Subsidies will hurt the poor more-Ministry of Finance

By Ritah Kemigisa

The Ministry of Finance has released a brief on the implications of subsidies and tax cuts on essential commodities as suggested by many Ugandans to cope with the high cost of living.

Speaking at a Policy workshop on the impact of high commodity prices this morning, the Finance Minister in charge of General duties Henry Musasizi says the increase in commodity prices is temporary and that providing subsidies is not an alternative because it will benefit the rich at the expense of the poor.

He adds that their study shows that taxes are not the main cause of price increments since tax contribution to the final price of affected goods like cooking oil and soap ranges between 6.7% to 27% for petrol.

Musasizi meanwhile says any tax reduction when the cause of the increase in prices is external will cause self-reinforcing increases if consumers buy more or hoard the goods.

He says this has been evident in the case of fuel subsidies in neighboring countries where the benefit is lost and the Treasury loses revenue.

In his last address, President Museveni ruled out calls for tax cuts and subsidies saying they are suicidal to the economy

Written by Noelyn Nassuuna