but they were faced with a lack of market because of factors beyond them but mostly because the prices had collapsed downwards to less than 2000 shillings per kilogram.

At that time 50% of the maize went to be mixed into the poultry food. As a result of this the Ugandan farmers either stopped or scaled down on the production of maize. But funny enough the next year prices of maize went up when the region was hit by drought in parts of the horn of Africa.

This pushed the prices of maize much higher, yet the farmers had not produced the maize this year. The consequence is that the maize prices have skyrocketed on the local market up to today in the region of 4000-5000 per kilogram.

This together with the taxes of animal feeds has had the net effect of killing off the poultry industry as the maize and soya which are locally produced are also too expensive to make poultry farmers break even.

To add more confusion in the mix, small fish otherwise known as Mukene is one of the local ingredients used to make chicken feeds is also a delicacy eaten by Ugandans! This means that human beings are competing with chicken for food!

And as you read this, farmers have nothing to feed their poultry.

To demonstrate how reckless they were in destroying the poultry sector, the URA has even tasked its lawyers who sit on the Alternative Dispute desk to look into the matter which is evidence enough to show that they were misled by the officials from the national planning authority and the ministry of finance to adopt a strategy without first studying its viability and impact assessment on the poultry sector.

We a-wait what will come out of the research by the experts but I hope you now know why chicken and eggs prices and maize have all skyrocketed.

While president Museveni is eager to enforce the East African market, he has failed to pay attention to production potential of his country which is still too low to cater for the bigger market. This is the same reason which has led to the over fishing of lake Victoria because it’s too small to cater for all the industries he invited to lift the fish sector. This has led to 22 fish industries to close because there are already too many fish industries competing and over fishing the lake. But Museveni is blaming the locals for fishing young fish and even deployed the army to stop them from fishing! Oh dear!

The Way Forward

The government needs to scrap all taxes on the animal feeds as an incentive for them to grow and produce enough for the local market and for imports. This is the only way that will facilitate the import substitution strategy to work.  Remember any tax that kills the growth of a given sector can only be regarded as a retrogressive tax and should be scrapped with immediate effect.

The author Fred Daka Kamwada a researcher, policy analyst and blogger; kamwadafred@gmail.com