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Will tax cuts on agriculture machinery spur sector?

By Billy Rwothungeyo

Added 29th July 2016 09:09 AM

Male Joe, a farmer in Gayaza says such a move is long overdue, and that government needs to start taking agro-processing seriously if Uganda is to achieve middle income status.

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Government removed 18% Value Added Tax (VAT) on the supply of machinery used for the processing of agricultural or dairy products

Male Joe, a farmer in Gayaza says such a move is long overdue, and that government needs to start taking agro-processing seriously if Uganda is to achieve middle income status.

To encourage more people to get into agribusiness, government in the financial year that started on July 1st decided to strike down 18% Value Added Tax (VAT) on the supply of machinery used for the processing of agricultural or dairy products such as hullers; oil press; tillers, grain dryers, manure spreaders among others.

What kind of impact will this move have on the agriculture sector?

Male Joe, a farmer in Gayaza says such a move is long overdue, and that government needs to start taking agro-processing seriously if Uganda is to achieve middle income status.

“I honestly believe this will have a great positive impact on general development. Definitely, machinery prices may lower a little down such that even smallholder famers can afford. Remember these are the biggest population of the farming community. For example: I deal with Power tiller tractors and Rice De-stoner machines with this tax exempt I am seeing many farmers groups potentially showing interest to buy these machinery,” he reasons.

Importers will also not pay any VAT on fertilizer distributor, trans planters, juice presses and rushers, seed and grain shellers, silage chopper machines; color sorters for coffee, and coffee roasters.

Orwothwun Charles, the manager credit and portfolio management at the Uganda Development Bank (UDB) says as much as the changes on VAT are a good thing, a lot more needs to be done to transform agriculture in this country.

 “When you slash the taxes on agricultural inputs, what does this mean for the common man? If you slash VAT on tractors, how many farmers in Uganda use tractors?”

One of the sectors that UDB is heavily involved in is agriculture. Orwothwun says stakeholders should first focus on re-organising farmers through cooperatives.

“We emphasize that as a country, we need to go into agro processing, but how many people have that capacity? We have not addressed the fundamental question which is who is doing agro-processing? The same people doing agro-processing are the middle-men milling maize, processing coffee.”

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