President Museveni has accused Uganda Revenue Authority (URA) of inefficiency in its audit department and tasked the tax body to sort out the mess before it is too late.
The President also asked the authority to stop punishing manufacturers for mistakes it should take responsibilities for.
While opening the 27th Uganda International Trade Fair at the Uganda Manufacturers Association (UMA) showgrounds at Lugogo in Kampala yesterday, Mr Museveni said many manufacturers were complaining of delayed audit of books by URA staff, adding that the tax body forced them to pay heavy penalties for crimes they did not commit.
"I am told that sometimes the traders present their books of accounts to URA for audit and URA delays to audit the books. When they come to audit the books, they ask the traders to pay all the arrears and penalties immediately. How can this be? How can any reasonable Ugandan, who knows the suffering of Ugandans say you must pay now?" he asked.
"It was not my fault that you did not come in time. If you did not have enough auditors, then I should not be punished for your mistakes. We shall sort that and stop it," Mr Museveni added.
The President also blamed the tax body for delayed refund of the Value Added Tax.
"If these people have given you money, why don't they bring it back? Why don't you wait until they export or sell locally then you tax them? The manufacturers are doing a very important job, they are creating a new form of wealth. This direct tax is a small matter, we shall resolve it and it will not happen again," he said.
Mr Museveni said despite the improvement of the investment climate in the country, several challenges still need to be tackled, citing the cost of borrowing, transport and electricity.
He said they were misadvised by international actors to privatise government-owned banks, hoping that interest rates would reduce.
"They told us that government officials were inefficient and that many people do not repay loans, and those who repaid also paid for those who refused to pay. They told us that that is why the interest rates were very high. We privatised UCB (Uganda Commercial Bank), but now the interest rates are at 23 per cent per annum," he said.
"They told us to privatise UDB (Uganda Development Bank) and we said no, we need to first see how the privatised UCB is doing. There is even Post Bank that belongs to government and this will never be privatised. The issue of privatisation is finished," Mr Museveni added.
He said government will capitalise UDB to provide cheap loans to the manufacturers and service providers.
"We are going to capitalise UDB so that it gives loans at not more than 12 per cent of interest per annum, but only for manufacturing and other sections of services such as hotels and tourism," he said.
Mr Museveni also said plans are under way to revamp the water and rail transport to ease movement of manufactured goods across East Africa.
He said when Standard Gauge Railway from Kenya reaches Kisumu, ships and ferries will be available to transport the goods on the lake up to Port Bell and other ports government will construct. He added that similar arrangements are being worked out with Tanzania.
Ms Barbra Mulwana, the UMA chairperson, said this year's trade fair attracted 15 countries across the world, with more than 500 companies exhibiting.
Ms Mulwana said over the years, locally manufactured goods have increased and led to positive balance of trade between Uganda and neighbouring countries.
"This explains in part why Uganda has a positive balance of Shs876.6b for January to July 2019," she said.
Ms Mulwana said they would continue to promote small scale industries to ensure that they eventually grow into big business empires.
"UMA believes that the development of this group will enable to propagate synergies across value chain, create jobs for youth, encourage innovation and ultimately grow the tax base eventually," she said.
The event, which started last week, will end on Thursday.
Ms Amelia Kyambadde, the minister of Trade, said manufacturers have played a positive role in generating revenue, noting that the sector contributed 35 per cent of tax revenue in 2018, creating more than two million jobs. She also said industries accounted for 19 per cent of the Gross Domestic Product in the same year.