Kampala, Uganda – The government will on Thursday announce the removal of Value Added Taxes on various products including liquefied petroleum gas (LPG) and the processed milk. The announcement is one of the measures contained in the 2020/21 financial year budget with an aim to boost the economy battered by coronavirus pandemic.
In a presentation on Monday, auditors at Ernst and Young said removal of these taxes will make cooking gas and milk cheaper enabling more Ugandans to consume these products. Allan Mugisha, the executive director at Ernst and Young said there is an expected celebration from environmentalists as no taxes on gas means more Ugandans will likely cook with it eventually leading to a reduction in the number of trees cut for firewood and charcoal.
Processed milk and LPG gas have been paying 18 percent VAT meaning their sellers have been factoring that percentage while setting prices effectively making it more expensive for a lot of Ugandans. Processors of milk in the country have for long complained about VAT on processed milk. They argued it made milk expensive and appeared to be discriminating them since those that sold unprocessed milk attracted zero tax.
Also exempted will be 18 percent VAT on upcountry hotels meant to make hotels cheaper and encourage tourism especially at a time when the coronavirus pandemic has hit the sector in an unprecedented scale.
On tourism still, Ernst and Young says the government should allocate more money to the tourism sector than has been indicated in the 2020/21 financial year budget. In the provisions for budget which will be read on Thursday this week, the sector has been allocated 198 billion Shillings, a slight improvement from the 193.7 billion Shillings that the sector got in the 2019/20 financial year.
Mugisha said the sector has been battered the most by the coronavirus crisis and this calls for special attention. He said it needs much more given that when it is fully functioning, the sector can earn the country up to USD 1.6 billion a year, the amount the sector brought in 2019.
Hotels are still not fully operational. Uganda Wildlife Authority has opened up national parks to tourists but only those without primates. Tourists numbers are expected to remain low until travel restrictions have been removed – a move not expected soon.