By Samuel Sanya
COMPETITION in the alcoholic beverages industry continues to rise year-on-year with over $90m (sh230b) invested this year alone.
The industry is crying out for a lower tax regime to remain competitive.
As the country moves toward funding its entire budget, taxes on alcoholic beverages have continued to shoulder large tax rates, and players say it affects the competitiveness of Uganda’s beverage industry in the East African region.
“We need a harmonised tax regime on alcoholic beverages in East Africa. The cost of energy, transportation and taxes is higher in Uganda,” Nyimpini Mabunda, the Uganda Breweries boss said.
“We would like to see a rationalisation of tax policy especially on locally sourced raw materials. The potential we have to brew with locally sourced raw material and therefore transfer the benefit to local farmers is immense,” he added.
Value Added Taxes (VAT) are the highest in Uganda and Burundi in the region at 18%, Kenya comes next at 17% while Rwanda has the lowest VAT at 15%.
Uganda charges 100% excise duty on locally produced spirits following a proposal to drop the rate from choking 140%. Excise on malt and non-malt beer is at 60% and 70% respectively.
The companies then incur the mandatory 30% corporation taxes. The Uganda Alcohol Policy Alliance has advocated for an additional 5% levy for a rehabilitation fund.
Uganda Breweries, Nile Breweries and Parambot breweries contribute more than sh2b in taxes to the national coffers each month and have invested more than $90m this year alone.
Over the past five years, the alcoholic beverages sector has injected more than $200m to expand production capacity in the lucrative sector, creating over 20,000 jobs in the process.
Mabunda notes that consumption of alcohol is expected to rise with the growing middle class and rising urbanisation.
However, he notes that demand has suffered under high inflation and rising individual debt through the year.
Whole sale prices of alcoholic beverages went up 6% in 2011 and players have had to absorb cost increments in the subsequent years.
Despite the charges, the industry has seen the entrance of international competitors.
Rising competition has led to growing innovation especially in the form of smaller, lower priced units of brew.