Posted on April, 24, 2023 at 07:03 am
If the Trade ministry has its way, 300,000 metric tonnes of white rice imported into Uganda at the value of more than Shs563.3 billion will be exempted from payment of tax.
We, however, understand that the ministry’s proposal to allow duty-free importation of rice from outside East Africa has provoked the ire of members of the Rice Association of Uganda, and the Rice Millers Council of Uganda.
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Monitor has established that the proposal was tabled before Cabinet last Monday. Mr Godfrey Kabyanga, the junior ICT and National Guidance Minister, revealed that the proposal was not discussed despite being on the agenda.
“It was deferred to the next Cabinet meeting,” Mr Kabyanga added.
The matter was, however, the subject of a petition to the Ministry of Agriculture long before it found its way onto the agenda of last Monday’s Cabinet meeting.
Members of the Rice Association of Uganda have petitioned Agriculture minister Frank Tumwebaze, calling for a halt to the duty-free importation of the rice pending an all stakeholders’ discourse.
“We, the farmers, petition you the minister to put an immediate halt to the proposal to import rice until all concerned stakeholders have been consulted and an agreement reached as to the state of rice production in the country, the effect of rising prices on food security and all other matters,” an April 3 letter seen by Saturday Monitor reads in part.
The figures
Computations by some tax experts both within the Uganda Revenue Authority (URA) and the private sector, who talked to Monitor on condition that they are not named, indicate that if the duty-free white rice is greenlit, the Treasury risks losing Shs642b.
This would be from four different forms of tax on the imported rice, including Import Duty, which is computed at 75 percent of the value of the import; Value Added Tax (VAT), which is computed at 18 percent of the value of the goods; Withholding Tax, which is computed at six percent of the value of the goods, and the Infrastructure Levy, which is computed at 1.5 percent of the value of the goods.
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The value of the imported 300,000 metric tonnes of rice based on the average world market price of $500 per tonne, and with the exchange rate at Shs3,755 to the dollar, comes down to Shs563,311,500,000.
That means that Import Duty computed at 75 percent of the value of the rice comes down to Shs422,483,625,000; VAT (Shs985,795,125,000); Withholding Tax (Shs33,798,690,000), and Infrastructure Levy, which is 1.5 percent, comes down to Shs8,449,672,500. The total proposed tax exemption is Shs422 million or $171,246,696.
As the Cabinet mulls over the Shs642b tax exemption, figures released earlier this month indicate that the taxman will not be able to hit the revenue collection target of Shs25.555 trillion for the current financial year.
Revenue collections between July 2022 and February 2023 raked in Shs16 trillion. Projections based on that performance suggest that URA will only be able to collect Shs25.185 trillion, indicating that there shall be a shortfall of Shs370b.
This has not stopped the Trade ministry from seeking Cabinet approval to licence traders to bring in rice on the free.
Motives questioned
Mr Tumwebaze was unavailable for a comment by press time, neither was Ms Geraldine Ssali, the Permanent Secretary in the Ministry of Trade, Industry and Cooperatives.
Ms Irene Kiiza Onyango, the spokesperson of the Trade ministry, however, told Monitor that the proposal is informed by the need to address an acute shortage of white rice.
“The importation is not decided yet, but the reason would be scarcity of the commodity on the market, which has resulted in an increase in the price of the commodity,” Ms Onyango said.
Ms Rachael Mbabazi, the chairperson of the Rice Association of Uganda, told Saturday Monitor that arguments being advanced to justify duty-free importation of rice are flawed.
“The rationale is that rice production in Uganda has gone down and as a result, prices have increased on the domestic market potentially leading to a shortage,” she started, adding, “The idea is that with imports rice prices will go down, the shortages will be averted. But that is flawed.”
The same arguments, she said, had been made before, but neither resulted in a reduction in prices nor increased food security.
Precedents
From 2015 to 2017, the government—citing a need to guarantee food security and give the local rice industry lead time to develop farms—allowed the importation of 151,411 metric tonnes of brown rice. This consequently led to the loss of Shs219b in taxes and Shs291b in foreign exchange.
In July 2020, the Trade ministry allowed Gotovate Uganda Limited to import tax-free 50,000 metric tonnes of rice from Tanzania. Ms Amelia Kyambadde, who ran the rule over the Trade docket at the time, got the firm a tax waiver, allowing it to bring in the rice without paying VAT or Withholding Tax.
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At the time, it estimated that Shs17b in taxes—which should have been collected by URA—was lost.
Last August, Parliament’s Committee on Trade and Industry issued a report in which it accused the State Minister for Trade, Ms Harriet Ntabazi, of political interference, abuse of office and corruption. She was accused of having appointed the Rice Agribusiness Development Foundation (RADFO) as the apex body in the rice sub-sector. RADFO was found to have collected Shs17.8b from rice importers, but declared only Shs1.7b to URA, actions for which the Committee had demanded that the minister be punished. The minister has always denied any wrongdoing.
“Those are precedents and those people in the ministry are making it happen again to allow duty-free importation of rice at the expense of the local farming communities,” Ms Mbabazi said.
Contradiction
Ambassador Phillip Idro, the chairperson of the Rice Millers Council of Uganda, accused Trade ministry officials of working in contravention of a ban that President Museveni ordered by way of a May 7, 2018 letter to Finance Minister, Mr Matia Kasaija.
The letter, a copy of which Saturday Monitor has seen, followed a meeting that Mr Museveni held with rice millers at State House Entebbe on April 16, 2018. The meeting agreed on four action points. One of them was that “there be no further importation of white rice.”
In the same letter, Mr Museveni directed Uganda Investment Authority (UIA) and the Trade, Finance, Investment and Agriculture ministries to split the 114,000 metric tonnes deficit of rice into quotas and allocate them to the millers to grow on local farms.
Saturday Monitor established that six firms, including Fol Logistics, Bulambuli; SWT Tanners, Bulambuli; Sunnad Uganda Limited, Kibogo; Villex Commodities, Masaka; and Kibimba Rice, Kibimba, established farms that—according to Mr Idro—are being let down by this latest development.
Ms Mbabazi has accused officials in the Trade ministry of overstepping their mandate. She accused them of pursuing curious policy shifts and variations, adding that such overtures are aimed at serving self-interest.
“The numerous attempts to import rice over the years, sometimes successful and at other times not, are always initiated by other ministries. This is usually the Ministry of Trade, Industry and Cooperatives…” Ms Mbabazi noted, adding that policy variations in regard to agricultural goods like rice should not be left to the Ministry of Agriculture.
Source: The Monitor