With barely months left to the start of the 2025/2026 Fiscal Year (FY), questions abound about how the government will plug a gap caused after development partners withdrew funding.
“It could compel [the] government to over rely on indirect taxes and other regressive tax measures which may disproportionately affect the poor and most vulnerable categories of people,” Mr Herbert Kafeero, the programmes manager at the Southern and Eastern Africa Trade Information and Negotiations Institute (Seatini), says.
If the taxman is to realise an ambitious Shs36.7 trillion domestic revenue target, a hard look will have to be taken at the internal picture. The 2023/2024 Auditor General’s report does not paint a rosy picture. The government, it notes, registered a Shs68.842b revenue loss accruing from gold exports valued at $3.014b (Shs11 trillion).
The exports in question were made without obtaining the necessary export permits from the Energy minister. This explains why civil society organisations (CSOs) under the Tax Justice Alliance Uganda proffered a string of measures to the House Committee on Finance. They want tough questions to be asked of exploration and mining companies in Uganda.
Findings from the Auditor General's report reveal that in the FY 2023/2024, the companies did not remit Shs439b rent fees. Those fees alone are close to the Shs538.6b the government intends to raise from new tax levies currently being considered by the House Committee on Finance.
“The formalisation of artisanal miners has not gathered pace, and yet their formalisation is critical for the development of the mining sub sector,” Ms Hilda Tumuhe, a debt and aid officer at Seatini, says.
“The sector has the potential to contribute increased domestic revenue mobilisation for the country and improved livelihoods of the miners.”
Away from the miners, the CSOs also want the government to go hard on cigarettes. Ms Robinah Kaitiritimba, the executive director of Uganda National Health Consumers’ Organisation (UNHCO), strongly recommends that the government “takes decisive action to increase tobacco taxation and prioritise public health because raising tobacco taxes is a win-win solution for Uganda’s economy and the well-being of its citizens.”
Dr Jim Arinaitwe, the centre manager of the Centre for Tobacco Control in Africa (CTCA), suggests that the government “doubles the current Excise Duty tax on both the locally manufactured hinge lid and soft cap.” Specifically, he suggests that “for hinge lid variants, tax rises from Shs80,000 to Shs160,000 per 1,000 cigarettes, while soft caps an increase from Shs55,000 to Shs110,000 per 1,000 cigarettes.”
The levies that the government has proffered are, in a sense, different. The government wants levies on locally manufactured cigarettes (soft cap) to be increased from Shs55,000 per 1,000 sticks to Shs65,000 per 1,000 sticks.
If the government has its way, the other category of locally manufactured cigarettes (hinge lid) will have its levy increase from Shs80,000 per 1,000 sticks to Shs90,000 per 1,000 sticks. This differs from the proposed levies, which propose that locally manufactured cigarettes (soft cap) range from Shs55,000 per 1,000 sticks to Shs65,000 per 1,000 sticks.
The other category of locally manufactured cigarettes (hinge lid) will have its levy increase from Shs80,000 per 1000 sticks to a planned Shs90,000 per 1,000 sticks. The government has also proposed that taxes on imported cigarettes (soft cap) increase from Shs75,000 per 1,000 sticks to Shs150,000 per 1,000 sticks. Elsewhere, the levy on imported cigarettes (hinge lid) is suggested to increase from Shs100,000 per 1,000 sticks to Shs200,000 per 1,000 sticks.
Capitalise, safeguard NIN
In an attempt to widen its tax base, the government intends to use the National Identification Number (NIN) to do what the Tax Identification Number (TIN) failed to do.
Mr David Kizito, a programme officer at Transparency International, says the switch is both an opportunity and a trap. For this to pay off, he says “Uganda Revenue Authority will need to work with National Identification and Registration Authority [Nira] to expedite the issuance of NINs and have all challenges associated with the attainment of NIN be expressly addressed.”
