Scrap Capital Gains Tax for Ugandans- Manufacturers

Ugandan manufacturers are calling for the scrapping of capital gains tax on capital transactions made by local investors, to encourage them to take up the much-needed long-term and cheap finance.

Lack of access to affordable or favourable capital finance is always cited as the main challenge to the growth of the private sector in Uganda, whether small and medium enterprises, or large corporations.

They have continuously condemned the local banking sector of being too expensive, with interest rates of more than17 per cent, compared to a regional market average of 15 per cent. Ugandan manufacturers have largely shunned the stock market which is deemed the main source of patient capital.

Of the close to 5,000 factory companies, eight percent are medium and large manufacturers earning more than USD 200,000 or 740 million Shillings a year, and the rest are SMEs. Of these, only four companies are listed on the Uganda Securities Exchange, one being a cross-listing from the Nairobi Securities Exchange.

Cipla Quality Chemicals was the last company to list on the USE, in 2018, and this came after a six-year lull. Salma Nakiboneka, the Business Development Manager at the USE says there are many options for low-cost capital, but that the Ugandan companies do not consider the various options and usually end up getting what is not the best for them.

She says that even on the stock market, there are various options including an outright sale of a stake, listing of shares, or bonds, but that the environment and the stage of growth of a business determine what kind of investment, a company must go for.

//Cue in; we always encourage…

Cue out…you’re looking for.”//

While they admit that they need the affordable capital, manufacturers say they have been unable to take it up on the stock market due to the conditions that are not tailored for the Ugandan economy. They cite the unfavourable tax regime, like the high withholding tax on dividends which is 15 per cent compared to 10 per cent in Kenya, and therefore less competitive.

Uganda also charges a tax on capital gains. Capital gains are included in and taxed together with the business income at a rate of 30 per cent when a company is selling its assets. This, according to UMA Chairperson Barbara Mulwana, should either be scrapped or lowered to encourage the sale of assets so that companies are at more freedom to get new investors.

//Cue in; Most of […]

Stay in the Know!

Sign up for the latest news and information on African Companies and Economy.

By signing up, you agree to receive MoneyInAfrica offers, promotions and other commercial messages. You may unsubscribe at any time.

Leave a Reply