Eliminate digital tax stamps on formal beer players to boost competitiveness-Nile Breweries

The value of the illicit beer trade in Uganda is estimated at US$1bn

| THE INDEPENDENT | Nile Breweries Limited executives want the government to put in place policies and regulations that support and protect the beer industry against unfair competition and tax laws.

While making a presentation on ‘how can tax regimes stipost-COVID-19 investments’ at the Uganda Economic Forum on Sept.7 in Kampala, NBL Country Director, David Valencia, said the beer industry is big and contributing to the economic development which is why players need a leveled playing field for the sector to thrive.

“The main challenges that are facing the beer industry right now are digital tax stamps and illicit alcohol. Despite government banning sachets and implementation of tax stamps, fiscal leakage from illicit alcohol has accelerated,” he said.

He said the value of this illicit trade in Uganda is nearly US$1bn, and that the total financial loss was estimated at US$458million in 2020, a 29% compounded growth rate since 2017.

“This loss dwarfs actual collections from the formal sector,” Valencia said urging the government to increase the competitiveness of formal players by eliminating digital tax stamps and enforcing the stamp on illicit alcohol, increasing control in the distribution of ethanol, tracking sources, and usage, setting a minimum price floor for packager spirits to decrease consumption of illicit.

He also suggests increasing penalties and punishment of illicit players and those retailing as well as putting in place deliberate and sustained enforcement.

Julius Mukunda, the executive director for Civil Society Budget Advocacy Group and Jane Nalunga, the executive director for the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI) support Valencia’s views.

Mukunda said the government’s tax and investment laws, and policies should support growth of businesses like NBL given that they contribute a lot to paying taxes and creating jobs and related opportunities. He, however, said he is optimistic about attaining fair tax laws and policies.

“We have come a long way and now the government consults all stakeholders on tax policy and laws,” he said.

NBL spends about Shs52billion on agricultural inputs from local farmers and purchases produces worth Shs80bn annually.

The company also invests close to Shs800million annually to up skill, connect and financially empower farmers.

Nalunga supports the model that NBL uses where farmers produce their crops with a guaranteed market. She said such a model supports the growth of the much-needed products in the value chain of beer production.

Enter Finance Ministry In response, Gerald Namoma, a senior economist at Ministry of Finance said, government is cognisant of the fact that fair tax policies support investment and economic growth.

“A lot of the policies that we put in place are not aimed at increasing taxes but addressing some of the challenges that manufacturers like Nile Breweries highlighted,” he said. “And we are on course to improve on our tax and revenue policies.”

According to the Oxford Economics Study on the economic footprint of the global beer industry, published in January 2022, the country’s beer industry sustained 92.000 jobs representing 0.6% of national employment compared to 1.9% in Tanzania and 1.5% in South Africa.

Valencia said, with a level playing field, Uganda has the opportunity to increase beer industry jobs to 222, 000 in the short term.

Beyond Valencia’s demands, during the Forum, the private sector stressed the need for government to create a conducive atmosphere for businesses to thrive by easing access to credit, taxes and eliminating non-tariff barriers that hinder business growth.

Government representatives stressed the need for businesses to formalise and focus on improving quality to beat the local and global competition.

The Uganda Economic Forum is an annual convening organised by NBS TV in partnership with Nile Breweries, Uganda Revenue Authority, Uganda Development Bank, Uganda Development Corporation, and Ministry of Finance Planning and Economic Development among others.

It is aimed at bringing together key stakeholders from the private sector, innovators, government, and civil society, academia for a constructive exchange on the impact of COVID-19 and what lies ahead for Uganda’s economy in FY2022/2023.