The Government is considering revisiting the incentives and tax holidays accorded to various investors to pave way for fair trade competition, industry and trade state minister James Mutende has said.
This follows widespread concern that the Uganda Investment Authority (UIA) favours foreign investors by giving them incentives such as tax holidays, loans and free land.
The World Bank and the International Monetary Fund have also called for the abolition of tax breaks to boost the much-needed tax revenue.
“The Government is concerned about infrastructural development.
In 1986 when the NRM took over power, the country was importing virtually everything, including sugar.
The Government could not revive the industries, so it decided to attract foreign investments with incentives such as free land and tax holidays,” Mutende said.
“However, now that we are somewhere in the manufacturing process, as the Government, we are going to sit and review these incentives. Some will be scrapped to allow fair competition.”
Mutende added that the Government was planning to meet with local and foreign investors to review and harmonise the incentives.
Earlier, Kampala City Traders Association chairman Everest Kayondo had pointed out that the continued incentives given to foreign investors were not treating local traders fairly.
“Some investors were given tax holidays for 20 years, yet they do not employ Ugandans and remit all profits to their mother countries,” said Kayondo at a meeting organized by the trade ministry last week.
A recent report about taxation in East Africa shows that Uganda loses $276 (about sh690b) to tax waivers.
Local investors and traders have described the corporate income tax-holidays and exemptions from import duty on some raw materials accorded to foreign investors as “ridiculous”.
“Tax incentives have created uneven ground for business operation between those that receive incentives and those that do not,” said Kassim Omar of the Uganda Clearing Industry and Forwarding Association.
But UIA board chairman Patrick Bitature said incentives that the Government gives to investors are open to both local and foreign investors.
“Many local investors do not come to the UIA to inquire about the available incentives and end up missing out,” he said.
He added that the few local investors who have sought out the available incentives have benefited.
According to the UIA, for a person to be recognised as an investor, one has to have or plan to have a business worth sh50m or more. Incentives are given to investors depending on the size and areas of investment.
By Patrick Jaramogi, The New Vision