Farmers from various parts of the country with support from civil society and some members of Parliament have compiled a petition to Parliament seeking to block taxes imposed by government on agricultural inputs, when they endorse the 2014/15 national budget.
The farmers and a coalition of Non-governmental organizations on Sunday launched a campaign to gather one million signatures for the petition to the speaker of Parliament to drop the tax proposal on agriculture inputs.
At a press conference held in Kampala to launch the program, farmers in attendance included fishermen, poultry farmers, cattle keepers and many others from various districts.
While presenting this financial year’s budget at Kampala Serena last month, Finance minister Maria Kiwanuka announced VAT on supply of livestock feeds, agriculture and dairy machinery, fertilizers amongst other farm implements.
On top of removing all tax exemptions for agriculture chain inputs, Kiwanuka further slapped an 18 percent Value Added Tax (VAT).
For farmers this was the most confusing and bad news of the 2014/2015 budget speech. From hoes, pangas, accaricides, pesticides, seeds, wheel barrows, milk cans, packaging material etc, now farmers will have to pay more and hope to recover their costs when they put their products to the market through high prices.
She also introduced new taxes on value addition processes of agriculture and agro-processing.
“We are concerned about the impact of these taxes on agriculture, foods costs, livelihoods and subsequently food insecurity in Uganda. We feel that they are reflection of our Government’s deliberate steps to make it harder for the poor small scale farmers to make a living and access inputs for farming purposes,” said Christine Adong a small scale farmer from Kibuku.
Farmers expressed concern about the impact of these taxes on agriculture, food costs, livelihoods and subsequently food security in Uganda.
At the conference which was organized by civil society organizations under the Civil Society Budget Advocacy Group (CSBAG) and ActionAid Uganda, farmers expressed their concerns about the proposed taxation on agriculture inputs urging government to look for alternative ways of getting revenue.
“We feel that they are a reflection of our Government’s deliberate steps to make it harder for the poor small scale farmers to make a living and access inputs for farming purposes. The tax proposals in the 2014/15 Budget on the value-addition processes of doing agriculture and in agricultural product processing will impede the efforts of small scale entrepreneurs and small scale farmers in expanding their business,” they said in a resolution.
“Ugandans need to be reminded that very few Ugandan farmers make it to output market level as majority is unfortunately still subsistence farmers with unviable surpluses.
This flat VAT rate is regressive, overburdening the small scale farmers and subsequently the poor as the new taxes and extra costs will be passed on to the farmers. This will, among others hinder entrepreneurship, job creation and threaten food security for millions of Ugandans supported by the once productive agriculture sector.”
Farmers urged Government to instead adopt a progressive taxation approach where the rich and profit-earning from agricultural businesses will incur more of the tax costs.
“We are of the view that taxes need to be imposed at the output level and on profit-making agribusinesses, so that it targets the commercial farmers who earn large profits in agriculture.
We therefore urge Parliament to reject the proposals to tax and terminate VAT exemptions on agriculture inputs. We advise government to look to other ways of generating revenue to fund the national budget.”
Other progressive sources of revenue that MPs should support and urge the Government to enforce measures, according to farmers, include scrapping tax holidays for multi-national companies and ensuring their tax compliance.
“We want government to ensure that multi-national companies comply in paying taxes and indigenous companies,” Adong stated.
URA speaks out
In response however, Uganda Revenue Authority said the new taxes had not been brought in bad faith, but to help in government efforts to bolster the sector.
In a couple of social media responses, URA noted that the agricultural sector which contributes 23 percent to GDP was too under taxed; only contributing less than 0.3 percent to tax revenue.
“Despite the wide exemptions in the sector, over the years, agriculture’s contribution to GDP has been declining,” they stressed.
Farmers said government must copy some key reforms from Tanzania such as amending the Uganda Investment Code to increase threshold of capital for investors, and reduce the powers of the Minister of Finance to grant exemptions; improving efficiency in revenue administration and management given that Uganda has the lowest Domestic Revenue to GDP ratio in the EAC region and borrowing a leaf from other EAC Countries, in Kenya for instance where import duties were removed on processing and preservation of seeds for planting. Tanzania reduced export levy on export levy on raw hides and skins.
Government was further asked to devise other means of raising revenues such as expeditious development of the mineral sector (iron ore, gold, Vermiculite, Limestone/Marble) which is estimated at US$ 38.3 billion.
Taxes to hurt subsistence farmer
According to Morrison Rwakakamba, C.E.O Agency for Transformation, few farmers in Uganda make it to output market places, as many are unfortunately still subsistence with unviable surpluses.
He says the assumptive argument at the Ministry of Finance that many small holder farmers will not be affected since they don’t engage in inputs markets is at most wayward and diversionary.
“The argument is also careless and lazy, because it seems to rather celebrate perpetuation of subsistence agriculture in Uganda. Millions of farmers, since they no longer have seed rights expressed through home grain granaries etc. have to buy seed and other implements in open input markets,” says Rwakakamba.
“The inputs traders will just pass the VAT incidence to farmers. And 98 percent of these farmers have not rights under our obtaining tax code to claim VAT returns from the Uganda Revenue Authority (URA) since they don’t have a requisite turnover of shs 50 million and above to qualify for VAT tax returns.”
Chimpreports understands Cabinet has in the last few weeks been debating the idea of scrapping the taxes on agricultural inputs. a