Recent developments at the Busia border have led to a significant disruption in cross-border trade between Kenya and Uganda. Close to 30 trucks loaded with tons of Irish potatoes from Kenya are currently stranded at the border, unable to proceed into Uganda. The cause of this gridlock? A sudden and drastic increase in withholding tax imposed by the Uganda Revenue Authority (URA) on imports from Kenya.
The situation worsened when URA implemented a new withholding tax policy, doubling the levy on products imported from Kenya. Reports indicate that approximately 20 trucks were seized by URA in Jinja on April 12, the very day the new tax policy came into effect. Importers, who previously paid a withholding tax of Shs120,000 per truck, were now facing demands of Shs1,200,000 per truck under the revised tax scheme.
Ibrahim Bbosa, the Commissioner of Public and Corporate Affairs at URA, clarified the tax adjustments. He stated that the withholding tax rate had been increased by 6 percent, resulting in a tax of $0.4 (equivalent to Shs1,560) per kilogram of Irish potatoes imported into Uganda. According to Bbosa, this adjustment was made to address past undervaluation of the product.
The sudden implementation and steep increase in taxes have sparked outrage among importers and clearing agents. Hajj Ali Mande, Chairman of the Uganda Clearing Agents and Forwarding Association in Jinja, described the tax hike as excessive and hastily enforced. He expressed concern over the potential repercussions, fearing that Kenya might retaliate by imposing restrictions on Ugandan goods, as seen in past trade disputes.
Indeed, Kenya’s previous trade bans on Ugandan goods, including sugar, maize, and dairy products, serve as a reminder of the delicate nature of cross-border trade relations. With tensions already high, the recent tax escalation threatens to exacerbate existing trade tensions between the two neighboring countries.
Traders and clearing agents at the Busia border voiced their grievances, highlighting the adverse impact of the tax hike on their businesses. The increased costs associated with importing Irish potatoes, compounded by additional fees imposed by regulatory bodies like the Uganda National Bureau of Standards (UNBS), have made the trade unfeasible for many.
Importers and traders, faced with mounting losses and logistical challenges, are urging for swift resolution to the impasse. They emphasize the need for transparent and equitable tax policies that support rather than hinder cross-border trade and economic cooperation between Kenya and Uganda.
The fate of the stranded trucks and the future of bilateral trade relations hang in the balance as the standoff persists.
