Ugandan manufacturers say tax dispute delays stalling industrial growth

Ugandan manufacturers have raised the alarm over what they call a “systemic bottleneck” in the country’s tax dispute resolution framework, warning that billions of shillings are being tied up in prolonged legal and administrative wrangles—crippling industrial growth and undermining economic momentum ahead of Uganda’s 2040 industrialization targets.

Through the Uganda Manufacturers Association (UMA), industry leaders are calling for urgent reforms to the current tax appeals system, particularly the controversial rule that requires taxpayers to first deposit 30 percent of the contested tax before their appeal is heard.

“This upfront payment requirement places enormous financial strain on businesses—regardless of whether the tax assessment is later found to be valid,” the UMA Economic Business Committee said in a statement following a high-level meeting of its members. “If the assessment is wrong, the business suffers. If it is correct, the funds still remain idle, delaying government programs.”

More than UGX 330 billion is currently locked up in tax-related disputes, UMA estimates, at a time when the country is grappling with liquidity challenges and slow post-pandemic recovery. Manufacturers argue that revising the 30 percent rule and fast-tracking tax dispute resolutions could unlock critical working capital needed for expansion, job creation, and innovation.

The manufacturing sector currently contributes between 16 and 17 percent to Uganda’s GDP, directly employing over 1.3 million people and indirectly supporting over 4.5 million—figures that underscore the sector’s central role in national development.

But tax gridlocks are just one of several constraints. The UMA also points to more than UGX 3 trillion in unpaid government arrears for goods and services delivered, as well as the UGX 7 trillion frozen in land-related court disputes nationwide—both of which restrict industrial investment and reduce operational liquidity.

“These are not isolated issues,” a UMA executive said. “They speak to a wider need for public-private dialogue to improve policy certainty, restore trust, and position Uganda as a competitive industrial hub in East Africa.”

The call echoes recent concerns by regional business leaders who argue that delayed payments and inefficient dispute resolution mechanisms not only discourage investment but also threaten the promise of inclusive economic transformation.

If Uganda is to meet its manufacturing ambitions and maximize its demographic dividend, analysts say systemic reforms—not just isolated policy tweaks—will be required to remove the friction from tax, procurement, and legal systems that affect the country’s productive base.