KAMPALA —More than half of alcoholic drinks on the Ugandan market are illegal with some not fit for consumption, Mr. David Valencia, the Managing Director Nile Breweries Limited has said.
The loss, Mr. Valencia said, is worsened by the laxity of Uganda Revenue Authority in enforcement of existing laws that govern the sale of alcohol.
Speaking during the Uganda Economic Forum running from 5th – 9th September, Mr. Valencia asked policy makers to put in place regulations and policies that support and protect the beer industry against unfair competition and disarming tax laws.
“Despite government banning sachets and implementation of tax stamps, fiscal leakage from illicit alcohol has accelerated. The value of this illicit trade in Uganda is nearly USD1B, not taxed and 1.6X larger than in 2017,” Mr. Valencia said, adding:
“Total fiscal loss from illicit trade was estimated at USD458M 2020, a 29% compounded growth rate since 2017. In practical terms, fiscal loss due to illicit alcohol doubled in 2020 versus 2017. This loss dwarfs actual collections from the formal sector.”
Beer operators say current penalties stipulated in the Act are not sufficient in curbing regular or new illicit players in the production, sales and smuggling of illicit alcoholic drinks.
The punishment imposed and paying of fines are considered worth the risk in illicit trading. Moreover, the inadequate enforcement allows illicit traders to continue operating and distribute their goods across formal and informal channels.
Valencia urged the government to increase the competitiveness of formal players by eliminating digital tax stamp and enforcing the stamp on the illicit, increased control in the distribution of ethanol, track sources and usage, set a minimum price floor for packager spirits to decrease consumption of illicit, increase penalties and punishment of illicit players and those retailing and put in place deliberate and sustained enforcement.
UG Economic Forum is an annual convening organised by NBS TV in partnership with Nile Breweries, Uganda Revenue Authority, Uganda Development Bank, Uganda Development Commission, Ministry of fiancé among others. The forum is aimed at bringing together key stakeholders from the Private Sector, Innovators, Government, Civil Society, Academia and the Media for a constructive exchange on the impact of COVID-19 and what lies ahead (opportunities and challenges) for Uganda’s economy in the 2022/2023 financial year.
While opening the forum for day two on Tuesday, the Minister of State for Trade, Harriet Ntabazi promised that the government of Uganda under the Ministry is working on creating a conducive atmosphere for businesses to thrive, however she stressed the need for quality products and consistent supply by the manufacturers and traders as one way of increasing their competitiveness.
Ms. Gerald Namoma, a senior Economist at Ministry of Finance, Planning and Economic Development said there was need to formulate policies that support investment.
“A lot of the policies that we put in place are not aimed at increasing taxes but addressing some of the challenges that manufacturers like Nile Breweries highlighted. Amidst a number of challenges, we are on course to improve on our tax and revenue policies, he said.
The forum provides a unique platform for the Private Sector and Government to theorize, dialogue and create practical solutions to the growing relevance of Economic Revival and how it shapes Social, Economic-Political interactions to achieve economic growth.
The Uganda economic forum will run up to Friday 9th having started on Monday 5th September 2029.
During the first three days, the private sector stressed the need for government to create a conducive atmosphere for businesses to strive by easing assess to funding, reducing taxes and eliminate non-tariff barriers that hinder business growth. The government representatives insisted that the government was doing all it can to support business growth but further stressed the need for the private sector to formalise their businesses and focus on improve quality of their products to improve their competitiveness locally and globally.