As Uganda continues its efforts to promote sustainable transportation and reduce carbon emissions, the government has introduced several measures to incentivize the adoption of Electric Vehicles (EVs).
Two such measures are increasing taxes on fuel as well as the exemption of Electric vehicle body frames and charging equipment from taxation, which can have a significant impact on the uptake of EVs in the country.
If you are not familiar with the developments, the Government of Uganda plans to introduce a couple of tax bills to its FY 2024/25 budget proposals. These, among others, would add a UGX 100 addition to the current taxes collected off Petrol and Diesel purchases; while exempting taxation of electric vehicle availability.
The obvious view we would all have is that, by increasing taxes on fuel, the cost of operating traditional Internal Combustion Engine (ICE) vehicles rises, making EVs relatively more attractive due to their lower operational costs.
This shift in taxation can incentivize individuals and companies to consider EVs as a cost-effective alternative, especially when coupled with financial incentives like tax breaks, subsidies, and lower interest loans that support the adoption of EVs.
Moreover, disincentivizing ICE vehicles through tax increments can level the playing field between ICE vehicles and EVs, making EVs more competitive in the market and accelerating their adoption.
As part of the broader energy transition plan in Uganda, the government is focusing on establishing charging infrastructure and providing significant tax exemptions for EV components, which are crucial steps to support the growth of the EV market.
Tax Experts beg to differ
However, experts on taxation from Ernst & Young think differently of the whole idea. During a press briefing set up to discuss the likely implications of the proposed tax amendment bills, they hinted on the government likely seeking for “what else can we bring into the tax net”.
Prosper Ahabwe, an Associate Director on Tax at EY Uganda, believes that this is largely a measure from the government to raise revenue. Prosper, whose experience spans across 16 years in the line of financial services, telecommunications, and other industries does not see a direct correlation between the fuel tax and a growth in EV adoption.
He stated that, “There were also a couple of amendments around attracting investment into the manufacturing of electric vehicles, which are separate incentives that came through within the excise duty, stamp duty and VAT Act. So the two (the increased tax on fuel and the waiving of tax on Electric Vehicles) are not directly related.”
He adds that, “It’s also arguable that as we look forward to a greener economy and we’re trying to put in place carbon mitigation measures, excise duty in the future may be used as a tax policy to drive aspects of climate change and discourage the use of vehicles that emit carbon.”
Environmental benefits of EVs in Uganda
The adoption of EVs in Uganda can provide significant environmental benefits by reducing air pollution and greenhouse gas emissions. EVs produce zero tailpipe emissions, making them much cleaner for the environment compared to traditional ICE vehicles.
In Kampala alone, it is estimated that CO2 emissions could fall by 36% if EV motorcycles replaced the city’s ICE motorcycles. As more EVs are adopted, Uganda’s overall carbon footprint will decrease, contributing to climate change mitigation efforts.
EVs also reduce noise pollution in urban areas, creating a quieter and more pleasant environment for residents. By promoting the adoption of EVs, Uganda is taking proactive steps towards mitigating air pollution and building a more sustainable future for its citizens.
To fully realize these environmental benefits, Uganda needs to continue its efforts in providing tax incentives for EVs and components, establishing a robust charging infrastructure, and raising public awareness about the advantages of EVs.
Current State of EV Adoption in Uganda
The current state of EV adoption in Uganda is gradually progressing, with a growing interest and awareness regarding electric mobility. While the number of EVs on Ugandan roads remains relatively low compared to conventional vehicles, there has been a noticeable increase in interest and environmental consciousness among consumers and key players in the market.
Uganda introduced the National Electric Mobility Policy in 2018 to promote EVs through incentives, tax breaks, and infrastructure development, aiming to integrate EVs into the country’s transportation network as part of the sustainable transport system outlined in Uganda’s Vision 2040.
The government’s waiver on import duties for all EVs has reduced the cost of acquiring these vehicles by 25%, further supporting the transition towards electric mobility in Uganda.
