Consultation needed on proposed VAT for agricultural inputs

A wide range of stakeholders met at the Kampala Serena Hotel on August 14 to discuss government’s proposed imposition of value added tax (VAT) on agricultural inputs in Uganda.

The discussion, co-hosted by the Economic Policy Research Centre (EPRC) and Alliance for a Green Revolution in Africa (AGRA) brought together government officials, farmers, MPs, NGOs and business persons.

EPRC Executive Director Dr. Sarah Ssewanyana noted that consultation was critical in ensuring that citizens assumed ownership of government decisions. This was true of tax decisions. She noted that the public remains unsatisfied and suspicious of the proposed resource mobilization efforts to finance Uganda’s development. “We need to think innovatively how government will turn the public sentiments into well thought reforms that are not driven by emotions but based on evidence based research,” she said.

In opening remarks read on behalf of the State Minister for Agriculture, Animal Industries and Fisheries, Professor Mijumbi Nyiira Zerubabel, Mr. Samuel Ssemanda acknowledged that plans were already underway to impose the 18% VAT on agricultural inputs. He also noted that agriculture had a critical role to play in alleviating poverty.

EPRC senior research fellow Dr Swaibu Mbowa presented an overview of the potential impact on Uganda’s agricultural sector.

He noted that there was pressure to “reduce the gap between government expenditure and revenue collection because of increasing government spending and declining donor aid”..

Dr Mbowa noted that the potential costs of the proposed imposition appeared to outweigh the potential benefits and recommended that the measures be reconsidered. He explained that “there is a disconnect between government’s intention to promote commercial farming and the introduction of taxes on agricultural inputs”.

He added that “the impact will be immense as more than 70% of Ugandans are employed in the agricultural sector”.

Similar sentiments were shared by Dr Steven Were Omamo, AGRA director of policy and advocacy. He explained that, Smallholder farmers form the bulk of food producers in rural areas of Uganda. Paradoxically, they also become net food buyers once the glut period is over as they are only able to produce enough for their families and for immediate living expenses.

“They lack adequate access to quality-certified and affordable seeds, fertilizer and pesticides. Additionally, because of the small size of their landholdings, mechanization is often difficult and all digging operations are done by hand-held hoes, further limiting their farm outputs,” noted Dr. Omamo.

The presentation was followed by a panel discussion moderated by Angelo Izama. The panelists included the Hon Mathias Kasamba (MP), Mr Samuel Semanda (MAAIF), Hon Kisamba Mugerwa (NPA), Mr Jabber Adbul (Balton-Uganda), Mr Charles Ogang (UNFFE), Dr Omamo and Dr Mbowa.

The meeting was closed by the chair of the parliamentary committee on agriculture Hon. Mathias Kasamba, with agreement that more discussion was needed on the impact of the proposed tax.