Beer makers say it is the only way of reducing on illicit alcohol.
Agriculture minister Tress Bucyanayandi has promised to table tax complaints raised by the beer industry with the finance ministry and Uganda Revenue Authority.
Reacting to concerns raised by Nyimpini Mabunda, the Uganda Breweries (UBL) chief, over what the brewery considers an unfavourable tax regime, Bucyanayandi promised to discuss the matter with the concerned players.
He hailed the effort of the beer industry in completing the value-addition chain by processing produce (cassava and maize) from farmers.
Beer makers want the Government to reverse or reduce the 30% excise tax on beer made using local input, saying it is the only way of reducing on illicit alcohol.
Mabunda also said the partnership with farmers will be affected because the demand from farmers will reduce as consumption goes down because of the increase in the beer unit. Three major brands Pilsner, Senator and Bell use local raw materials.
Since the tax raise, the price of Senator has increased from sh1,800 to sh2,000, according to David Onyango, UBL’s corporate relations manager.
In the past, the Government imposed a 20% excise tax on beer, which have since gone up to 30% for products with local content exceeding 75%. This tax rise is usually passed onto the consumer.
“Our lower level consumers then resort to illicit brews, which cause a lot of social and health economic burdens such as HIV and broken families,” noted Mabunda.
He also noted that in Kenya, when the tax was raised, people resorted to consuming illicit alcohol, resulting into tragic social incidences. The tax policy had to be reversed.
“Uganda is a highly-price sensitive market and we are not immune to this as an industry. When volumes go down, fewer farmers get involved.”
He also added that an increase in illicit alcohol means the Government also loses more revenue because most of the illicit alcohol trade is done informally.
Currently, 70% of the alcohol on the market is illicit, according to estimates. This year, UBL bought 4,000 metric tonnes of cassava, a rise from 2,500 metric tonnes. The brewery is currently working with 5,000 tonnes.