Ministers, MPs disagree over rice tax

PARLIAMENT.

A paper trail from the Finance ministry shows that the plot to exempt husked rice from tax has stirred disagreements and back and forth exchanges between the ministry and interested parties that wanted the tax waived.

While in Plenary on Wednesday, Mr Odonga Otto, the Aruu County MP, accused Mr Matia Kasaija, the Finance minister, and Mr Keith Muhakanizi, the Secretary to the Treasury, of being behind a decision to exempt taxes on imported unprocessed rice in order to benefit from the directive.

Mr Otto said the duo had imported, “colossal tonnes of unprocessed rice through a company they have interest in and that it’s the same rice, which the Disaster Preparedness ministry bought and is donating to famine-stricken families.”

However, the letters Daily Monitor has seen, show that Mr Hilary Onek, the Disaster Preparedness minister, and Mr Mangusho Cherop, the Kween County MP, wrote to the Prime Minister, and the ministry of Finance, making a case for a relaxed tax regime for husked rice on the grounds of helping to fight hunger and to protect FOL Logistics Ltd, a rice importing company, from possible closure.

This was after the Finance minister wrote in December last year, instructing the minister of East African Community Affairs to inform the EAC Secretariat that Uganda was to reinstate the EAC tax rate charged on every tonne of rice imported from the subsidised rate of $250 per metric ton (MT) to $345 per MT.

A February 2 Cabinet meeting agreed to not only reinstate the old $250 tax, but also to waive the tax.

Subsequently, Mr Kasaija wrote to the URA Commissioner General, citing minute No. 65 (CT) and directed her to clear the unprocessed with without import duty with effect from April 1, 2017, for an initial period of four months.

“By copy of this letter, the 3rd Deputy Prime Minister and minister for East African Community is hereby requested to proceed to obtain the duty waiver from the East African Community. “Also by copy of this letter, Rt Hon Prime Minister and minister of Trade, Industry and Cooperatives are informed that we have agreed with the millers to sell their product at not more than Shs3,000 per kilo, retail price,” the letter dated March 30 reads.

After Mr Kasaija’s instruction to the EAC minister, letters started flying in from rice importing companies and politicians who argued that reinstating the tax rate would tantamount to removing the tax.

“...The rice price will increase by 60 per cent leading to the food inflation and hunger that will affect the whole population, especially now that there is a nationwide drought,” Mr Mohammed Ahmed Bawazir, the managing director FOL Logistics Ltd, one of the rice importing companies, wrote to Mr Kasaija in January.

On January 11, 2017, Minister Onek wrote to the Prime Minister expressing surprise over the government’s increase in tax liability on imported rice from $250 to $345.

“As you are already aware, there is looming hunger in the country as a result of severe drought. Consequently, the number of households in urgent need of food relief has increased from the recent 1.3 million people to 8 million [people]. It is anticipated this may increase to 11.1 million [people] in the next few weeks,” he said.

Mr Kasaija objected to Mr Onek’s request to stay the implementation of the tax increase, arguing that the company Mr Onek was making a case for is not a charity organisation.

Minister responds

To Mr Cherop, who had also written a letter to the minister, Mr Kasaija thus responded: “The decision to reinstate the common External tariff to $345 was reached in an effort to protect the domestic rice growers like the ones in Kween District from undue competition from husked rice imported at a reduced rate and sold in the local market to outcompete the locally grown rice.”