Textile traders want review of tax on materials

Jul 23, 2020

The new rating system came into effect on July 1, 2020

Kampala City traders under their association have requested the government for a reduction in the new tax rates imposed on them.

The textile dealers are demanding a decrease in the rates imposed on raw materials for local tailors and fashion designers, saying they are not practical.

During a press conference held at the Kampala Capital City Traders' Association (KACITA) offices in Kampala, the traders said that with the introduction of the new rates, taxes have risen to an average of over sh400m for 20ft containers and sh900m for 40ft containers which is beyond the total value of the goods in these containers.

They explained that initially, they have been paying between sh45-50m for a 20ft container and sh70-80m for a 40ft container respectively.

The new rating system came into effect on July 1, 2020.

"The $5 per kilogram rate given is high and not practical considering the average purchasing price of the same material," KACITA secretary-general Thaddeus Keno Musoke said.

Musoke says that application of $5 per kg clearly means that the government is frustrating importation of these raw materials (polyester) which in turn will suffocate the supply of the same material required for the local production in the textile sector that includes tailors, designers, cutters and many other casual labourers.

He said that as KACITA they made research on this specifically imported polyester and found out that no factory produces the material including NYTIL, Sunbelt and Fine Spinners among others.

The traders explained that the decision was to grant Uganda a stay of application of the East African Community rate of 0%, 10% and 25% and to apply a duty rate of 35% or $5 per kg, whichever is higher for one year.

They noted that although the business community embraces and appreciates all the efforts by the East African Community, there is a need for economic and business consideration before the implementation of any recommended policies.

This would, therefore, encourage the importation of finished products that would have been locally manufactured.

"It also discourages a large number including the youth and women whom we involved in training and creating employment through cottage industries as a measure of embracing and implementing import substitution, through the Buy Uganda Build Uganda initiative and value addition in the textile sector," Musoke said.

In addition, there is a lot of business support that our members extend to local manufacturers by purchasing from them all other locally available materials for the production of uniforms and other items.

URA speaks

When contacted, the Uganda Revenue Authority spokesperson Vincent Seruma explained that URA is aware of the traders' grievances and said that the Authority is considering reviewing the tax.

"We are aware of this matter, however for the traders whose cargo was already in transit, URA will give them a grace of period of three months as they prepare to clear their cargo."

Traders speak

"These taxes are too high for us especially during this time when we have been under lockdown for three months. Some of us have not started working," Bridget Bagonza a trader in one of the city arcades said.

"After being trained and equipped by KACITA and its partners, we started small cottages with an intention of starting big factories as per the President's call (import substitution, value addition, and business diversification) but we have been discouraged," Moses Bagonza said.

"We request a reversal of this proposed rate especially the $5 per kg since it is practically impossible for our Ugandan business to cope with," Abdul Iga said.

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