7 June 2017

Uganda: Prices of Soda Set to Increase

Kampala — Industry players of carbonated soft drinks in Uganda have warned that soda prices might go up if the government stays a new tax. This, they say will result in further reduction in sales, jobs cuts and drop in revenue volumes.

The proposed Amendment Bill No 6 of the Excise Amendment Bill 2017 stipulates that excise duty on nonalcoholic beverages not including fruit juice, or vegetable juice will be charged at a rate of 13 per cent or Shs240 per litre.

In 2016, representatives of the industry met with the parliamentary committee on Finance, to put forward the proposal for a reduction in the Excise duty and the committee recommended a reduction of 3 per cent in the financial year 2016/2017.

On April 12, 2016, a meeting was held with President Museveni at which it was agreed that owing to the financial burden and effect of an immediate reduction on tax collection targets, the recommended reduction from 13 - 10 per cent be implemented in the financial year 2017/2018.

Commenting about the new tax measure, Mr Harry Patrick Oyuru of Century Bottling Company, said: "... it's true that we have been presenting various growth oriented scenarios to Government that would benefit both the soft drinks sector as well as the people of Uganda without depriving Government the much needed revenue.

His Excellency the President and the Parliamentary Committee of Finance understood our case. We are extremely hopeful that the President's pledge will be honored."

Impact

The impact of the increase is also expected to result into a drop in Value Added Tax and lead to reduction in government revenues as a result of low sales volumes.

Due to the sensitivity of their consumer base, the industry players say it is not possible for the sector to pass the incremental costs to the consumers as this only serves to frustrate the hopeful investors in the sector.

The high tax regime will further inhibit their expansion plans and also lead to further job losses.

The Coca-Cola plant in Mbarara is also said to be performing under capacity; should the taxes be passed, the factory may closedown.

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