Ugandan industrialists are asking the  government to increase the categories of imported raw materials exempted from import duty, a move they say will boost the sector.

In last year's budget, the Minister for Finance, Planning and Economic Development, Gerald Sendawula announced that no import duty would be charged on raw materials that are not locally available. But the manufacturers say they want the bracket of exempted materials expanded.

"We want more materials included. In our budget proposals, we have showed that the effects of the new regime have been positive, with industries contributing more revenue to government," Patrick Banya, a spokesman of the Uganda Manufactures Association (UMA) told The EastAfrican.

The manufacturers are also urging government to reduce the 30 per cent corporate tax. They argue that the reduction would make the country more competitive. "The 30 per cent does not significantly increase government's tax revenues yet is a hindrance to investment," the UMA official said.

Mr Banya would not reveal the rest of the manufacturers' proposals, saying they were still in negotiations with the government.

But it is believed that the manufacturers have also asked government to improve on tax policy and tax administration. Of particular concern however is the rampant smuggling, particularly on Lake Victoria and along the Kenya-Uganda border. Cigarettes, batteries, textiles, cooking oil and other consumer goods are some of the main items smuggled cheaply into the country.

Officials of the Uganda National Chamber of Commerce and Industry (UNCCI) say they would like to see more stringent measures taken against smugglers, who they say are forcing genuine traders out of business. 

"The Uganda Revenue Authority should draw up new measures to fight smugglers. We who pay taxes are the ones suffering as smugglers flood the market with cheap products," an official said.

The Special Revenue Protection Service (SRPS), a paramilitary agency linked to State House, has since late 2000 stepped up its anti-smuggling activity but remains too thin on the ground to stamp out the practice. 

The chamber official said that government should also lower taxes on fuel as the high transport costs were pushing up production costs and prices for several commodities. "Any tax cuts that would make locally produced products more competitive would be most welcome."

Uganda's manufacturing sector last financial year grew by 2.4 per cent, which government officials said was a reflection of the effects of worsening terms of trade. The sector grew at a rate of 18 per cent in 1995/6 but has since slowed. Mr Sendawula says, "As much of the manufacturing sector provides goods for the domestic market but relies heavily on imported inputs, a real exchange rate depreciation squeezes profitability in the sector." 

He said becoming more efficient, sourcing a larger share of inputs from the domestic market and selling a larger share of output on export markets would help Ugandan firms become more competitive.

In their proposals for the 2001/2002 Budget and Economic Policy, the manufacturers recommended the delinking of the Tax Appeal Tribunal from the Ministry of Finance to give it autonomy. They said it should be under the Ministry of Justice and Constitutional Affairs for supervisory purposes and oversight.

Hilary Obonyo, the UMA executive director, said corporate tax should be reduced to 25 percent from 30 per cent and that the reduction would raise the level of compliance for liable companies that are currently not paying this tax.