Government Reconsiders Sugar Tax Hike Amidst Industry Concerns

The Ministry of Finance is currently evaluating a proposal to double the excise duty on sugar, a measure intended to boost government revenue for the 2026/27 fiscal year. The proposed increase would raise the tax from Shs100 to Shs200 per unit.

This review comes after sugar manufacturers voiced significant concerns about the sustainability of such a hike. They argue that the industry is already grappling with a nearly 30% drop in sugar prices and a substantial increase in production capacity, which has doubled to 800,000 metric tonnes.

Finance Minister Henry Musasizi acknowledged the manufacturers’ points and stated that the ministry will thoroughly study their objections over the next two weeks. “Their concerns, especially on increasing excise duty, will be further studied by the Ministry within two weeks before a decision is made on the way forward which is favourable to both government and the sugar manufacturers,” Musasizi commented.

Manufacturers warned that the tax increase could lead to reduced domestic consumption and potentially harm the industry’s viability, ultimately impacting the government’s expected revenue. Beyond domestic issues, the Uganda Sugar Manufacturers Association also highlighted challenges with trade barriers within the East African Community, hindering their export potential.

Minister Musasizi assured the manufacturers that the government shares their concerns regarding regional trade impediments and pledged to address these issues with EAC partner states. The ministry’s final decision on the excise duty hike is anticipated within the next two weeks, aiming for a resolution that balances revenue needs with the sector’s operational realities.

Source: Nile Post