TAX POLICY PROPOSALS REGARDING LIQUIFIED PETROLEUM GAS (LPG).

Dear PSST Ramathan Ggoobi

As you push to balance the revenue and expenditure sides of the upcoming national budget, kindly consider the hereunder:

The foregoing refers,

1. Uganda’s national energy objective as enshrined in the current National Development Plan is to: Meet the energy needs of Uganda’s population for social and economic development in an environmentally-sustainable manner.

According to Vision 2040, one of the Uganda government’s development plan for the next 25 years, is to encourage use of LPG though collaborating with neighbouring states to build a gas pipeline to and from gas fields in the region.

2. The fierce urgency to adopt use of LPG for clean and healthy cooking:

• 0.5 – 1% of a population of 40 million use LPG (Ubos datasets).

• Uganda’s 0.45kg per capita LPG usage is lowest in the East African region according to Uganda National Bureau of Statistics – and 89% of the population use fuelwood as a source of energy.

• According to National Environmental Management Authority (NEMA), Uganda loses 80,000 hectares, up from 50,000 hectares of forest annually. At this geometric rate, the country will face an environmental crisis if we don’t act now.

3. The need to review the prevailing tax regime for LPG.

• In the 2014/15 financial year, government reversed the VAT exemption it had placed on cooking gas after some public officials argued that the exemption did not bring down prices significantly.

• However, statistics indicate that there had been a consistent rise in the sale of LPG. For example, the 2016 Statistical Abstract published by Uganda’s Bureau of Statistics (Ubos) show that between 2011 and 2013, LPG sales rose from 9.813 cubic metres to 12,513 cubic metres. In 2014 sales dropped to 11,899 cubic meters before slightly increasing to 11,903 in 2015.

Uganda remains a price sensitive market and our view is that once VAT and import duty exemption is restored, it will be extended to consumers in form of lower pricing for cooking gas – (*Benchmark: Vietnam and Peru increased consumption of LPG from 4 per cent to 50 per cent in 10 years by reducing value added tax and import duty on LPG.

4. Key policy proposals for action

• Implement VAT and import duty exemptions for LPG, LPG cylinders and stoves.

• Introduce carbon tax/environmental permits on vehicles and motorcycles manufactured before year 2015 to replace revenue loss from exemptions

• Use tax revenue from Kerosene and environmental /carbon permits to finance universal LPG use awareness campaigns.

• Incentivise the private sector to build storage facilities in order to ensure sufficient LPG stocks in the Country.

• Put in place National regulations and safety standards for LPG.

• Incentivise production of LPG cylinders and accessories to further push down end-user prices.

5. We take cognisance of Uganda’s solid participation at The UK – Africa Investment Summit which proclaimed investments focused on energy transition from carbon intensive to renewable and clean energy sources. Implementing the foregoing will be a further step towards a decarbonised energy future of Uganda.

Warmly,

M.Rwakakamba

Coffee farmer — Nyeibingo /Ikuniro parishes, Rukungiri District