Uganda's Overhauled Tax Laws Aim to Boost Revenue Collection

Strategic Insights -

Uganda's Finance Minister Matia Kasaija has announced a revised budget for the financial year 2025/2026, with a focus on plugging revenue leaks and boosting domestic revenue collections. The government has allocated $20.1 billion to finance various sectors, with the Uganda Revenue Authority (URA) tasked with raising almost $9.5 billion (Ush34.051 trillion) to cover 47% of the total budget requirements. To achieve this target, MPs have amended various tax laws, including the Income Tax, VAT, and Excise Duty, to generate an additional $675.8 million. The government has also introduced a 1% customs value fee on taxable items and a $10 per tonne export levy on wheat bran, cotton cake, and maize bran to discourage the export of raw materials needed for the livestock feed industry.

Key Takeaways:

  • The revised budget allocates $20.1 billion to finance various sectors, with URA tasked with raising $9.5 billion (47% of the total budget requirements).
  • MPs have amended various tax laws, including Income Tax, VAT, and Excise Duty, to generate an additional $675.8 million.
  • The government has introduced a 1% customs value fee on taxable items, which is expected to increase the cost of importation of certain goods.
  • A $10 per tonne export levy has been introduced on wheat bran, cotton cake, and maize bran to discourage the export of raw materials needed for the livestock feed industry.
  • Taxpayers are expected to review their consignments regularly to assess whether they meet the VAT registration threshold of Ush150 million ($41,661).
  • The government has introduced an anti-avoidance rule for VAT importers to rope in importers who have been avoiding shipping goods valued at Ush150 million.
  • Chadema shadow finance minister Ibrahim Ssemujju Nganda has described the revenue collection targets set by the finance ministry as unrealistic, citing the country's narrow tax base, weak enforcement, high informality, and low taxpayer compliance.
  • The government has introduced several tax measures, including:

+ Excise duty on cigarettes: Ush65,000 per 1,000 sticks

+ Import declaration fee: 1% of the customs value

+ Export levy: $10 per metric ton of wheat bran, cotton cake, and maize bran

+ Import duty on imported fabrics: $2 per kilogram or 35%

+ Five percent export levy on hides and skins

+ Gaming and Betting Centralised Payments Gateway system

+ Use of National Identification Number as a Tax Identification Number

+ Winners: Three-year income tax holiday for startup businesses established by Ugandans after July 1, 2025

+ Tax exemption for Bujagali hydropower up to 30th June 2026

+ Removal of excise duty rate of 30% or Ush950 per litre on beer manufactured from barley grown and malted in Uganda

+ Removal of stamp duty of 0.5% or Ush15,000 on mortgages and agreements

+ Exemption from capital gains tax on transactions

+ Zero tax rate on aircraft supplies

Statistics:

  • The revised budget allocates $20.1 billion to finance various sectors.
  • URA is tasked with raising $9.5 billion (47% of the total budget requirements).
  • The government expects to collect $903.1 million (Ush3.246 trillion) from fees and local government collections.
  • MPs have amended various tax laws to generate an additional $675.8 million.
  • A 1% customs value fee on taxable items is expected to increase the cost of importation of certain goods.
  • A $10 per tonne export levy on wheat bran, cotton cake, and maize bran is aimed at discouraging the export of raw materials needed for the livestock feed industry.
  • Uganda lost $19 million in revenue through gold exports valued at $3.014 billion (approximately Ush11 trillion) in the 2023/24 financial year.

Sources:

  • Uganda's Budget for the Financial Year 2025/2026
  • Uganda Revenue Authority (URA)
  • PwC tax experts
  • Chadema shadow finance minister Ibrahim Ssemujju Nganda
  • Auditor General's report to Parliament in 2023/24
  • Journal of Business and Economics