Museveni explains fuel prices, taxes

By Henry Mukasa
and Cyprian Musoke

PRESIDENT Yoweri Museveni has defended the taxes levied on various commodities in the country, saying the revenue is used to build key infrastructure on which economic development hinges.

The President also explained that factors contributing to the high fuel prices are outside Uganda.

Speaking during a talk-show programme, Mugoba Nsonga on Vision Group-owned Bukedde Television and Bukedde FM last evening, the President explained that the taxes were low and charged mainly on luxury goods.

Thousands of listeners and viewers sent SMS, asking questions or raising issues during the talk-show. Finance state minister Prof. Ephraim Kamuntu, flanked by senior Vision Group managers, received the President at the company’s premises.

Museveni listed the key infrastructure the Government needed to work on such as ensuring peace, which he termed as the foundation, energy (power), roads, railway, air transport, education, health and water. He pointed out that these will be his main priorities in his new term.

He said when he became president in 1986, the economy had collapsed and commodities were scarce as factories had closed and investors fled the turmoil.

He said after his government resuscitated the economy, the revenue base had widened, investors returned and dependency on donor aid reduced.

The President observed that government may review the taxes downwards if he is convinced that this would not destabilise funding for infrastructural projects and development.

“We can look into all that (taxes). That’s why I came here to explain,” the President said as he responded to a question about taxes on fuel.

“Reducing taxes is not a problem, but you have to make a choice. Can taxes come down and government still builds roads and dams for power generation? Ask that to these wise people who talk a lot. Should we drive cars and leave road construction and other things to God?” Museveni asked.

But he explained that many products are tax-free.

“Most things are not taxed. For example, food produced here in Uganda is not taxed. If you have matooke, there is no tax. No taxes at all on agricultural products here. No taxes on our coffee which goes for export yet previous governments used to tax exports,” he explained.

“For imports, we don’t tax most of them. For example, drugs to save life, scholastic materials, new computers, industrial machines, fertilisers, salt, pesticides, hoes, and many other things. Everything that adds value to the Ugandan economy, we don’t tax because our aim is to rejuvenate the economy.”

“What, therefore, do we tax? We tax only those things for leisure and consumption like beer, wine, cigarettes and mobile phones. We say if you have money to buy a phone, give us some tax to help on our roads. Bottled water, cement, paraffin and petrol are taxed because that tax is on consumables,” he explained.

Fuel taxes
The Government, he said, levies sh850 per litre of petrol, sh530 per litre of diesel and only sh200 for a litre of paraffin. Giving last year as an example, the President said the Government collected sh700b from taxes on fuel alone.
But he stressed that external factors were to blame for the current high cost of fuel.

“Petrol price here in town costs sh3,500 but most of it is not taxed. Most of this cost is from abroad. To arrive at Eldoret in Kenya, a litre of petrol is at sh2,400. Therefore, from Eldoret to Uganda, it goes up by sh1,000 only. Of this, only sh850m is tax. Therefore, most tax on oil is from outside because of wars in Libya, Iraq and pirates in the Indian Ocean. All these add on the cost,” he explained.

Museveni also defended the sh1.7 trillion expenditure to procure eight fighter jets from Russia, saying the army was demobilised from 100,000 to 40,000 men so that, “its small with modern equipment.”

“How shall we farm when we don’t have stability. I have land in Rwakitura but I could not step there for eight years because they would cut my head off. So if you don’t have stability and talk about farming, etc, you are joking. Peace is the foundation of all these.”

“In 1991, we reduced our army from 100,000 and remained with 40,000. Few soldiers with more sophisticated equipment. That arrangement we are still completing. If we don’t do it, we shall remain with few soldiers without modern equipment.

That’s not wise. Now all of Uganda is stable; Karamoja, the north. Therefore, these are the modern equipment bought in the last 40 years from 1986 to today to serve us the next 20 years. Those speaking against these are interfering with our role,” he explained.

Taxes
But he observed that Uganda’s taxes are comparatively low in the region. He said in Uganda, taxes account for 12.8% of GDP. But in Kenya, it is 18% of their GDP and Tanzania is at 16%.
He said in other developed countries like Holland, taxes account for 32% of GDP. He said the media should help educate the population on tax issues.

