Taxing Agriculture – Pros and Cons

Finance Minister Maria Kiwanuka has proposed a raft of proposals, which include introducing taxes on agriculture. Julius Businge sought out the views of Tress Bucyanayandi, the minister of Agriculture, Animal Industry and Fisheries, and Charles Ogang, the president of the Uganda National Farmers Federation (UNFFE).

Taxes won’t hurt agriculture – Bucyanayandi

How do you justify the reasoning behind the removal of tax exemptions on agriculture?

I think the taxes on agriculture are fine. For a long time people have misconceived agriculture as a peasant activity. The government is now emphasizing profitability and certainly there are people who are making money. For instance if you look at all these sugar, tea, coffee estates, livestock, processing industries all these are making money.

Most of these taxes target people who can afford to pay them. In my view, the proposed taxes are not a threat to the sector because they are relatively small. If you make money why shouldn’t you pay some taxes to government so it can extend more services to you? My message to farmers is they should grow more crops. They should be calculative in terms of what they grow so they can make money. President Museveni has set a target for every farmer to raise their income to at least Shs 20 million per household per year.

That is why we are putting much effort in cash crops such as coffee, tea, cocoa and cotton. For food security, we are urging farmers to grow beans, maize, cassava, bananas and rice. We are also emphasizing livestock, dairy products, fish and beef. If you do farming in a smart way, there is no way you are going to fail to become a millionaire.

To what extent did the exemptions impact on the growth of the sector ever since they were introduced?

Obviously there were positives. It means the farmer was making much more money than what probably they will make in the regime of new taxes. But that does not suggest that the proposed taxes are a bad idea or will affect farmers’ earnings. They will still make money. They should not worry.

So, why are some people opposed to the move?

Nobody has ever liked to pay taxes. Even in the Bible there are examples of people who tried to avoid tax. Uganda today has many tax evaders. Yet, they want services tarmac roads, electricity, water and medicines in the hospitals. So there is no way government is going to provide these services without taxing people. Taxation is necessary.

What do you anticipate as the negative consequences?

I don’t see any because any tax especially VAT is paid by those who can afford a commodity. It is only when you have made some money that you will buy. Like I said, we are emphasizing profitability. We want farmers to go commercial and make money. Once they make money, it becomes easy for them to pay taxes. For instance, I come from an Irish potato- growing area where we use fertilizers, herbicides etc and because it is profitable to use them, farmers are willing and able to buy them. So even if the prices of these inputs go up somehow, we will continue to use them because they enable us earn more. It is a question of profitability, nothing else.

What do you see as the major positives from this move?

Government will get more money to deliver services to the people. It is one way of widening the tax base. I urge all people to support this move for the good of our country.

What does it mean in as far as consolidating the growth of this sector is concerned?

The sector can still grow even with these taxes. I can give you an example of coffee where we are subsidizing famers by giving them a coffee seedling at between Shs 300- Shs 500. Three or four years later when a famer harvests a minimum of three clean kilos per tree, he earns Shs 15, 000 at the current market price. Now if you take the tax index of Uganda where each of us pays between 30-35% of what we earn, that means government is getting back Shs 5, 000 and the farmer is making Shs10, 000. That shows you that we can still pay taxes and continue with our profitable agriculture. There is no way we are going to run away from it. I am sure the government has done all the necessary research about these taxes and no one should lie to you that the sector would not grow because of the new taxes. It will continue growing.

What is your message to the law makers as regards this new tax policy?

They should support these budget proposals because they were discussed widely with all major stakeholders. What has come out is a product of consensus and no one should oppose them.

Going forward, how optimistic are you that this will be seen as a wise decision in future?

Like I told you, the government wants to get more money to extend services to the people. Some of these services – roads, electricity, etc – will support the sector to grow even faster to feed the rapidly grow

Source : The Independent

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