Uganda Breweries Warns Tax Hike on Alcohol Could Backfire

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Uganda Breweries Warns Tax Hike on Alcohol Could Backfire
Alcohol and cigarettes

Uganda's plan to increase alcohol taxes by 20% could backfire, potentially reducing government revenue according to Uganda Breweries, the country's largest brewer. They argue the tax hike would make legal drinks too expensive, leading people to buy less and turn to smuggled untaxed alternatives. This concern is bolstered by Uganda's existing problem with smuggled alcohol, with a recent study showing 65% of Ugandan alcohol consumption comes from illegal sources.

Member of Parliament Dickson Kateshumbwa shares these worries, fearing Uganda's high tax rates would make it a less attractive market compared to its neighbours, leading to a surge in smuggling.

The Uganda Alcohol Industry Association (UAIA) is calling for a broader approach to alcohol taxation. They propose shifting from a value-based tax to a fixed tax per litre of spirits and equalizing taxes for ready-to-drink beverages and local beers to promote domestic ingredients.

Currently, Uganda has the highest excise tax rates on spirits within the East African Community. The proposed increase would widen this gap further.

The Ugandan government must weigh the potential benefits of the tax increase against the possibility of reduced revenue and a rise in the black market for alcohol. Considering alternative tax structures and collaborating with the industry could lead to a more sustainable solution.

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