Uganda’s Tax Reforms are Dipping into the Profits of Local Businesses

In July 2021, the government implemented new tax reforms as part of Uganda’s economic plan to reduce imports and boost local production, in part to create jobs. That had a counter effect on traders who rely on imports, who now must pay on many textiles a duty rate of 35%—an increase from 25%—or a charge of $3 to $3.30 per kilogram, whichever is higher. The traders—who are part of Uganda’s private sector that contributes 75% of the country’s gross domestic product—have decried these tax measures, calling them counterproductive as they hurt small businesses, which have yet to recover from the economic aftershocks of the coronavirus pandemic. But pushback from traders on the tax reforms has prompted the government to respond. In August 2021, the Uganda Revenue Authority waived the higher tax for garments and fabrics that can’t be locally sourced, which accounts for 90% of imported textiles and garments. The tax reforms complement a series of other economic policies the Ugandan government has implemented to strengthen the country’s economic potential by bolstering local industries. They include the Buy Uganda, Build Uganda policy, a legal framework that outlines strategies to build Uganda’s economy through buying and selling local goods and services.

SOURCE: QUARTZ AFRICA