For many Ugandans, beer evokes warm memories, cheers with friends, or a cold drink at the end of a long day. However, in the coming financial year, they will need to dig deeper into their pockets for their favorite drink as the government has imposed higher taxes on beer.
Finance Minister Matia Kasaija announced new taxation measures targeting the alcohol industry, particularly imported beer and wine brands, during his budget speech on Thursday.
Despite some analysts suggesting that the 2024/25 budget was not overly “tax-laden,” the minister introduced a Shs 1,000 tax on each kilogram of powdered beer.
This new excise tax is likely to increase the final price of this type of beer, which has become popular in top bars and clubs. Unlike bottled beers, powdered beer, imported from countries like Germany, instantly transforms into beer when mixed with water.
Additionally, Kasaija announced an increase in excise duty on imported wines from 80 percent or Shs 8,000 per liter to 100 percent or Shs 10,000, whichever is higher. The current excise duty on beer made from malt is 60 percent or Shs 2,050 per liter, while opaque beer is taxed at 12 percent or Shs 150 per liter.
In March, Uganda Breweries Limited (UBL) Managing Director Andrew Kilonzo warned against the government’s plans to impose a 20 percent tax increase on both locally manufactured and imported spirits. He highlighted that Uganda’s excise duties on spirits were twice as high as those in other East African countries. Kasaija did not announce new excise duties on spirits, meaning the current ones remain in place.
The minister also announced Shs 100 tax on each liter of diesel and petrol and imposed excise duty on adhesives, grout, white cement, and lime to align their tax treatment with that of cement. Withdrawals of money from platforms other than mobile money will be subject to an excise duty of 0.5 percent of the withdrawal value, except for withdrawals from agent banking or banking halls. This measure is likely to affect those who use electronic banking wallets.
To promote e-mobility and the affordability of electric cars and motorcycles, Kasaija announced that electric motorcycles, vehicles manufactured or fabricated in Uganda, and their respective charging stations and batteries, will be exempt from tax.
Starting next financial year, taxable goods and services provided by an employer to an employee will attract VAT, a move that generated debate in parliament. MPs argued that if a company, for instance, produces cement and donates bags to its employees for self-development, the gift would be subject to VAT.
The government will exempt investors from tax on capital gains arising from the sale of holdings in private equity or venture capital funds regulated by the Capital Markets Authority, aiming to incentivize such investments in Uganda.
Tax holidays will be provided for income generated by those manufacturing and fabricating electric motor vehicles, motorcycles, batteries, and charging equipment, as well as for those developing or operating medical facilities. However, civil society actors have previously warned that such tax holidays can deny the country significant revenue. The Uganda Revenue Authority estimates that the country loses about Shs 160 billion annually in foregone corporate income tax due to these holidays.
The minister also extended the waiver of penalties and interest on arrears outstanding by June 2023, applicable when the taxpayer pays between July and December 2024. A 10 percent withholding tax was introduced on commissions paid to banking agents and fintech agents.
Kasaija reported that Uganda’s total public debt stands at Shs 93.38 trillion ($24.69 billion), with external debt at Shs 55.37 trillion ($14.64 billion) and domestic debt at Shs 38.01 trillion ($10.05 billion). The public debt is projected to reach Shs 97.638 trillion ($25.716 billion) by June 30, 2024. The debt-to-GDP ratio is estimated at 49 percent, below the 52.4 percent threshold for the financial year 2023/24 and under the 50 percent target for debt sustainability.
While acknowledging the increase in debt, Kasaija emphasized that it remains sustainable and that the borrowed funds have been well-invested, yielding good returns.
