KAMPALA, Uganda — As boda boda riders navigate Kampala’s gridlocked streets and households grapple with rising food and transport costs, Uganda’s latest tax proposals are reigniting a familiar concern: how much more citizens will pay, and whether public services will improve in return.
The government is finalising a series of Revenue Enhancement and Compliance Measures for the 2026/27 financial year, targeting an additional Shs4.8 trillion. Of this, UGX2.3 trillion is expected from new tax policy changes, with the remainder to be raised through improved enforcement by the Uganda Revenue Authority (URA).
The reforms form part of a broader fiscal strategy anchored in the Public Finance Management Act, as Uganda seeks to reduce reliance on borrowing and strengthen domestic revenue mobilisation amid mounting debt obligations.
What the new tax measures propose
Key proposals include:
- Raising Pay-As-You-Earn (PAYE) to 40% for monthly incomes above UGX 10 million, up from 30%
- Increasing the tax-free threshold from UGX 235,000 to UGX 335,000
- Adding UGX 200 per litre on fuel excise duty
- Tripling sugar excise duty from UGX 100 to UGX 300 per kilogram
- Expanding taxes on property transfers, capital gains, and selected consumer goods
- 6% withholding tax on public entertainers
Finance State Minister Henry Musasizi has defended the proposals as necessary to sustain government expenditure.
Uganda’s 2026/27 budget is projected at UGX 84.209 trillion, with UGX 44.5 trillion expected to come from tax revenues.
Debate over fairness and economic impact
While some of the measures target higher-income earners, economists and lawmakers warn that indirect taxes, particularly on fuel and essential goods, could have the broadest impact.
Kira Municipality MP Ibrahim Ssemujju Nganda argues that such taxes are often less visible but more burdensome.
“For every litre of petrol, the government already charges between Shs1,350 and Shs1,550; the passenger ultimately pays,” he said.
Uganda’s tax base remains narrow. Of approximately 5.2 million registered taxpayers, only 2.5 million are active, with about one million salaried workers contributing through PAYE.
“When people see deductions on their payslips, that is when the pain becomes real,” Ssemujju said, warning that higher PAYE rates could significantly erode disposable incomes.
Amolatar Woman MP Agnes Atim Apea echoed concerns about equity, noting that Uganda’s tax-to-GDP ratio remains relatively low.
“Our tax-to-GDP ratio is still about 13–14%, which is low. But we must ask: who are we taxing, and at what cost to livelihoods and businesses?,” she said.
She also raised questions about tax exemptions, arguing that they often favour larger or foreign firms, leaving local enterprises at a disadvantage.
Rising prices and public concern
Civil society organisations warn that increasing levies on fuel and basic commodities could trigger a ripple effect across the economy, driving up the cost of goods and services.
Transparency International Uganda has cautioned that the timing of some proposals could worsen existing economic pressures.
David Kizito of the organisation said: “Increasing fuel taxes during global supply disruptions will raise pump prices. In a liberalised market, government cannot control the final cost.”
Higher excise duties on essentials such as sugar, he added, risk disproportionately affecting low-income households.
Accountability and public trust
Beyond the tax rates themselves, public debate is increasingly focused on how government revenues are spent.
Ssemujju pointed to rising recurrent expenditure, including administrative costs such as vehicles, fuel, and allowances, even as public services remain under strain.
“The issue is not just collecting taxes, it is whether taxpayers see value for money,” he said.
Many Ugandans say the proposed measures come at a difficult time.
“The biggest pain is increasing taxes without tackling corruption or reducing government expenditure,” said Lillian Aber.
James Obed added: “Instead of lowering the cost of materials like cement, taxes are increasing while wastage continues.”
Others questioned whether policymakers are shielded from the real-life impact of such decisions, calling for spending cuts before new taxes are introduced.
Debt pressure and economic outlook
Uganda’s tax reforms, grounded in the Income Tax Act and the Excise Duty Act, must still be debated and approved by Parliament.
Analysts note that the proposals combine progressive elements, such as higher taxation on top earners, with regressive features that affect all consumers.
With public debt estimated at nearly UGX 130 trillion and interest payments consuming an increasing share of revenue, pressure on the government to expand its tax base is unlikely to ease.
The World Bank has previously warned that four in five Ugandan businesses fail within five years, citing high taxation and limited access to affordable credit among the contributing factors, raising further concerns about how the new measures could affect private sector growth.
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