Economy
Museveni spoke at length about the country’s economic journey since independence.
He noted that by 1962, the country’s economic base was still low with just a few tarmac roads.

He observed that the economy was ruined in the 1970s and 1980s “and even the little we had was lost because of bad leadership at that time.”
He said there were a handful of industries and schools.

Essential items like sugar, salt, paraffin, soap and clothes were being imported.

On electricity, he added, Uganda had only one dam which the British left in Jinja, producing 150 Megawatts but by the time the NRM came, all the turbines were spoilt and it was left with only four turbines producing 60 megawatts.

“All those we had to put right. We had to rebuild what was left by the British. But over and above that, we had to expand economic infrastructure,” he said.

Museveni said when NRM took power, it had to rebuild the economy from the foundation.

The foundation, he stressed, is peace, electricity, roads, education, health, railways, water and air transport.

Government, he added, had to depend on donors to borrow money or aid. “They tried, but since Uganda is not their country, they don’t care much. They helped a little and stopped there. So that little cannot solve all our problems.”

“Soon the economy started recovering because of the peace. Those who had run away were returning like the Madhavanis, Mehta, Sudhir and other new ones like MTN, and other mobile telephone companies.”

Roads and railways
The President said many roads are now being worked on using government funding.
They include Kampala-Masaka, Mbarara-Kabale, Mbarara-Katuna, Tororo- Soroti, Bwaise-Kafu, Busega- Mityana and Matugga-Semuto-Kapeeka.

Others soon to be worked on are Mukono-Kyetume-Katosi, Mpigi-Kanoni-Kabulasoke-Maddu-Ssembabule, Mbale-Moroto, Ntungamo-Mirama hills, Ishaka-Kagamba, Masaka-Nyendo and Bukomansimbi-Ssembabule.

He said the Government had started rehabilitating the railway lines using the Rift Valley Railways company and UPDF manpower.

Answering another question, Museveni warned that those who do shoddy work would be nabbed by a monitoring unit he has set up akin to the drugs monitoring unit.

He said he had directed that people in the islands should not be charged for using the ferries because the vessels act like roads. He promised to look more into this.

Oil and food reserves
Museveni explained that reserves are only necessary during war, when there is no supply.

“Its (reserve) purpose is to serve in emergencies when supply is cut off but under normal circumstances, the reserves change nothing. Instead, they add a burden because it would mean diverting some other money from the roads, then buy fuel and keep it.”

Sugar prices
Museveni explained that the although the price of sugar is at sh2,800 per kilogramme, the tax on it is only sh376.

He said the tax on sugar generates sh81b in revenue to the Government. He noted that even if the tax is removed from sugar, the price will be as high as sh2,400 a kilogramme.

On fishing
Museveni said the Government is going to educate the population against harvesting immature fish.

“For us in Ankole, it’s a taboo to eat a calf even when starving because it (the calf) rejuvenates the kraal. Therefore, I told them (in Ankole) that to harvest young fish is a mistake.”

Kololo swearing in
The President also defended the sh3b for his swearing-in ceremony, saying it would cater for the visiting heads of state. Museveni said such leaders’ visits benefit the country because “friendship is business.” Parliament was informed recently that 32 leaders had been invited.

“Go and look into Uganda’s trade statistics. How much money are we getting from Rwanda, Sudan, Congo, Kenya, Tanzania, Central African Republic? The leaders we invite here mean friendship and friendship is business.”

“Those who say friends are not important, that is also their thinking. But in my wisdom, friendship is business,” he said, noting that as a result of CHOGM, the country now has so many hotels.

“Compare the money we are getting from tourism out of CHOGM. They went back and told others how beautiful Uganda is.”

Besigye’s parallel swearing-in ceremony
Asked about reports that FDC leader Col. Kizza Besigye plans a parallel swearing in ceremony at the Constitutional Square, Museveni stated: “I want to assure Ugandans that no one will get power outside elections, and which elections have been finished.”

“Besigye to swear in on May 12 as President is not wise and it will not happen. Anybody who will involve themselves in that, I feel sorry for them because Uganda has laws and the Constitution which guides on those matters,” said Museveni.

“I want to assure Ugandans that what Besigye is doing is katemba (circus). We have arrested him twice and he has been released by the court. Don’t worry about Besigye because there is nothing he can do to derail us.”