By Aggrey Baba
Uganda’s sugarcane sector is facing significant revenue losses, with the Uganda Revenue Authority (URA) estimating annual tax evasion amounting to over Ugx120 billion.
Systemic weaknesses, including lax enforcement, unregulated supply chains, and manipulation of weighbridges, have enabled widespread tax leakages, allowing some manufacturers and middlemen to bypass proper tax compliance.
The country’s sugarcane industry has an installed crushing capacity of 52,000 tonnes per day, translating to an annual demand of approximately 15.6 million tonnes.
However, with factories operating at only 60% capacity, the actual demand stands at around 9.36 million tonnes per year. According to the New Vision, farmers estimate that 15-25% of sugarcane deliveries go unreported, leading to an undeclared supply of approximately 1.6 million tonnes annually.
Based on current market prices, this translates to a potential tax loss of sh120 billion, primarily in Value Added Tax (VAT) and stamp duty.
URA Commissioner General John Musinguzi Rujoki acknowledged the existence of tax evasion within the sector, noting that some manufacturers deliberately under-declare sugarcane volumes, report lower production figures, and sell sugar without the necessary stamp duty.
Rujoki further highlighted cases of alcohol manufacturers evading taxes and factories purchasing large quantities of sugarcane while underreporting production levels. As part of the government’s response, URA is intensifying enforcement efforts, particularly targeting value-added sugar processors who have not been paying taxes on their profits.
Meanwhile, sugarcane farmers under the Greater Busoga Sugarcane Growers Co-operative Union Limited have petitioned Parliament, calling for a review of taxation policies affecting the industry. In a petition dated March 17, 2025, farmers led by Dr. Michael Mugabira argue that sugarcane, as an agricultural raw material, should not be subject to income tax.
They contend that fluctuating sugar prices, coupled with excessive taxation, have placed undue pressure on their financial sustainability.
The farmers assert that the current break-even price for sugarcane production is Ugx130,000 per tonne, yet factory gate prices average only Ugx125,000 per tonne, leaving them operating at a loss.
The Uganda Sugar Act 2020 prescribes a formula for revenue sharing between millers and outgrowers, taking into account statutory taxes such as VAT and stamp duty.
A 50kg bag of sugar, priced at Ugx182,000 at the factory gate, generates Ugx32,760 in VAT and Ugx5,000 in stamp duty. Given that one tonne of sugarcane produces approximately two bags of sugar, the total tax contribution per tonne amounts to Ugx75,520, with farmers alone contributing about Ugx37,760 per tonne to government revenue.
Despite the contributions, farmers claim that URA continues to impose additional tax burdens on them, resulting in instances of double taxation.
In response, Musinguzi refuted claims that URA is unfairly taxing farmers, clarifying that agricultural income remains largely non-taxable. He explained that income tax is only applicable to those earning taxable profits and urged farmers who believe they have been wrongfully assessed to provide evidence for further review.
To address revenue leakages and enhance transparency in tax collection, farmers have proposed several measures, including linking all off-station factory weighbridges to URA’s system to ensure accurate reporting, strengthening enforcement mechanisms against tax-evading sugar processors, and revising taxation policies to prevent undue financial distress for outgrowers.
As URA continues its crackdown on tax evasion in the sector, the ongoing tensions between tax authorities, manufacturers, and farmers highlight the urgent need for reforms that balance government revenue generation with the sustainability of the sugarcane industry. (For comments on this story, get back to us on 0705579994 [WhatsApp line], 0779411734 & 041 4674611 or email us at mulengeranews@gmail.com).
