Uganda Promoting Local Cigarette Production

Uganda’s Parliament has passed a bill scrapping taxation on processed tobacco and restricting it to unprocessed leaf for export, the Parliament’s website reported. The measure is meant to promote local value addition and improve revenue.

According to finance committee chairman Henry Musasizi, levying tax on both processed and unprocessed leaf will undermine the efforts of companies that have set up plants to process it locally and justify the efforts of those companies that moved out of Uganda.

“We shall also experience an increase in contraband and smuggling of cigarettes into Uganda, loss of jobs to Ugandans working in the processing plants and stifle agri-industrialization,” Musasizi said.

Representative Syda Bbumba said that an export levy on unprocessed tobacco should be charged to discourage its exportation and encourage local processing of the product.

“Tobacco growing is already exploitive on our farmers and, therefore, we should encourage value addition. We also need to increase the levy on imported cigarettes to encourage those processing tobacco to manufacture it locally,” she said.

Representative Solomon Silwany said that the government should focus on the unprocessed leaf and tax it at a rate of $1 per kg. “We have local companies that are struggling to process and employing people; this should be our opportunity to support and encourage them to produce cigarettes as a finished product,” he noted.

The Minister of State for Finance David Bahati, however, said that the local companies should make sure the tobacco leaf is dried and manufactured into cigarettes.

“We do not want to be confused by these people simply drying the tobacco leaf to skip taxes instead of the more worthwhile process of manufacturing cigarettes,” he said.