Kampala — The East African Court has found the Ugandan government acted illegally by imposing Excise Duty on goods imported by British American Tobacco within the region.
This, the First Instance Division ruled yesterday, was a violation of the East African Community Treaty, Customs Union and the Common Market Protocols.
The ruling followed a case filed by British American Tobacco (BAT) Uganda, challenging the government over the Excise Duty (Amendment) Act of 2017, that was assented to by President Museveni June 13.
The tax was later implemented on July 1, 2017 with Uganda Revenue Authority subsequently issuing assessment notices to BAT on the basis of the amendments to pay Excise Duty for cigarettes manufactured in Kenya and imported to Uganda.
The tax assessment initially categorised the cigarettes as locally manufactured but subsequently re-categorised the same as imported, attracting Excise Duty of Shs75,000 per 1,000 sticks of 'soft cup' and Shs100,000 per 1,000 sticks of 'hinge lid'.
The judgment delivered by a panel of five judges in Arusha, Tanzania further ruled that the Excise Duty (Amendment) infringes on sections of the East Africa Customs Union Protocol and the Common Market Protocol.
Yesterday, Mr Dickson Kateshumbwa, the Uganda Revenue Authority, said they would comply to the ruling as soon as it is communicated to the tax agency through the Attorney Generals office.
The court further set aside payment registration slips issued to BAT for additional taxes of Shs325.2m for 1,170 packages of soft cap cigarettes, directing that government must ensure the interpretation and application of Excise Duty Act does not contradict set EAC laws. Each party will bear costs of the suit. The land marking ruling is likely to shape EAC intra-regional trade that is significantly important to a number of stakeholders within and beyond EAC.
The five-judge panel was led by Lady Justice Monica Mugenyi. It also composed of judges including Justice Faustin Ntezilyayao, Justice Fakihi A. Jundu, Justice Audace Ngiye and Justice Charles Nyachae.
Background to the case
On June, 30 2017, government published the Excise Duty (Amendment) Bill proposing an increase in the rate of Excise Duty on cigarettes (soft cup) from Shs50,000 per 1,000 sticks to Shs 55,000 per 1,000 sticks. The said rate was to apply uniformly to all applicable tobacco products manufactured within the EAC.
The Bill, which was later enacted, introduced amendments of Excise Duty on locally manufactured cigarettes (soft cup) of Shs55,000 per 1,000 sticks and Shs75,000 per 1,000 sticks for imports.
It also introduce a charge of Shs80,000 per 1,000 sticks for hinge lid locally manufactured and Shs100,000 per sticks for imports.
The government, through the Uganda Revenue Authority, subsequently issued tax assessment notices requiring the BAT to pay Excise Duty for its cigarettes manufactured in Kenya and imported to Uganda, which the cigarette manufacturer challenged.
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