Sugarcane farmers protest tax burden, petition govt for reforms

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Sugarcane farmers under the Greater Busoga Sugarcane Growers Cooperative Union Limited have petitioned the government, seeking relief from what they describe as unfair income tax demands by the Uganda Revenue Authority (URA).

In a petition dated March 17, 2025, and addressed to the Speaker of Parliament, the farmers call for urgent reforms in the taxation framework applied to the sugarcane sector.

They argue that inconsistent pricing, taxation policies, and opaque weighbridge systems are straining their financial stability.

The petition, signed by Dr Michael Mugabira, coordinator and member of the National Bio-Fuels Committee, argues that sugarcane is a raw material for sugar production and by-products and should not be subject to income tax.

Farmers claim the fluctuating prices and taxation system put them at a disadvantage. Currently, the break-even price is estimated at sh130,000 per ton, while factory gate prices average sh125,000 per ton—leaving farmers operating at a loss.

Under the Uganda Sugar Act 2020, sugarcane farmers operate within an out-grower scheme, sharing proceeds with millers based on a prescribed price formula. However, despite already contributing to statutory taxes such as VAT and stamp duty, URA continues to levy additional income tax, which the farmers argue is an unfair burden.

Breakdown of tax contributions

Farmers outlined their existing tax obligations, explaining that under the revenue-sharing model, 50% of sugar sales proceeds go to farmers.

A 50kg bag of sugar, sold at a factory gate price of sh182,000, generates sh32,760 in VAT and sh5,000 in stamp duty.

Since one ton of mature sugarcane yields approximately two bags of sugar, the total VAT and stamp duty contributions amount to sh75,520 per ton, meaning farmers contribute sh37,760 per ton to the national treasury.

Despite these deductions, URA allegedly ignores these contributions, leading to what farmers describe as double taxation. They are demanding an immediate review of tax assessments and a fair reconciliation of accounts to prevent financial distress.

Proposed tax collection reforms

To address revenue leakages and improve tax transparency, farmers have proposed several measures, including connecting all off-station factory weighbridges to URA systems.

They argue that weighbridges used to measure sugarcane deliveries are vulnerable to manipulation, leading to financial losses.

Integrating them with URA’s monitoring system would enhance transparency, ensuring proper traceability of raw material supplies and sugar production.

Another key proposal is linking sugar and cane weighbridges within factories to URA systems.

Farmers say separate weighbridges for sugarcane and processed sugar inside factories create loopholes for revenue losses. Connecting them to URA’s system, they argue, would eliminate discrepancies.

Additionally, farmers suggest reconciling VAT and stamp duty with income tax demands. They propose that URA mandate sugar factories to remit VAT and stamp duty contributions directly to farmers’ Taxpayer Identification Number (TIN) accounts.

This would ensure that any additional income tax assessments reflect actual earnings and expenses incurred in sugarcane production.

Losses due to weighbridge manipulation

Farmers also highlighted significant tax fraud due to undeclared sugarcane supplies.

With Uganda’s installed sugarcane crushing capacity at 52,000 tons per day, annual raw material demand stands at approximately 15.6 million tons. However, with factories operating at only 60% capacity, they require about 9.36 million tons per year.

Farmers estimate that 15-25% of cane supplies remain undeclared, translating to approximately 1.6 million tons lost to tax fraud.

Given current sugar prices, this results in an estimated sh120 billion in lost VAT and stamp duty revenue annually.

The petition urges URA to shift its focus from taxing individual farmers to implementing a transparent, sector-wide weighbridge monitoring system to prevent such losses.

The petition has been copied to the Minister of Finance, Planning and Economic Development, the Minister of Trade, Industry and Cooperatives, and the Commissioner General of URA.

Farmers are calling for a fair and inclusive taxation framework to support rather than stifle sugarcane entrepreneurs.

Industry stakeholders agree that the concerns raised warrant urgent attention to protect Uganda’s sugarcane sector from economic decline.

URA responds

URA Commissioner General John Musinguzi Rujoki questioned whether those raising complaints had provided evidence of being taxed on sugarcane.

“It is unusual for them to complain about the URA when they have not yet engaged with us. They should first reach out to us. However, it is the policy of the Government of Uganda not to tax farmers, as agriculture remains largely non-taxable. That said, income tax applies to anyone earning taxable income, and it is paid on profits,” noted Rujoki.

However, the petition indicates that it was received by the concerned authorities, including URA’s mail registry on March 17, 2025.

Manufacturers evading taxes

Rujoki revealed that some manufacturers have been selling sugar without stamp duty, while some alcohol manufacturers are evading taxes.

“Additionally, several factories are purchasing large quantities of sugarcane while reporting lower production levels, which suggests under-declaration. We are now carrying out strict enforcement on value-added sugar processors who are not paying taxes on their profits,” he said.

Rujoki further stated, “I think I know where this noise is coming from. We are clamping down on some non-compliant players in the sugar sector who have been dodging taxes. They are the ones now claiming to be sugar farmers. Otherwise, show me one income tax assessment to a sugar farmer.”

Sector background

Bunyoro was originally designated for sugar cultivation by Uganda’s colonial government, but a factory was only established in 1964.

The goal was to meet growing sugar demand, though commercial production at Kinyara only began in 1976.

Since then, the industry has faced persistent challenges, including conflicts between factory managers and out-growers over pricing and farmers’ freedom to choose their buyers.