Tobacco Companies in Uganda Oppose Planned Increase in Taxes  

Source from:  East African Standard (ke)  09/23/2013

Tobacco companies in Uganda have opposed the planned increase in taxes on their product announced in June during the budget reading.
 
The Finance Ministry proposed a 42 per cent tax on cigarettes this financial year to raise additional revenue after donors pulled out of direct budget support.
 
The tax increment means that for every 1,000 sticks of cigarettes, tobacco companies will pay $134.420, up from $88.33. Statistics show that Uganda consumes 1.8 billion sticks of cigarettes, out of which 1.078 billion are the Sportsman brand, supplied by British American Tobacco Uganda (BATU).
 
BATU said the rise was detrimental to the industry.
 
"Such sharp increases usually lead to a rise in illicit trade, currently standing at over 20 per cent of the market value, which is damaging to stakeholders, including the public health lobby," said Dian Apio, the BATU spokesperson.
 
Leaf Tobacco Commodities Uganda said the new tax would kill the industry, and asked for a government incentive.
 
"Whereas we are investing more money on the ground, at the national level, the sector is being suffocated by high taxes," said company spokesman, David Kamukama.
 
Leaf Tobacco wants the incentives to boost its $20 million investment in the Green Leaf Threshing factory based in Arua, in West Nile.
 
Nti Kofi, an economist with WHO Uganda, said the bone of contention lay with the numbers.
 
"They are fighting to reduce it [the tax], but that is where the money is. We are arguing that government should have $0.00499 per cigarette. We are saying that we want $ 5 million from Sportsman alone. They are saying they can give $1.152 million on Sportsman," said Mr Kofi.
 
Anti-tobacco activists on the other hand are asking legislators not to bow to the pressure from tobacco companies to reduce the taxes, arguing that the proposed increases are below the industry's international threshold of 70 per cent of retail price. The threshold is outlined by the World Health Organisation (WHO) and the World Bank.
 
Uganda's taxes also fall below those in Kenya, Rwanda and Burundi, which have imposed levies of at least 50 per cent of retail price.

The WHO argues that high cigarette prices reduce consumption, especially among the poor, which in turn reduces the number of people who contract tobacco-related diseases such as cancer. Enditem