http://www.newvision.co.ug/news/659781-parliament-set-to-scrap-taxes-on-agricultural-inputs.html
Overview:
On June 12th,
2014, all the East African Countries, presented the 2014/15 budget proposals
that are all geared at promoting economic growth and development. RWECO as a pro-poor focused civil society
organization located in Rwenzori region, Uganda, has taken a keen eye in
finding out how the 2014/15 budgets are tackling food security to answer the
big questions looming in the East African Community of ensuring food security for increased productivity and
growth.
Table1: EAC, budget Allocations
|
s/n
|
Country
|
2013/14
(shs)
|
2014/15
(shs)
|
2014/15
(US$)
|
|
1
|
Uganda
|
UgSh13.06 trillion.
|
UgSh14.36 trillion
|
$5.616Billion
|
|
2
|
Kenya
|
Ksh. 1.64 trillion
|
Ksh1.77 trillion
|
$21.52Billion.
|
|
3
|
Tanzania
|
Tzsh.18.25 trillion
|
TzSh19.5 trillion
|
$12.268Billion
|
|
4
|
Rwanda
|
Rwf1.6773 trillion
|
Rwf1.75 trillion
|
$2.558Billion
|
|
4
|
Burundi
|
|
|
|
NB:
Burundi budget is not aligned to the rest of the EAC countries.
Fig. 1:
2014/15 FY: EAC Budgets in US$ (bn)
Source: Calculations from the
2014/15 budget speeches
Kenya
has continued to be the biggest EAC economy followed by Tanzania as indicated
in the fig.1. In the EAC regional
Governments have taken it upon themselves to present the budget estimates on
the same day and time, save for Burundi which has a different budget
arrangement. However, as we note from
the Fig. 1, the 2014/15 budget estimates for all the four countries increased
slightly.
The case
of Uganda, the budget has hit Ugx. 15 trillion with an estimated growth of
6.2%. While we are all happy with the growth, agriculture as a backbone to
development has remained underfunded thus resulting into the food security
questions. In the horn of Africa, Uganda is believed to be the food basket but
the budget allocations to Agriculture in the 2014/15 was 3.1% of the total
budget which is far below the 10% Maputo (2003) recommendation to the Agriculture sector.
Table 2:
What the place for Agriculture in the 2014/15 EAC Budgets : Ensuring food
security
|
s/n
|
Country
|
2014/15
(shs)
|
2014/15:Agriculture
|
|
1
|
Uganda
|
UgSh14.363 trillion
|
Ugsh. 473.66bn
|
|
2
|
Kenya
|
Ksh1.77 trillion
|
Kshs 3bn
|
|
3
|
Tanzania
|
TzSh19.5 trillion
|
Tzsh. 1,084.7 bn
|
|
4
|
Rwanda
|
Rwf1.75 trillion
|
Rwf170.3 bn
|
|
5
|
Burundi
|
|
|
Source: EAC Country 2014/15 FY
Speeches, Ministrial Policy Statements ( June, 2014
Fig. 2:
EAC Countries 2014/15 Budget (US$M)Allocation
to the Agriculture Sector
Source: Calculations from 2014/15 budget allocations
The case of Uganda.
“Agriculture Production and Productivity….agriculture and
agribusiness is a
priority to Government to create jobs,
improve productivity and expand exports in the medium term. The sector employs
70 percent of the Uganda’s labour force,
and contributes about 21 percent to the GDP. Government plays an important
support role to ensure value for money
and lower the cost of doing business”. ( Budget Speech, 2014/15, Uganda)
Source: MAAIF, Ministerial Policy
Statement FY2014/15
Source: MAAIF, Ministerial Policy
Statement FY2014/15
Whereas, government opines that, Agriculture employs 73% of the
Uganda’s labour force, budget allocations of Ugx. 473.66bn will not meet the
envisaged targets of ensuring increased productivity compared to Tanzania’s Tzsh. 1084bn to support irrigation, and Kenya’s
Ksh. 3bn for agriculture inputs. The
Ugx. 473.66bn, represents 3.3% of the total budget far less than what other EAC
countries have allocated to the Agriculture sector. The last harmer that broke
the camel’s back was for President to transfer
NAADs program that was employing close to 4513 youths to the army as the
NAADs technical team had created a structure of ‘human beings’ having wasted tax payers money on salaries and workshops. The president during the address of the nation
castigated NAADS technocrats for having hijacked the program and instead
allocated 70% of the budget to salaries of staff, workshops, monitoring e.t.c.
