Illicit alcohol production a key contributor to tax leakage, says report
A report released by the Uganda Alcohol Industry Association has indicated that production of illicit alcohol was one of the country’s biggest tax leakages, denying government huge sums of money in taxes.
“Tax leakage is driven by wide-scale under-declaration of production of spirits, mainly illegal waragi by small scale registered and unregistered entities located in hidden clandestine areas outside of main towns,” the report indicated.
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Putting figures to this loss, it was estimated that government lost Shs1.6 trillion in unrealised taxes due to trade in illicit alcohol.
According to the report, the value of illicit alcoholic drinks increased from $577.8 million in 2017 to $956.8 million in 2020 whereas the total consumption of this kind of alcohol increased by 9.1% partly due to lack of regulation.
“Tax official resources are limited outside of main centres as illegal operators make use of multiple distribution networks and falsify information to remain under the radar,” the report said.
It was also reported that distilled and fermented homebrew were found to be most the prominent illicit drinks, followed by illicit spirits whereas homebrew is widely available in both urban and rural areas and comes in many forms, with illicit waragi being the most popular.
Recommendations
The report however noted that there is need for government authorities to increase focus on control in sales of alcoholic drinks.
“Inactivity of controlling bodies remains a key issue in prevention of illicit alcoholic drinks production, sales and consumption. Traffic controllers often bypass points-of-sale for illicit alcohol without taking any actions to prevent its sale, as this is out of their responsibilities scope. Moreover, inspections and outlet visits by authorities remain rare outside of main towns,” the report said.
“There is need for collaboration with the government to strengthen law enforcement and implementation but also control the distribution of supply of raw material ingredients. There is the need to control and track the distribution ethanol in Uganda.”
