Kampala, Uganda | By Michael Wandati | For many Ugandans, beer is synonymous with warm memories, friendly gatherings, or unwinding after a long day. However, starting Financial Year 2024/25, enjoying their favorite drink will be more costly due to new government taxes on beer.
Finance Minister Matia Kasaija announced new taxation measures targeting the alcohol industry, particularly imported beer and wine, during his budget presentation for the 2024/25 Financial Year. One significant measure includes a tax of Shs 1,000 per kilogram on powdered beer, a recent favorite among bar and club patrons.
This powdered beer, primarily imported from Germany, turns into a drinkable beer when mixed with water, unlike traditional bottled beers.
Additionally, the excise duty on imported wines has increased from 80% or Shs 8,000 per liter to 100% or Shs 10,000, whichever is higher. This follows previous concerns raised by the brewing sector regarding high excise duties. Currently, malt beer is taxed at 60% or Shs 2,050 per liter, and opaque beer at 12% or Shs 150 per liter, whichever is higher.
In March, Uganda Breweries Limited (UBL) managing director Andrew Kilonzo warned about a proposed 20% tax hike on both local and imported spirits, noting that Uganda’s excise duties on spirits are twice as high as those in other East African countries. The latest announcement did not include new taxes on spirits, implying that existing rates remain unchanged.
Additional Tax Measures
To support budget financing, the minister introduced a Shs 100 tax per liter on diesel and petrol and imposed excise duties on adhesives, grout, white cement, and lime, aligning their tax treatment with cement.
Mobile Money Withdrawals
The new budget also stipulates a 0.5% excise duty on withdrawals from electronic banking wallets, excluding agent banking and banking halls. This change will impact those relying on electronic banking platforms.
Value Added Tax (VAT)
To encourage e-mobility and the use of electric vehicles, the minister announced tax exemptions on the supply of electric motorcycles, vehicles manufactured in Uganda, and related charging infrastructure.
Tax on Employee Gifts
Starting next financial year, taxable goods or services provided by employers to employees will attract VAT. This controversial measure sparked debate in parliament, with MPs concerned about its implications, such as taxing cement given to employees by cement-producing companies.
Income Tax Incentives
The government will exempt investors from capital gains tax on the sale of holdings in private equity or venture capital funds regulated by the Capital Markets Authority, aiming to encourage such investments in Uganda.
Tax Holidays
Tax holidays will be provided to manufacturers of electric vehicles, motorcycles, batteries, and charging equipment, as well as developers of medical facilities. However, civil society groups have cautioned against such tax holidays, which could result in significant revenue loss.
Also Read: Full Uganda Budget Speech for Financial Year 2024/25
The Uganda Revenue Authority (URA) estimates a Shs 160 billion annual loss in corporate income tax due to these holidays.
To alleviate taxpayer burden, the government extended a waiver of penalties and interest on arrears outstanding by June 2023 for payments made between July and December 2024. A 10% withholding tax on commissions paid to banking and fintech agents was also introduced.
Public Debt Update
Uganda’s total public debt stands at Shs 93.38 trillion ($24.69 billion), with external debt at Shs 55.37 trillion ($14.64 billion) and domestic debt at Shs 38.01 trillion ($10.05 billion).
The debt is projected to reach Shs 97.638 trillion ($25.716 billion) by June 2024. Despite the increase, Kasaija assured that Uganda’s debt remains sustainable and investments funded by this debt are yielding positive returns.
While the debt-to-GDP ratio is projected to end at 47.9% this financial year, below the 52.4% threshold, the government is committed to maintaining debt sustainability and ensuring that borrowed funds are used effectively for the country’s development.
