Govt rescinds excise duty on locally-made packing bags

Government has changed its earlier position on imposing excise duty on packing bags. This was announced by finance state minister David Bahati recently when he appeared before the Parliament finance committee and presented the proposed amendment.

The proposed amendment was presented as an additional clause in the Excise Duty Bill government presented in June 2020 for additional revenue measures.

Bahati proposed that clause 5 be included in the Excise Duty (Amendment) Bill 2020, stating: "Sacks and bags of polymers of ethylene and other plastics under HS codes, imported or manufactured by a person without recycling plant in Uganda, except vacuum packaging bags for food, juice, tea and coffee, sacks and bags for direct use in the manufacture of sanitary pads."

The minister said those who are not in the excluded category will pay excise duty of 120% or sh10,000 per kilogramme of plastic bags.

Explaining the background to the changes, the finance ministry's director for revenue collection, Moses Kaggwa, said they received a petition from local manufacturers of packing bags, who argued that the tax government had imposed on them would cause them to close their businesses and lay off over 3,000 employees.

The sh10,000 excise duty on each kilogramme of packing bags, which the local manufacturers opposed, had been imposed in the Excise Duty Bill 2020, which government presented in April and Parliament passed it in May this year.

"We had discussions with the local manufacturers under the chairmanship of Operation Wealth Creation and we agreed to relieve them," he explained.

Kaggwa informed the legislators that whereas local manufacturers who have recycling plants had been exempted from payment of the tax, the local manufacturers without recycling plants would have to pay the tax.

The committee chairperson, Henry Musasizi, tasked the finance ministry with explaining why the other local manufacturers without recycling plants had not been exempted.

Kachumbala County MP Patrick Isiagi said: "I think you need to treat local manufacturers without recycling plants better than the importers because they also contribute a lot to the economy."

Clarifying on the questions from the MPs, Kaggwa said: "There are over 46 local manufacturers who have recycling plants.

We have exempted them because by recycling used materials, they will be helping the country in protecting the environment," he said.

On treating local manufacturers without recycling plants better than importers, Kaggwa said importers would on top of paying the excise duty of sh10,000 per kilogramme of packing bags, have to pay import duty of 25% and withholding tax of 6%.

Kaggwa said in doing so, the government would be enabling local manufacturers of packaging bags to have a competitive advantage over those who export packing bags to Uganda.