Ugandan Government Proposes new Taxes

The Ugandan government, in its four year investment and development plan, proposed taxing land and food crops in an attempt to broaden its revenue base away from dependence on coffee sales.

The government also said in the plan, made available to Reuters, that a devaluation of the Ugandan shilling would do little to redress a chronic balance of payments deficit.

The plan, the first since President Yoweri Museveni took power 15 months ago, seeks to raise 2.4 billion dlrs in investment funds from abroad between 1987 and 1991.

It says the government had already secured 1.4 billion dlrs in pledges before Islamic lenders promised a further 494 mln dlrs at a conference in Kampala last week.

Uganda already had an external debt of 984 mln dlrs at the end of 1986 and in the nine months of the current budget debt servicing will cost 204 mln dlrs, almost 50 pct of export earnings of 431 mln, the plan said.

The new fiscal measures include a proposed tax on large land holdings, regardless of whether the owners are exploiting them, and taxes on maize, beans and other crops sold by the Produce Marketing Board.

The plan says the aim is to spread the tax burden, which in Uganda has traditionally fallen almost exclusively on coffee farmers. Coffee provides over 90 pct of foreign exchange earnings and more than 70 pct of government revenue.

On exchange rate policy, it repeats Museveni’s argument that any form of fotation would not help allocating resources.

Western governments and multilateral funds say the Ugandan shilling is grossly overvalued and the government must change the exchange rate if it wishes to encourage investment. The shilling sells on the black market at more than 15,000 to the dollar, compared with an official rate of 1,400.