Museveni opens Trade Fair, vows to clean up tax system

President Yoweri Museveni has vowed to improve the taxation system and also clean up administration bottlenecks, which he says, has partly crippled the development of some economic sectors such as manufacturing companies.  

Speaking shortly after a meeting with board members of Uganda Manufacturers Association (UMA) at the launch of the 27th Uganda International Trade Fair in Lugogo, President Museveni said some of the tax bottlenecks faced by manufacturers is purely an administrative issue by the Uganda Revenue Authority (URA).

"The issue which I have picked from [Barbra Mulwana, UMA] chairperson is the issue of the Value Added Tax (VAT) refund. If you sell inside Uganda, you pay VAT. But if you export, the money you pay for VAT should be refunded.

President Museveni hands over the best overall exhibitor award to Steel & Tube Industries. Photo by Eddie Ssejjoba

President Museveni with officials from Mayfair Insurance. Photo by Eddie Ssejjoba

"There is a company called Paramount Cheese which closed because of the tax issues. Why do you tax them before and not wait if you are not sure whether they will export or not? They (URA) don't know important things. They don't understand. They are very stupid. I am sorry for using harsh words but I can't control myself," Museveni said.      

According to Oketcho Micheal, director trade information at Uganda Export Promotions Board, many manufacturing companies face cash flow problems due to delays experience to get VAT refunds from URA.   

"When you don't refund their money in time, you clog their operations. Manufactures need operating capital. Any money you hold affects their operating capital which makes them run smoothly on a day-to-day basis," he said.   

Trade minister Amelia Kyambadde hands over an ward to officials from Uganda Communications Commission. Photo by Eddie Ssejjoba

"The delay in tax refunds cuts across all the sectors due to the process and the law. The law needs to be eased to enable cash flow availability at the operational level," he added.  

In 2018, a list of over 70 top companies filed cases at the Tax Appeals Tribunal, a special court that provides independent arbitration in tax disputes, over taxes that UgaURA wanted them to pay but which they claimed they do not owe.

While speaking to journalists about the closed-door meeting with Museveni, Barbra Mulwana said that they raised some of the issues to improve the efficiency of companies but also have good working relations with the tax authority.

President Museveni said that the current inconvenience is an administrative issue that will be addressed.  President Museveni said the government is currently focusing on bigger challenges such as providing reliable electricity for manufacturers to be able to produce at full capacity.

 "The big cost pushers are four; the cost of transport, cost of electricity, cost of money and cost of labour. The problems for Africans have been the three. Uganda has managed to grow at 6% despite some of these bottlenecks because of peace, being near to the market and liberalization," Museveni said.

On transport, Museveni said that the government is working with Kenya and Tanzania to bring the modern railway to Kisumu in Kenya. He said once it gets Kisumu government is working to revamp the water transport system to ease transportation of cargo.

"We shall use water transport from Kisumu to Uganda to move cargo to Port bell, Bukakata, Jinja among others. That will start before we commence building the railway inside Uganda. We are going to build the railway from Tororo to Kampala. From Kampala to Congo border then to South Sudan. The issue of transport is going to be very much addressed," Museveni said.

Trade minister Amelia Kyambadde said that the industrial and manufacturing sectors contributed 19.6% and 9% to the gross domestic product (GDP).

"The iron and steel industry has grown from 22 last financial year to 24 within a year. The installed capacity is now 1.7 million tons per annum from 856 metric tons in 2013/2014. Manufacturing contributes 35% of the total tax revenue collected annually," she said.

Guests at the event included Marion Nankya (right) the wife of Prince David Wasajja. Photo by Eddie Ssejjoba

"The cement industry has expanded to five factories which has more than doubled annual production from 2 million five years ago to 4.43 million metric tons," she added.  

Mulwana said manufacturers are optimistic that the ongoing amendments to the PPDA law will continue to enhance exports especially when our request for a specific schedule of goods and services that must be procured locally.