Agriculture is Uganda’s “green gold” with the capacity to transform the economy as a source of raw material for industrialization, job creation and shared prosperity. The sector in its state employs about 72% of Uganda’s total labour force (60% women) - contributing to 23% to the national gross domestic product. Unfortunately, government imposed a withhold tax of 1% to every person who makes a gross payment for agricultural supplies in excess of Shs1m. ESAFF Uganda as a movement for small scale farmers acknowledges governments’ efforts of raising Shs16.2 trillion domestically, out of which about Shs418b from non-tax revenue in the FY2018/19 -amounting to about 53% of Shs30 trillion total resource envelope.
However, taxing low scale agriculture indicates dire consequences on a sector that is trying to uplift itself from years of low activity thus defeating the purpose of a paradigm shift to commercialization as envisioned in NDPII, leaving one wondering why government is taxing “primary production and small holder farmers using rudimentary methods of farming?”. Therefore, the sector that has not received more than 5% share of the national budget since 2009/10 way below the 10% budget allocation as per the Malabo declaration must be protected than exempting a developer whose investment capital is at least $30M for a foreigner or $10M for citizen over 10 years, because it is affecting production and market access for small scale farmers. A study on the costs of tax incentives to Uganda’s socio-economic landscape reveals that incentives have not delivered as expected in many areas such as providing jobs, revenue to the government and attracting investment instead on average, government spends at least Shs75b every financial year on a range of companies that are entitled to tax holidays and exemptions on import and excise duties. The revenue foregone over the last eight financial years is in excesses of about Shs7.6 trillion equivalents of nearly half of the money needed to be collected domestically to finance the budget.
ESAFF Uganda as a farmers’ forum adds its voice to call upon government as it is revisiting the tax law that this tax be geared towards value addition and commercial agriculture, short of which government is flogging a dead horse.