Excise duty shortfalls on sugar and airtime hit Uganda’s indirect tax collections

KAMPALA, Uganda — A decline in tax revenue from everyday consumer goods, including sugar and mobile phone airtime, caused Uganda’s indirect domestic taxes to fall short of government targets in October.

The Ministry of Finance, Planning and Economic Development’s latest report shows that indirect domestic taxes posted a deficit of 25.64 billion shillings for the month. Total collections amounted to 659.83 billion shillings against a projected target of 685.47 billion shillings.

The Ministry attributed the decline to lower-than-expected collections of excise duty and value-added tax (VAT) on a specific range of goods. Beyond sugar and airtime, the shortfall was driven by lower tax returns from spirits, soft drinks and electricity.

Revenue and spending gaps

The dip in consumption-based taxes was mirrored by struggles in direct domestic tax collections. The Uganda Revenue Authority collected 758.58 billion shillings in direct taxes, achieving only 89.4 percent of its 848.32 billion shilling target. Officials pointed to lower returns from pay-as-you-earn (PAYE), corporate tax and withholding tax as the primary causes for the gap.

While revenue missed the mark, government spending surged. Total expenditure for October reached 4.61 trillion shillings, exceeding the planned budget of 3.81 trillion shillings by 802.74 billion shillings. This increase was fueled by higher spending on goods, services and grants to local governments.

Despite the monthly fluctuations, the cumulative domestic revenue for the financial year through November stands at 12.77 trillion shillings, representing a 95 percent performance rate against the 13.44 trillion shilling target.

Credit market remains active

While the tax office faced headwinds, the credit market showed steady activity. Financial institutions approved 1.93 trillion shillings in loans during October. Although this was a decrease from the 2.12 trillion shillings approved in September, the loan approval rate rose slightly to 76.7 percent.

Personal and household loans dominated the credit market, accounting for 24.7 percent of all approvals at 477.5 billion shillings. Other major recipients of credit included:

• Trade: 312.8 billion shillings
• Building and real estate: 247.9 billion shillings
• Social services: 229.7 billion shillings
• Agriculture: 227 billion shillings
• Manufacturing: 217 billion shillings

The total stock of outstanding private sector loans reached 24.35 trillion shillings by the end of October, a modest increase of 0.3 percent from the previous month.