The government is set to write off more than Shs35 billion in tax arrears owed by tea factories as part of efforts to revive Uganda’s struggling tea industry, Deputy Speaker of Parliament Thomas Tayebwa has said.
Tayebwa said the tax waiver will be effected when Parliament resumes from recess, following sustained pressure from MPs representing Greater Bushenyi and other tea growing areas over the worsening crisis in the sector.
He made the remarks while representing President Yoweri Museveni at the burial of the late Edna Kentaro Baryaruha in Bushenyi District.
“The minister directed that, when we resume Parliament, we will write off tax arrears worth more than Shs35 billion. I want to thank MPs from Greater Bushenyi who have worked hard on this issue,” Tayebwa said.
The proposed tax relief is expected to ease pressure on tea factories that have accumulated debts and struggled to remain operational amid falling tea prices, high production costs and weakening demand on international markets.
Tayebwa said the government would also address other challenges affecting the management and operations of tea factories, which he said had contributed to the difficulties facing the industry.
“The other issues will also be streamlined to ensure that factories are run better,” he said.
The Deputy Speaker said the government was undertaking a broader review of the tea sector as part of efforts to restore its long term sustainability.
Uganda’s tea industry has in recent months faced growing pressure following a sharp decline in tea prices. Weak international demand, coupled with increased volumes on the market, has contributed to an oversupply that has pushed auction prices down.
The situation has been worsened by political and economic disruptions in some key importing markets, including Sudan, which has traditionally been an important destination for East African tea.
Uganda, which largely relies on the Mombasa tea auction and mainly produces CTC black tea, has been particularly exposed to the shocks affecting the regional market.
Farmers have also been hit by rising production costs, including fertiliser and other agricultural inputs. The high costs have made it increasingly difficult for some farmers to maintain their plantations, affecting both the quality and quantity of green leaf delivered to factories.
The fall in tea prices has also affected factories’ ability to pay farmers and meet operational expenses, creating financial pressure across the value chain.
Tayebwa, however, said the government was preparing a broader intervention, including a Shs212 billion investment in the tea industry.
He said the funds would be available to tea factories that demonstrate efficient and effective management, signalling that government support will be tied to the performance and management of individual factories.
President Museveni last year visited Bushenyi, where he engaged tea farmers and processors on the challenges affecting the industry and efforts to rescue the sector.
