Uganda: Non-malt beer tax increment incites agriculturalists and traders to critics
Agriculturalists and produce traders are projecting a difficult year after Finance Minister Dr. Ezra Suruma's announcement of excise tax increments on non-malt beers, The Monitor posted June 22.
Excise duty tax levied on non-malt beer was increased from 20 percent to 30 percent in the 2006/07 budget, causing fear among agricultural produce traders and beer companies that this will affect their business.
Mr Benon Barasa, a sorghum trader who sells part of his produce to Nile Breweries Ltd said: "It [tax increment] is an unfortunate thing to do".
Non-malt beers comprise Senator Lager and Eagle Lager, which are produced from local raw materials. These beers were introduced on the Ugandan market to create market for locally produced raw materials such as sorghum and barley. These beers are consumed mainly among low-income earners who find malt beers more expensive.
"This will present the beer industry with many challenges. Increase in excise duty in this category of beer (non-malt) will have a direct negative impact on beer volumes and taxes and thus the overall economy," said Brenda Mbathi, the Corporate Affairs Manager East African Breweries Ltd.
Malt beers that include brands like Bell, Tusker Malt Lager, Pilsner, Guinness, Castle, Nile Special and Club pilsner, are made from malt.
Players in the beer industry say low excise duty imposed on non-malt beer, which the industry has enjoyed in the past, promoted growth in this category of beers. This has mainly been because consumers who hitherto consumed illicit alcohol such as crude waragi consumed affordable branded beers such as Eagle Lager and Senator.
It also led to increased investment as beer companies seeking to benefit from tax concessions provided by the government, invested in non-malt beer production. But the tax increment by 10 percentage points on non-malt beers threatens to increase the price of the products.
"It may be difficult for the breweries to absorb the excise tax increase coupled with increases in costs of production and indeed cost of doing business due to the energy crisis," said Mbathi.
This will translate into increased consumer prices, likely to push consumers back to illicit liquor drinks such as crude waragi, Malawa, Tonto among others. There is also fear that sorghum farmers and dealers could redirect their energies elsewhere to fend off rising costs and lack of market from brewers. "We will have to channel our energies elsewhere," Barasa said anticipating a reduction in production of non-malt beer as a result of excise tax increments.
Mr Patrick Bakoja, the Secretary General of Uganda Farmers Association, however thinks otherwise. He said the tax increase might not necessarily affect consumption.
"Tax increments does not necessarily mean an decrease in consumption. It is only when there is a considerable tax increment," he said. In this scenario, brewers are likely to increase the price of non-malt beers.
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