The Uganda Breweries Managing Director, Andrew Kilonzo, cautioned that the proposed tax increase in the Excise Duty (Amendment) Bill 2024 could render alcoholic beverages unaffordable for consumers. He emphasized that the anticipated rise in government revenue might not materialize due to reduced volume sales resulting from a 20% tax hike on both locally manufactured and imported spirits.
During discussions with the Parliament’s Finance Planning and Economic Development Committee, Kilonzo highlighted concerns that such tax increments could drive consumers towards cheaper illicit products, leading to a decline in tax revenues by an estimated shs 49.7 billion from the industry and shs 28.5 billion from Uganda Breweries alone.
Kilonzo suggested alternatives, such as setting a specific excise structure for spirits and harmonizing taxes on ready-to-drink beverages with locally produced beers. He also proposed a revised taxation approach for imported alcoholic beverages with an alcoholic strength below 80%.
Jackie Tahakanizibwa, Chairperson of the Uganda Alcohol Industry Association, echoed Kilonzo’s sentiments, emphasizing the need for tax measures that promote economic growth. She advocated for tax harmonization and emphasized Uganda’s high excise rates compared to other East African Community (EAC) member states.
Highlighting the potential consequences of excessively high excise duties, Sheema Municipality MP Dickson Kateshumbwa warned against Uganda’s position as having the highest tax regime in the region. He expressed concerns about increased smuggling and parallel importation from neighboring countries due to the proposed tax adjustments.
The discussion also touched on Uganda’s ongoing struggle with illicit alcohol trade, accounting for 65% of the market, according to a 2021 Euromonitor study. Despite a 9.1% Compound Annual Growth Rate (CAGR) in the total alcohol market from 2017 to 2021, the illicit sector experienced a 17% CAGR during the same period.
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