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Taxes on agricultural inputs will kill sector, MPs told
Publish Date: Jul 08, 2014
Taxes on agricultural inputs will kill sector, MPs told
Chairperson Uganda Seeds Association Masagazi Cliff addresses the committee as Managing Director Victoria Seeds, Josephine Okot looks on. Photo by Maria Wamala
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By Umaru Kashaka

THERE is need for more time before government can think of introducing taxes on agricultural inputs and equipment if the country is to avoid food insecurity as a result of low crop output, officials from the formal agricultural input and output sector, told MPs on Tuesday.

They included Uganda Seed Trade Association (USTA), Uganda National Agro-input Dealers’ Association (UNADA), The Grain Council of Uganda (TGCU) and Crop Life.

They warned that the proposed taxes would kill the agricultural sector they said is struggling with a meagre growth of 1.5% to increase the use of agro-chemicals, improved seeds and fertilisers.

The officials made the remarks while appearing before the parliamentary committee on trade and industry over the proposed taxes in 2014/2015 financial year budget by the ministry of finance last month.

While reading the budget, finance minister Maria Kiwanuka proposed an 18% Valve Added Tax (VAT) on agricultural supplies such as hoes, fertilisers, seedlings and tractors in order to generate sh30.4bn, about 0.2% of the entire budget.

The sector chairman, who is also the managing director of Pearl Seeds, Richard Masagazi, argued that a period of five years is needed before tax introduction so as to register, profile and categorise the farmers in the country and investigate on how to tax them directly based on income.

“Currently 100,000 farmers are producing half the needs; there are 3.5 million farmers out there that need to move from small to medium scale. Commercial farmers are few and represent little, but take a large part of organised grain exports due to superior quality,” he said.

The operations director of AFGRI Kai limited Chris Kaijuka warned that the impact due to less production will be dire for the sector that employs 73% of the population.

“We should expect high prices for all farm inputs and allied products, less grain availability for local food consumption and grain export as well as less competitive food prices in the region,” Kaijuka told the committee chaired by the Kyegegwa Woman MP Flavia Kabahenda.

Josephine Okot, the managing director of Victoria Seeds limited explained that since most of the food farmers produce is for home consumption, the taxes will adversely affect them as they will be unable to pass VAT to anybody else.

“Unpredictable weather conditions can negatively impact on agriculture and increase food prices and in turn increase inflationary pressures. Instead of slapping taxes on agricultural inputs, Government should introduce additional levy on fuel at sh50 per litre which will yield sh60b,” she suggested.

They also called for a Bill against counterfeits, protecting the formal sector to include seed or crop protection products issues and be passed before taxing the sector.

Their views were shared by committee members Lucy Ajok (Apac) and Kenneth Lubogo of Bulamog County who said that the taxes are going to push farmers to subsistence production and use of rudimentary farming methods since the cost of inputs will be high.

“It’s going to worry me if the inputs and equipment are taxed because the move might impact on food security in these times when it’s hard to get seeds and drought is affecting some parts of the country,” Ajok said.

However, Kabahenda broke ranks with the committee when she asked the private sector to support the Government efforts of broadening the tax base.

“We continue to depend on the same tax payers and yet there are people in the informal sector of agriculture here earning sh50m every month and they are not taxed. Let’s be realistic,” she implored.

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