Overview:
While tax revenue from digital firms has jumped sixfold, the Auditor General says a lack of independent verification means companies are under-reporting their true earnings in Uganda.
Uganda has successfully brought 82 global tech giants into its tax net, but the country’s spending watchdog believes the 29.5 billion shillings collected so far is only a fraction of what should be reaching the national treasury.
The Auditor General’s report for the year ended Dec. 31, 2025, reveals that while tax revenue from non-resident digital service providers is now nearly six times higher than the initial 5 billion shilling projection, millions of dollars are likely being lost to under-reporting and a lack of technical oversight.
When the government first amended the VAT Act in 2021, the move was met with skepticism. The law required foreign entities providing electronic services—including streaming platforms, cloud providers and online advertisers—to charge 18 percent VAT to Ugandan consumers and remit the funds quarterly. While the Uganda Revenue Authority initially set a modest target, the rapid expansion of the digital economy has outpaced expectations, bringing in 29.5 billion shillings in the 2024/25 financial year.
However, the Auditor General argues that these figures do not reflect the true scale of the market. The core of the problem lies in how the tax is collected. Currently, the tax body has no independent mechanism to verify the accuracy or completeness of the returns submitted by tech giants. Unlike domestic businesses, whose transactions are visible through local banking data and electronic filing systems, payments for digital services typically flow through offshore platforms and international card networks.
This lack of visibility creates a significant revenue leak. The report points out that while major names such as Amazon, Apple, Meta, and Google have registered, the list of 82 providers is far from exhaustive. Many other companies providing high-volume services in online betting, music streaming and digital education continue to operate in Uganda without contributing to the tax base.
The Auditor General noted that sectors like cloud computing and software subscriptions have thin oversight despite their massive transaction volumes. Because the tax authority relies almost entirely on self-declared returns, it cannot confidently state how large the compliance gap actually is.
To address these vulnerabilities, the government is looking toward a technological solution. The central bank is in the process of procuring a national payment gateway system. This infrastructure is intended to give the tax authority timely access to transaction data involving non-resident providers, moving away from a system of trust to one of transparency.
This push for digital revenue is vital for Uganda’s broader economic goals. The country’s tax-to-GDP ratio currently stands at 13.4 percent, falling short of the 15 percent benchmark recommended for developing nations. Capturing the full value of the service sector, which is one of the largest contributors to the economy, is seen as the only way to bridge this gap.
In a separate economic development, the Bank of Uganda reported a significant surge in gold earnings. Revenue from the precious metal rose by 28.85 percent in December, jumping to 823.68 million dollars from 639.26 million dollars the previous month. The increase reflects a combination of higher global gold prices and renewed investor confidence in the sector.