Uganda loses shs38bn in taxes to trade in illicit cigarettes

Officials from British American Tobacco (BAT) have revealed that Uganda lost as much as shs38 billion to trading in illicit cigarettes last year.

Speaking during a sensitization workshop on illicit trade at Hotel Africana in Kampala organized by Uganda Breweries Limited, Billy Tsuma (right), the BAT Fiscal Affairs Engagement Manager for East Africa said in the same period, much of the cigarettes consumed in Uganda were as a result of illicit trade.

“Cigarettes are one of the most trafficked goods and this reduces governments’ revenue. In the last quarter of 2021, 24% of the cigarettes smoked in Uganda were as a result of illicit trade and shs38 billion which was supposed to go URA was lost,”Tsuma said.

He added that it also becomes difficult to deal with the vice of illicit trading since cigarettes are fast consumer goods that are bought by retailers in the morning and in the evening, they are all consumed.

By accounting for 24% of the cigarettes on the market, the Ugandan government lost out in excise revenues and led to lessening of revenue collected from legitimate cigarette sales.

The official also noted that most of the illicit cigarettes were manufactured locally, whereas 49% were smuggled from neighbouring countries.

According to information, the biggest driver of illicit tobacco trade is tax-evaded cigarettes including those with fake tax stamps, cigarettes for export that are not sold in their destination market and cigarettes smuggled into Uganda.

Speaking during the same function, Joanita Menya, the Managing Director for Unilever Uganda said trade in illicit goods has had a toll on individuals, companies and governments.

“It costs reputation for businesses and companies. Companies like Uganda Breweries and Unilever are known for quality but every time there are counterfeits, we lose out on reputation.  It makes consumers lose trust in us because those products come at a cheaper price than the genuine ones,”Menya said.

“We have lost the Geisha and Sunlight factories which were here but the parent company in the UK decided to pull out of Uganda due to counterfeits. Because the businesses were not making optimal investments, they chose to pull out of Uganda. This essentially means we are losing out as a country in terms of investment opportunities but also on jobs.”

According to trade in illicit goods is growing day by day due to a number of factors.

“Many of the people would want to go for alternate goods which are cheaper and, in most cases, these are goods which are not genuine. The fact that illicit trade is profitable because of not paying taxes and being unregulated but people are earning has seen this vice grow,” said Joseph Lubuulwa, the Brand Protection Manager for Uganda Breweries Limited.

Commit to fighting illicit trade

 The various manufacturers, companies and government enforcement agencies however vowed to combine efforts to ensure the vice of illicit trade is fought.

“It is important that we put together efforts to fight the vice of illicit trade because it affects all of us,” said the UBL , the Brand Protection Manager.

The official from British American Tobacco said there is need for awareness among the public to ensure they shun counterfeit products which don’t only deny government tax revenues but are also harmful to people’s health.

“There is also need for serious enforcement by the various government agencies to ensure culprits are arrested and given punitive sentences.”

The URA Assistant Commissioner in charge of enforcement, Julius Nkwasire said the tax body has always impounded and destroyed several illicit goods, noting that this will continue.

“This week, we are to burn cigarettes worth shs1.2 billion. This is a signal that we will not accept people to continue dealing in illicit goods.  We shall continue with prosecution of those found with these illicit products,”Nkwasire noted.

However, the Criminal Investigations Division spokesperson, Charles Twine highlighted the need to have a separate standalone law that deals with counterfeits.

He said currently, on arrest, dealers in counterfeit goods are charged in accordance with the UNBS Act which emphasizes standards as well as the Trademark Act which deals with forged trademarks.

“In some cases, the standards are very fine according to UNBS parameters and the trademark of the illicit product has not been registered here in Uganda. This means this person cant be prosecuted. There is need to introduce an anti counterfeit law,” Twine said.