He adds: “In business, time is money. So, for a business person who is trying to import a product, you can’t tell them to wait for two months to get their NIN from Nira so that they can formally do business.”
Mr Kizito also wants the URA systems to be readied for the new changes that may be occasioned by the shift from the TINs to use of NINs.
“Government should work on an infrastructure within URA so that they can manage this database. We believe that if we roll it out in this current system, we may find a bottleneck at URA, where you have too much data coming in, but then the capacity to sieve it is actually not good enough,” he states.
Mr Jonathan Odur, an economist and lawyer, says thus: “It is a reform that is possible but will require a lot of tax education because there are people who have NINs but they have zero knowledge that they are supposed to pay tax.”
Mr Odur, also the Erute South lawmaker, recommends that the approach on the NIN “must be phased out in a certain way that will not disadvantage a local person.” He says the rollout can begin by piloting it on persons in the formal sector under a sector that is easy to track, such as Members of Parliament.
“You pilot with a defined group, which are clear, and then you see how it is performing, then once you are done with the government or those in formal employment, then you can now move to capture those who are in the informal sector,” he says.
Five-year tax holiday, bets
Mr Aloysius Kitengo, a member of the Tax Justice Alliance Uganda, suggests that the government plan of granting a three-year tax exemption to start-ups be elevated to five years in revisions to be made in the Income Tax (Amendment) Bill, 2025.
“Based on market experience, start-ups typically reach a break-even point after approximately five years, depending on the nature of the business. Given this, we believe that a five-year period would be a more appropriate timeline to consider the introduction of taxation for startups,” he says, adding that clarity around defining a business start-up will be just as vital.
Elsewhere, Mr Moses Talibita, the Legal officer at the Uganda National Health Consumers' Organisation, supports the government’s plan to compel all gaming and betting outlets to issue payouts to winners to be wired through Bank of Uganda’s centralised managed system.
He also sides with the proposals contained in the Tax Procedures Code (Amendment) Bill, 2025 seeking to impose a Shs11b fine on any outlets that go against these provisions.
“An operator of a casino, gaming or betting activity who does not use or is not integrated with the gaming and betting centralised payments gateway system is liable to pay a penal tax equivalent to double the gaming or withholding tax due or five thousand five hundred currency points, whichever is higher,” the Bill reads in part.
A fortnight ago, Mr Denis Mudene Ngabirano, the chief executive officer of National Lotteries and Gaming Board (NLGB), told lawmakers on the Finance Committee that the proposal is meant to close possibilities that could be used for money laundering.
Mr Ngabirano revealed that by the close of FY 2023/2024, Shs194b had been collected as revenue while “this [Financial Year] July [2024] to February [2025], we are at Shs189b.”
Agriculture investments
The government has also been advised to not only incentivise the agricultural sector but also avail more funding to the sector. The CSOs recommend that agricultural investments with big funding injected need to attract taxes commensurate to their financial stature. In doing so, investments such as the Atiak Sugar Factory and Inspire Africa in the coffee business will be compelled to remit substantial taxes to the taxman.
In a joint paper submitted to the House Committee on Finance, which is currently scrutinising the seven tax Bills, CSOs have also advised the government to close tax leakages causing revenue loss to URA, undertake intense tax educations, and institute heavy punishments for all persons found in the habit of evading taxes.
“The need to provide tax-related information with the citizens who are the taxpayers cannot be overstated,” the paper authored by the Tax Justice Alliance Uganda reads in part. “The amendment of the tax laws every financial year necessitates the need for the taxpayers to understand and appreciate the new amendments. This is more likely to lead to an increase in tax compliance.”
The Finance ministry and URA will before the end of this month appear before the Finance committee and defend their initial proposals in the seven tax Bills.
The committee will then retire to a close-door meeting to deliberate on the submissions collected on tax Bills. Afterwards, the committee will author a report with recommendations that will be tabled in the House to take a final vote to decide on the taxes to be levied on Ugandans in the 2025/26 Financial Year.
