Uganda’s Parliament wants more tax slapped on alcohol, tobacco

Parliament’s Health Committee wants taxes for harmful products like alcohol and tobacco increased by 20% in order to bridge the gap left by donors, who have indicated plans to reduce funding to Uganda’s health sector.

MPs argue that if the tax rate on harmful products is increased by 20%, Uganda’s revenue could increase from US$95.3M (Shs362.412Bn) in FY2022/23 to US$726.49 (Shs2.762Trn) in FY2026/27.

The Committee also urged the Government to consider ring-fencing social media tax for upgrading of Health Centres and for community health financing as the community health strategy launched remains largely unfunded.

“Over the years, Health Development Partners have supported the Health Care system especially in the areas of immunization, HIV/AIDS, TB, Malaria control and Infrastructure development. However, the Committee is concerned about the shrinking resource envelope due to global factors and a shift of priorities.

In light of the constrictive fiscal space, the committee observes that Government should consider some innovative domestic financing mechanisms to generate some additional revenue for the health sector,” noted Dr Charles Ayume, the Chairperson Health Committee while presenting the report on the 2024/25 ministerial policy statement for the health sector.

This comes as the government introduces new taxes as captured in five sets of tax Bills that include the Excise Duty Amendment Bill, 2024; Stamp Duty Amendment Bill, 2024; Income Tax Amendment Bill, 2024; Value Added Tax Amendment Bill, 2024, and Tax Procedures Code Amendment Bill, 2024. 

The proposed taxes were tabled early this month by the State Minister of Finance in-charge of General Duties, Mr Henry Musasizi. The proposals were later referred for processing to the House Committee on Finance, chaired by Mr Amos Kankunda. 

Under Excise Duty, the government proposes to impose Shs500 on each 50kg bag of cement, adhesives, grout, white cement or lime. The same Bill fronted by the Ministry of Finance also shows that gasoline users will pay Shs1,550 tax on every litre, gas oil will have a Shs1,230 tax on each litre, while paraffin users will have to incur Shs1,550 per litre bought. 

However, the proposals have triggered concern among economic policy experts, including MPs, with the majority opposing the proposals, but government reasons otherwise. 

The State Minister of Finance in-charge of Planning, Mr Amos Lugoloobi, has since defended the tax proposals, reasoning that the move is meant to lessen government’s reliance on borrowed funds, which in turn attract heavier interests. 

“Let me state that we are a country whose resource envelope depends on revenue and borrowed funds. We borrow because the revenue we use is not enough. But how long can you go on borrowing?” Mr Lugoloobi wondered. 

He insists that the resources have to be siphoned from the majority Ugandans through taxes imposed on items frequently used such as fuel and construction materials such as cement. 

“So it is the natives of a country that build their own country. They are not going to expect us to go to America [and borrow] and come here and finance the development of this country. It has to come from us,” he said.

The Ministry of Finance has tabled a Shs58.3 trillion Budget for the FY2024/2025, reflecting a Shs5.64 trillion increase above the Shs52.7 trillion of the ongoing FY2023/2024.