Is VAT on Agricultural Inputs Cost Effective?

Mbowa Swaibu, Were Omamo Steven and Rusike Joseph

No 206181, Policy Briefs from Economic Policy Research Centre (EPRC)

Abstract: This policy brief summarizes the results of preliminary analysis to quantify the potential farm-level and aggregate impacts of the proposed imposition of 18% value added tax (VAT) on key agricultural inputs in Uganda. Results reveal that the potential costs of the proposed imposition of VAT on agricultural inputs appear to far outweigh the potential benefits. The impact of VAT imposition on maize seed and fertilizer is estimated to contribute total tax revenues of $10.29 million compared to estimated total losses to maize farmers of $20.93 million. This implies a benefit-cost ratio (BCR) of 0.49. This ratio of benefits to costs is well below acceptable levels; and if other commodities, inputs, and other impact channels (e.g., the “output price effect”)were considered, the BCR could be even much lower. In conclusion, the proposed measure undermines basic agricultural and broader economic growth and development objectives; and the ratio of benefits to costs renders the proposed measure unjustifiable based on economic arguments. Therefore, the proposed measure should be reconsidered; and alternative sources of revenue sought.

Keywords: Agribusiness; Agricultural Finance; Farm Management; International Relations/Trade; Land Economics/Use; Marketing (search for similar items in EconPapers)
Pages: 4
Date: 2014-08
New Economics Papers: this item is included in nep-pbe and nep-pub
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/206181/files/4 ... Cost%20Effective.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:eprcpb:206181

DOI: 10.22004/ag.econ.206181

Access Statistics for this paper

More papers in Policy Briefs from Economic Policy Research Centre (EPRC) Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().