The taxman says the incentive, which has seen local beer making firms increase the quantities of local inputs in their brands, is open to abuse through tax evasion.
“We have now deployed some scientists to verify input and output ratios in their operations so as to minimise risks of tax evasion,” said Henry Saka, URA’s Commissioner for Domestic Taxes. “We also intend to dig deeper into the industry value chain in order to bridge deficits in excise duty revenues.”
Popular local inputs used in beer production include maize, sorghum, barley and sugar.
Excise duty collected from the beer industry stood at Ush121.96 billion ($38.6 million) during the period under review against a target of Ush158.7 billion ($50 million).
Excise duty charged on higher local content beer was 20 per cent, but the latest amendments to tax laws passed recently by parliament pushed this rate to 30 per cent for the financial year 2015/16.
Total sales volumes for higher local content beers — containing domestic inputs which exceed 75 per cent of total ingredients excluding water — stood at 158,015,910 million litres equivalent to 73 per cent of overall industry sales in the period July 2014-April this year, data compiled by the URA shows.
In comparison, overall sales volumes for medium local content beers stood at 26,909,164 million litres during the period under review. While the excise duty rate for this category stands at 40 per cent, the tax changes have led to a 10 per cent cut from next month.
Overall sales volumes for lower local content beers that bear an excise duty rate of 60 per cent grossed 31,105,413 million litres in the same period.
The East African
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