The Uganda Revenue Authority (URA) is under scrutiny for misclassifying animal feed concentrates as premixes, a practice flagged in the 2024 Auditor General’s report as a major source of revenue loss.
The misclassification, stemming from ambiguities in the East African Community (EAC) Customs Union’s tariff system, has enabled importers to evade significant import duties and Value Added Tax (VAT).
The issue lies in the different tax rates applied to animal premixes and concentrates under the EAC’s Harmonized System (HS) codes.
Premixes, which contain micronutrients like vitamins and minerals, are classified under HS code 2309.90.10 and attract a 0% import duty per kilogram.
Concentrates, which form a larger component of animal feed and provide essential macronutrients, fall under HS code 2309.90.90 and carry a 10% import duty per kilogram.
An audit of the ASYCUDA customs system uncovered 1,202 instances where imports that should have been taxed as concentrates were instead classified as premixes, exempting 372 importers from import duty and VAT.
The resulting revenue loss has raised concerns about deliberate exploitation of the tariff system.
URA has acknowledged the problem, stating that it has submitted a proposal to the EAC Sectoral Council on Trade, Industry, Finance, and Investment (SCTIFI) to harmonize the classification of animal feed products.
However, no resolution has been reached. The Auditor General has recommended that URA push for a faster resolution while also investigating whether the misclassification was intentional tax evasion.
The lack of clarity in the EAC tariff system is not only costing Uganda crucial revenue but also distorting competition within the animal feed industry.
URA is under pressure to enhance oversight and enforcement to prevent further losses and ensure fair trade practices.
