The price of progress?

Uganda’s tax overhaul draws praise—and alarm—from civil society

Kampala, Uganda | JULIUS BUSINGE | A coalition of over 50 civil society organizations under the Tax Justice Alliance Uganda (TJAU) has raised critical concerns over the Government of Uganda’s proposed Tax Amendment Bills for the 2025/26 financial year, warning that certain changes could deepen inequality and place an unfair burden on vulnerable citizens.

In a joint statement, the Alliance commended government efforts to streamline tax administration and broaden the tax base. Still, it cautioned that some of the proposed reforms, if passed without revision, risk undermining tax fairness and disproportionately affecting low-income earners.

The government, through the Ministry of Finance, tabled a suite of seven Tax Amendment Bills before Parliament on March 27. These include amendments to the Excise Duty, External Trade, Hides and Skins Export Duty, Income Tax, Stamp Duty, VAT, and Tax Procedure Code Acts. TJAU acknowledged the government’s progressiveness in adopting four key CSO proposals from last year, such as the removal of stamp duty on mortgage deeds and VAT exemptions for renewable energy products like biomass pellets.

Grey hair areas in the bills

However, several elements of the new bills have drawn sharp criticism from the coalition. One key flashpoint is the proposed extension of tax exemptions for Bujagali Hydro Power Project until 2032. TJAU argues that the company has already recouped its investment and continues to earn substantial profits.

According to a 2022 parliamentary report, Bujagali Energy Limited had been paid nearly double its investment, raising serious questions about the necessity of continued exemptions. If upheld, the extension could cost Uganda over Shs115 billion annually without guaranteeing reduced electricity tariffs for end users.

The Alliance also pushed back against the anti-fragmentation clause in the VAT Amendment Bill, which seeks to clamp down on importers who divide shipments to avoid taxation. While aimed at curbing cartel behavior, CSOs argue the policy could inadvertently penalize small traders who import goods in smaller consignments due to limited capital. They recommend leveraging existing customs systems like ASYCUDA for more effective and targeted enforcement.

On the subject of supporting entrepreneurs, the Income Tax Bill proposes a three-year tax exemption for citizen-owned startups. Although welcomed as a step toward formalizing small businesses, TJAU argues the grace period is insufficient, noting that most startups only break even after about five years. They also flagged the impracticality of requiring business owners to file detailed information returns using forms that, according to the Alliance, do not yet exist.

Another critical concern centers on the plan to replace Tax Identification Numbers (TINs) with National Identification Numbers (NINs) as the primary means of taxpayer registration. TJAU supports the move in principle but warned that the Uganda Revenue Authority (URA) systems may not yet be equipped to handle the transition, and delays in NIN issuance from the National Identification and Registration Authority (NIRA) could disenfranchise eligible taxpayers.

The Alliance also questioned the rationale behind increased excise duty on fuel, warning that successive tax hikes could raise production costs and the cost of living. While acknowledging the government’s Domestic Revenue Mobilisation Strategy, CSOs emphasized that tax policy must balance fiscal needs with citizens’ economic realities, especially in the wake of COVID-19 recovery.

Positives

Despite their criticisms, TJAU applauded certain positive reforms, including the waiver of interest and penalties for taxpayers who settle their principal tax obligations by June 2026 and amendments to the penalty regime under the Tax Procedures Code that align penalties more proportionally with the value of goods.

Looking ahead, TJAU is urging the Ugandan Parliament to reject regressive proposals and instead champion a tax system grounded in fairness, equity, and transparency. The coalition is also calling for stronger oversight of tax exemptions, particularly those that benefit large corporations without delivering tangible public benefits.

Uganda’s resource envelope for FY2025/26 is projected at Shs71.9 trillion, with a domestic revenue target of Shs36.7 trillion. But TJAU says the pressure to meet this target must not lead to over-reliance on indirect taxes, which they say place a heavier burden on the country’s poor.

The Alliance further called for urgent action to formalize artisanal miners, track gold exports to curb revenue leakages, and recover billions lost to untaxed mineral exports, citing the Auditor General’s December 2024 report that revealed over USD 3 billion worth of gold exported without permits or proper tax assessment.

As the legislative debate on these bills heats up, civil society voices have made clear they will not relent in pushing for reforms that uphold justice, transparency, and inclusive growth in Uganda’s fiscal framework.