The cost of doing business in Uganda is rising after the removal of tax exemptions in key sectors.

Experts have warned that the high cost of doing business will hurt economic growth.

In the current financial year, the government introduced new taxes on insurance services, private schools, mobile money transfers, kerosene and agricultural inputs, which business leaders say are ill-advised and should be scrapped.

READ: Tax-heavy national budget leaves 7m poor Ugandans in the lurch

In the latest development, dealers in agriculture inputs say their firms have already suffered as a result of value added tax imposed on the inputs. The dealers told parliament that as a result of the removal of VAT exemptions on agro-inputs starting this financial year, farmers have stopped purchasing the inputs.

Victoria Seeds managing director Josephine Okot said her company had to return a fully loaded truck of seeds to Kampala after farmers in Kasese District, western Uganda, refused to buy due to increased prices.

Uganda Seed Traders Association chairman Richard Masagazi said seed prices have so far increased by about 10 per cent but predicts a further increase next season.
Starting in July, a kilogramme of maize seed has risen from Ush4,500 ($1.7) to Ush5,500 ($2.1).

“These prices will increase by another 20 per cent next season as farmers have to absorb the increased costs of fertiliser and pesticides,” he said.

Agro-chemical dealers said 6,000 consignments of inputs are being held at Malaba border after the companies failed to pay VAT.

On average, a container of agro-chemicals costs Ush260.1 million ($100,000) and imposition of VAT pushes the cost up by over Ush40 million ($14,991.3) said group chairman Abbey Kazibwe.

Clayton Arinanye, the general manager of the Crane Creameries Co-operative Union, said the increased costs of input have affected farmers as prices of livestock drugs and acaricides have gone up.