City arcade traders have said high import duties imposed by the Government have continued to hurt their businesses to the point of closing down.

Uganda implemented new tax reforms in 2022 as part of its economic plan to reduce imports, with the aim of boosting local production, partly to create jobs for especially the youth and women.

Arcade businesspeople, under their umbrella Kampala Arcade Traders Association (KATA), are now saying their businesses are failing due to taxes.

Businessman and Chairman Kampala Arcades Traders Association Godfrey Katongole voicing his concerns at the Presidents Office Building in Kampala (Photo by Isaac Nuwagaba)

The association's chairman, Godfrey Katongole, said their businesses are collapsing due to high import taxes, which they say is in turn failing them to pay loans that they acquire to run their businesses.

“I used to import textiles from France, Italy and China for the last eight years, hoping that businesses would recover after COVID-19, but we are subjected to a duty rate of 35% [up] from 25% by the Uganda Revenue Authority, which is exorbitantly unrealistic,” he said on Tuesday.

Katongole was speaking at presentation of the National Resistance Movement (NRM) manifesto week progress report 2022/23 by the Ministry of Trade, Industry and Cooperatives.

He argued that import duties should be revised before passing the 2023/2024 budgets to aid survival of local businesses.

“Before the taxes are passed, the government should first engage key stakeholders in a meeting like Kampala City Traders Association (KACITA), KATA executive, manufacturers and subtenants to have import duties revised and harmonized."

UDB loans

Katongole revealed that Uganda’s effort to help local traders secure cheap loans for business recovery since 2021 has yielded no effort after traders reportedly failing to acquire financial assistance due to lack of paper work.

“No single trader from our association has ever been allowed to access any funding from UDB (Uganda Development Bank) as President Yoweri Museveni had suggested during COVID-19 lockdowns.

"So the question is, who are those specific traders allowed to access such loans from UDB if not us?" wondered the KATA leader.

Imported goods are charged a value added tax (VAT) of 18% and a 15% withholding tax, which is not reclaimable.

“Combined, these taxes effectively charge a 33% tax on all foreign goods and services.  Imports are also charged a 1.5% infrastructure tax to finance railway infrastructure development," said Katongole.

'Dumping ground'

Trade state minister David Bahati responded by saying the tax reforms complement a series of other economic policies the Government has implemented to strengthen the country’s economic potential by bolstering local industries.

David Bahati, the State Minister for Trade, Industry and Cooperatives speaking at the NRM manifesto week while giving accountability of the ministry (Photo by Isaac Nuwagaba)

He said such taxes, include the Buy Uganda, Build Uganda (BUBU) policy, a legal framework that outlines strategies to build Uganda’s economy through buying and selling local goods and services.

“We use tariffs to regulate imports. If we don’t, we shall remain a supermarket of imported products and a dumping ground for foreign goods at the expense of our cottage industries," added Bahati.

Uganda has seen local factories increase from 81 factories to 8,640 factories since 1986.

Bahati pledged to work with traders so as to turn them into exporters as opposed to importers by encouraging them to set up distribution units in other countries.

“With your knowledge in international trade, you are best suited to promote Ugandan goods in other markets in East African Community member states, Africa and elsewhere in the world,” he added.

KACITA chairperson Thaddeus Musoke Naggenda on the other hand called for the reduction of the Central Bank lending rate (CBR), saying it has made borrowing from commercial banks very expensive.

He asked the Government to transfer the management of the presidential fund meant for promoting the BUBU campaign from the trade ministry to traders associations such as KACITA.

The argument for this reform is that such groups are best suited to implement the fund since they are also traders.

“We want the government to transfer the COVID-19 stimulus package for traders from UDB to business-owned SACCOs because it has been hard for beneficiaries to access the package through the bank," said Musoke.