14 February 2013

Uganda: Taxes Hurting Agoa Initiative

Enterprises operating in northern Uganda want the government to remove taxes on their products if they are to benefit from the African Growth and Opportunity Act (AGOA).

The enterprises that produce various products ranging from bags, hats, beads and necklaces for the US market, contend that high taxes are making life difficult for them.

"Our biggest challenges are taxes and sourcing local materials. Taxes on our shipment costs are between 65-75%. This makes the cost of production high," said Jared White, the Social Enterprise director at MEND, a social and financial enterprise that makes high-quality bags. The bags go for $250.

White raised the concern during a fact-finding mission by the Senior Presidential Advisor on AGOA and trade, Susan Muhwezi, to Gulu district last week. MEND employs 22 women, mainly former LRA abductees. AGOA is an initiative that allows products from sub-Saharan African countries into the US market duty-free and quota-free.

"What makes me happy is to see AGOA at the grassroots with women busy making crafts. But I am actually surprised that they are paying taxes," Muhwezi said.

"AGOA is a duty-free and quota-free initiative. There is no way you should be paying taxes because that cuts down on your profits. If they pay taxes, then they should be able to get their refund. I want to assure you that our unit together with the ministry of Trade will ensure that these enterprises meet all the AGOA requirements."

Muhwezi, who was on a two-day visit, toured three different companies making bags, hats, beads, necklaces and bangles. The products are being exported to the US market. The women, mainly former abductees, have been trained in various art and craft skills. Gulu LC V chairman, Ojara Mapenduzi, said the enterprises have socially and financially impacted on the livelihoods of the most vulnerable.

"Such initiatives have empowered especially the former abductees, to move from a dependency syndrome to learning and working. We expect as a district that our people are able to stand on their feet," said Ojara.

Thirteen years since it came into force, Uganda is yet to significantly benefit from AGOA. A number of bottlenecks continue to hamper the country's progress, with poor funding, raw materials and lack of a national textile policy, ranking high.

The AGOA country response office says it operates on a shoestring budget.

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