The President of Uganda, Yoweri Museveni has said government will not consider waiving taxes on commodities as a way to combating sky-rocketing prices.
President Museveni while addressing the nation on Sunday night said that waiving taxes on commodities like bread, fuel, gas and others whose prices have gone up in the past months could lead to the collapse of the economy and hence government is not considering that as an option.
“It is a choice between collapse of the economy on one hand or survival on the other. The real medicine for high prices and shortages, is increased production. Produce more, if you can,” he said.
He blamed the high prices on on the Russia – Ukraine war, and more demand for commodities than supply, following the end of COVID-19 pandemic.
“The war in Ukraine and western sanctions on Russia have caused shortages of wheat for the bread-eaters, fertilizers, petrol, gas, among other commodities. As already pointed out above, the problem of high commodity prices is not as dangerous as covid-19. However, if it is not handled correctly, it can lead to collapse. Yet, with patience and correct response, it will turn out to be an advantage for the country” he said.
A serious problem solver, the President said would cluster the commodities with high prices into two clusters: the imported ones on one hand and the locally produced ones on the other hand. It is on this that Museveni rejected calls for removal of taxes on commodities.
“Some of the ideas people think about when confronted with high commodity prices, are the idea of subsidy or removal of taxes by Government from those commodities. With imported commodities, this is a recipe for disaster. It will lead to collapse. Why? Let us take the example of petrol. A litre of petrol before the rise of prices in November 2021, was 4,590 shillings which meant USD 1.33 at that time. A litre of petrol is now 5,500 shillings which means USD 1.48. This is all with the tax.”
“The removal of taxes on some of the commodities, would mean tax loss to Government of: 1.53 trillion shillings for petroleum; 1.15 trillion shillings for diesel; 520 billion shillings for wheat. How, then, do we fund our budget for – roads, electricity, schools, medicine, security, etc? There are items we do not tax eg. Medicine, raw materials, etc. It is, therefore, not true that we tax everything. The very crucial items, are not taxed. Therefore, removing taxes or subsidizing many of the imports is suicidal and a blunder,” he added.
Further, he revealed that he had sympathy for removing taxes on locally produced goods such as sugar, milk, cement, etc, because, if people buy more of them, it will be good since they are buying more local goods. He, however, noted that this would lead to massive tax loss.