Coffee processors in the districts of Greater Masaka Sub-region are up in arms over what they describe as exorbitant direct tax imposed on their factories.
Led by Mr Joseph Mbaziira, the chairperson of Bukomansimbi Coffee Processors Cooperative Society, the processors say the demand notices, currently being distributed by Uganda Revenue Authority (URA), indicate that each factory is supposed to pay Value Added Tax of Shs5m up from Shs100,000 effective July 1.
In the 2018/2019 budget, the government introduced a 1 percent Value Added Tax on coffee buyers and coffee processors in what it said was a way of encouraging inclusive tax contribution.
Mr Mbaziira wondered how URA arrived at issuing demand notices before carrying out fresh assessments to establish the incomes of each coffee processing factory.
“We are wondering what they [URA] based on to set the standard levy of Sh5m per factory. There are big and small factories, how can they pay the same tax?,” he wondered during an interview on Tuesday.
Mr Peter Ssenyonjo, another proprietor of a coffee factory in Bukomansimbi District, said the new tax burden will negatively impact on their businesses.
“We are already paying other taxes and incurring high operational costs. Where does government expect us to get the money to pay Shs5m?” he asked.
Mr Vincent Ggaliwango, also a coffee processor in Bukomansimbi, said many processing factories are servicing huge bank loans and subjecting them to any additional tax will push them out of business.
“We wonder why government is primarily focusing on collecting taxes from our businesses without creating for us a conducive working environment. When they thought about value addition, they outsourced an Italian investor to be in charge of our coffee, which is not fair,” he said.
Ms Christine Nandagire, the Bukomansimbi North MP, said the tax increment is exploitative and cannot go unchallenged.
“Coffee processors have a genuine concern and it will be unfortunate if they close their factories over unfair taxation. I am going to forward their concerns to the line ministry and URA to see how this can been addressed,” he said.
Ms Justine Najjuuko, an accountant with Kasaali Farmers’ Coffee Cooperative Society in Kyotera District, said: “We ask the government to look into this and save our businesses from collapsing.”
Mr Joseph Bbaale, the chairperson of coffee processors in Kinoni Town Council in Lwengo District, said: “We have not yet started paying the money [Shs5m], because we believe it is unreasonable. The coffee harvesting season has just started and government thinks we are making a lot of money, which is not true.”
Mr Joachim Lubwama, the head of URA in Masaka, asked the coffee processors to take their complaints to the regional office.
“Our duty is to collect taxes, if they [coffee processors] feel cheated, let them come to our office because we are ready to listen to them,” he said.
Greater Masaka Sub-region is one of the major coffee growing areas with almost 60 percent of households engaged in coffee business. A good number of the farmers grow cloned Robusta coffee, which has the preferred screen 18 bean size and has high demand.
Through their cooperative societies, including Masaka Cooperative Union and Kibinge Coffee Farmers Cooperative Society, the farmers usually contribute a considerable percentage of the graded green coffee, which the government exports to other countries. For example, Kibinge Coffee Farmers’ Cooperative Society in Bukomansimbi contributed 1,280 bags of 60kgs to the country’s general coffee export estimated at 2.2 million bags, according to the Comparative Coffee Export performance report of 2020/2021 by the Uganda Coffee Development Authority.