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Stakeholders in small scale industries have asked government to reduce the incentive threshold, noting that the current one locks majority of them out.
Speaking during a dialogue on the impact of taxation on small scale industries, Mr David Busuulwa, the Uganda Small Scale Industries Association finance manager, said the Shs150m threshold is high for majority of small scale industries to benefit from tax incentives.
This, he said, prices them out of incentives and measures on which government is seeking to grow small businesses into large enterprises.
“There are very many tax incentives that do not consider small scale industries. I would think the best strategy for industrialisation is developing small scale industries,” he said, noting that if enough effort is put in developing small scale industries, government would be enabling inclusion of different Ugandans in the money economy.
Mr Busuulwa also argued that by enabling growth of small scale industries, government would be widening instead of deepening the tax base.
The tax base is concentrated among a few Ugandans, thus the tax to gross domestic product ratio has stagnate to under 12 percent. However, Mr Michael Masembe, the Uganda Revenue Authority acting manager for tax education, said beyond being locked out of the tax incentive fold, small scale industrialist had highlighted that they lacked knowledge on the tax regime, especially for persons involved in manufacturing.
For instance, he said, a number of small scale manufacturers consider themselves as SMEs, which is misleading. Beyond this, he said, the way some small scale manufacturers present themselves for tax administration, constrains the relay of information.
He further noted that a number of businesses had after Covid-19 changed from trade to manufacturing, which in itself has implications on how URA assesses tax against such businesses.
Mr Busuulwa also said there is need to review the Income Tax Act, which doesn’t consider proprietors of small industries as investors, noting that the current tax structure does not support progressive industrialisation.
Mr Masembe says that whereas the tax regime indeed locks out some small scale industries, many of them are not registered or have tried to apply for tax incentives. Therefore, he says, small industries must get in the tax fold as government creates a better incentive regime.
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