The big question is, where will the over 4513 youths employed by Naads go
despite the challenges faced? We need to engage government on that and not to
cause a vacuum in solving one problem.
Snap shot of the NAADs Activities: 2014/15
NAADS Services
2014/15
In the 2014/15, NAADs services budget was drastically decreased
from Ugx. 104.34 bn to 68.87 bn, a shift in the right direction but we also
note that, NAADs district wage was increased from Ugx. 26.90 bn to Ugx. 62.37
bn. We question why money is moved from one vote but being transferred to the
wage vote indicating that the cost of running NAADs is still high (42%)
compared to what will go to the farmers ( 46%). While NAADs was presumably
overhauled, the farmers are still getting leap services given the high wage
bill at NAADs secretariat and the district wage bill. If we must realize value
for money, all these anomalies must be addressed in favor of the peasant
farmers who are the beneficiaries.
The Agriculture allocation in the 2014/15 budget is short of the
Maputo 2003 declaration of 10% and also the Kyankwanzi 2011 NRM caucus to
increase the agriculture sector budget to 4.8% till the target of 10%
Taxing the Agriculture inputs will hurt
the poor women and men:
Terminated exemption on interest income on
agricultural loans. The measure is expected to generate sh25.1b. Terminated
exemptions on the following supply with effect
from 1st July 2014:-
i. Supply of Feeds for Poultry and Livestock
ii. Supply of Agriculture and Diary Machinery
iii. Supply of Packaging Materials to the Diary and Milling Industries
iv. Supply of Specialized Vehicles, Plant and
Machinery services and civil works
related to roads and bridges construction, agriculture, water, education
and health.
The above measures are projected to generate sh215b
and the details are contained in the VAT
(Amendment Bill) 2014.
Termination
of the exemptions VAT zero-rated supplies with effect from 1st July 2014:-
v. Supply of cereals, grown, milled or produced in
Uganda
vi. Supply of processed milk and milk products
vii. Supply of Machinery and Tools for Agriculture
viii.
Supply of Seeds, Fertilizers, Pesticides and Hoes
RWECO
has observed that, the above taxes if implemented in their current form will further
stifle the agriculture sector that employs 73% of the labour force who derive
their livelihoods. The taxes slapped on Agriculture inputs will further curtail
the developments in the agriculture sector that is already underfunded by
government. CSOs need to engage with government to identify other tax
alternatives including increasing taxes on
betting, the music industry and bear and cigarettes among other measures.
The taxes imposed on agriculture inputs will hurt
the grassroots women and men who derive their livelihoods from subsistence
farming, this category of people are susceptible to economic shocks. Other
taxes on basic needs like paraffin of shs. 200/ will have much impact on the
poor than the middle class. The Ugx. 50/
exercise duty on petrol and diesel will
have a further indirect increment on the cost of living as trader will transfer the burden to the
final consumer who is an average citizen. Overall, the poor will suffer the tax
burden as the traders will transfer the tax on commodity prices. As we move
towards the 2016 general elections, citizens need assurance of a fair and free
elections both in the pre-election, during elections as these elections have a direct impact on the
economy as evidenced in the post 2011 elections.
Proposals
for a pro-poor 2014/15 budget
·
Government
to engage with all stakeholders before NAADS is re-directed to UPDF to identify alternatives for the over 4513
youths who are employed and their dependents will fill the burden more;
·
Revise
the excise duty on kerosene and instead increase the tax on betting since its
counter productive;
·
Scrap
the tax on agriculture inputs as the tax will have a direct impact on food
security and employment in the agriculture sector;
·
Harmonize
the taxes proposed with the rest of the EAC countries as indicated in fig 2
above.
·
Conclusion:
Uganda as a food basket in the horn of Africa
has the capacity to increase food production if more resources were allocated
to the Agriculture sector and focus put on water for production. The tax
policies proposed in the 2014/15 budget are likely to hurt the grassroots men
and women the more given that they derive their livelihoods from subsistence agriculture. Moving from subsistence farming requires
deliberate efforts by government and the private sector to invest both human
and financial resources.
RWECO
will continue to work with the CSBAG platform to engage with government in
order to come up with pro-poor tax proposals that will not hurt a bigger
percentage of the population given that if the tax proposals are implemented in
the current form, the grassroots citizens will suffer as traders will transfer the tax burden to the
final consumer .
Jimmy
Baluku Odyek
MA
–Development Studies (Poverty Studies and Policy Analysis)
Coordinator RWECO and a partner with CSBAG
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