National Budget 2020/21: Government has increased taxes on imported agricultural inputs by 25%
Government of Uganda has increased taxes on all agricultural inputs imported into the country by 25% for the financial year 2020/2021.
While reading the National Budget yesterday, the finance minister, Hon Matia Kasaija said that this is part of government’s plan to promote import substitution.
Import substitution according to the economics refers to a strategy that emphasizes the replacement of imports with domestically produced goods, rather than the production of goods for export.
As a result, Kasaija said that the government decided to increase the taxes on agricultural imports to 60% from the previous 35% in a bid to encourage the development of the domestic industry.
Kasaija was first to give an example of many value addition factories that have been importing drastically almost all their agricultural raw materials from outside Uganda.
He said that by increasing taxes it means importation will be limited and many of these factories, hotels and restaurants will have to depend on the locally produced agricultural raw materials and food items.
“We have been importing refined industrial sugar yet we are a surplus producer of sugar,” minister Kasaija noted adding that government has already agreed with sugar manufacturers to produce refined industrial sugar locally.
He said that unlike the sugar factories, they are also ready to support other factories including offering them with subsidies provided they are determined to boost the local agricultural market.
“We shall protect them from imports,” the Minister added stressing that they have also scrapped off the Value Added Tax (VAT) on the supply of agricultural equipment.
Meaning, the supply of processed milk will be VAT free to enhance the price competitiveness of milk produced in Uganda.
Meanwhile, part of the budget, the Ministry of Works and Transport will retain a lion’s share of Shs5.8 trillion followed by Security with Shs4.5 trillion while interest payment comes third with Shs4 trillion.
Others are Education (Shs3.5 trillion), Health (Shs2.8 trillion), Energy (Shs2.6 trillion) and Accountability Sector (Shs2.1 trillion) Justice, Law, and Order Sector (Shs2 trillion), Local Government (Shs1.7 trillion), Water and Environment (Shs1.6 trillion), Agriculture (Shs1.3 trillion), Public Administration (Shs1.3 trillion) while Parliament will take Shs667.8 billion.
The government also plans to spend Shs662.5 billion on Public Sector Management, Shs264.5b on Science and Technology, Shs200b on Lands, Housing and Urban Development, Shs193.6b on Tourism, Shs172.2b on Social Development, Shs171.8b on Trade and Industry while Information and Communications Technology will take the smallest portion with Shs162.9b.
