Most of the dairy producers in Uganda are smallholders, so taxation could be detrimental to the industry.
Dairy farmers under Uganda Crane Creameries Cooperatives Union (UCCCU) have expressed fears over taxation, which government intends to levy on incomes as a hindrance to development of the industry.
In a meeting held in Mbarara recently, they were informed by Clayton Arinanye, the general manager, UCCCU that Uganda Revenue Authority is to tax their milk incomes.
“This will affect a young industry that is struggling. Besides that, it will lead to farmers refusing to sell their milk collectively in an attempt to hide their records of production,” he noted.
Arinanye pointed out that farmers have no records for cost of production to verify the tax imposed. The majority of farmers sell through informal sector yet the cost of production is very high.
Dairy cooperative unions are new phenomenon in the country following the privatisation of Dairy Corporation. Through this, farmers joined hands to set up their own industries and cooperative groups.
UCCCU with funding from The Netherlands and Denmark through aBi Trust have been instrumental in boosting the dairy industry in the south western Uganda.
This has given an impetus to milk production, value addition and cold chain management through acquisition of milk tankers.
Some of the achievements of the aBi Trust intervention are the timely delivery of milk to the market through the loans and subsidies on the 100 coolers, 10 milk tankers, milk laboratories, milk-testing equipment, and farmer’s trainings, among others.
So far 671 farmers have been trained and adopted to recommended standards but the target is 1,000. Milk production has increased from 57.5 million litres in 2014 to 141 million litres in 2015.
The modern milk coolers have saved on running costs by almost 70 per cent especially on fuel and time taken to chill the milk from eight to three hours.
Altogether, UCCCU has a membership of about 20,000 dairy farmers in the south western region. The number is increasing as more have seen the usefulness of cooperative marketing as not only viable but profitable as well. “With these achievements, we feel that this tax will take us back to where we come from,” said Perez Kambaho, a farmer from Kanyanya Dairy Cooperative Society in Kiruhura District.
Since the intervention of aBi Trust, this cooperative society has acquired two milk coolers because production has gone up. “We used to get 3,000 litres of milk per day before the intervention. There was an old cooler, which would take eight hours to chill the milk but we have since increased production to 8,000 litres per day. This called for another cooler because the first one could only hold 5,000 litres,” adds Kambaho who is also the manager.
If farmers leave the cooperative movement for the informal sector they are bound to lose on bulk marketing. There will be loss of jobs, decline in milk volumes, and deterioration of milk quality and price reduction, among others.
But Arinanye points out that farmers are not opposed to the tax but would want government to go slow as the industry reorganises itself from decline to progress.
“Let us first build the industry before being taxed. We have met the Prime Minister and he promised to address the issue with relevant authorities. Some of the advisors of UCCCU have met the president in their individual capacities and he reportedly said he was not aware of the development,” he explained.
At the same meeting, Stephen Ayikiriza, the regional manager, Dairy Development Authority (DDA), informed the farmers about the vision to have a dynamic well-regulated dairy sector.
Once this is attained, there will be no fear for taxes, he said. However, the industry is still grappling with milk quality where DDA has intervened and earning the wrath of the farmers.
“This is a young industry yet attractive, our desire is to sensitise stakeholders until such a time when the farmers have reached a level where they can be taxed”, he says.
But taxing farmers at this level will scare off many leading to the collapse of the dairy industry. Therefore, the proposal is that taxes should be levied at consumption level not at the farm level.
This article was first published in the Daily Monitor Newspaper on Wednesday, January 13, 2016