Experts, businesses welcome Uganda’s 2026/27 tax proposals but warn of pitfalls

KAMPALA — The business community, economists, and civil society have largely welcomed the Government’s proposed tax measures for the 2026/27 financial year, but some say certain provisions could have unintended consequences.

According to the budget proposals tabled before Parliament last Wednesday by the Ministry of Finance, Planning and Economic Development, Uganda’s total resource envelope is projected at UGX 84.2 trillion, with domestic revenues expected to fund 52.8 percent of the budget. This means Ugandans will contribute UGX 44.4 trillion, up from UGX 37.2 trillion projected for the current financial year.

The government’s proposals, presented through eight tax bills, aim to boost domestic revenue amid dwindling external support and a growing public debt, now standing at UGX 126 trillion. Key bills include the Income Tax (Amendment) Bill, 2026, the Excise Duty (Amendment) Bill, 2026, the Value Added Tax (Amendment) Bill, 2026, and the Stamp Duty (Amendment) Bill, 2026, among others.

The Tax Justice Network Uganda praised measures aimed at increasing domestic revenue but criticised ongoing tax exemptions for categories like Members of Parliament and the judiciary, calling for equitable taxation across all sectors.

Jane Nalunga, Executive Director of SEATINI Uganda, urged the government to focus on boosting economic growth and domestic revenue mobilisation, stressing that available resources must be used prudently amid global economic uncertainties.

Several civil society groups welcomed increases in excise duty rates on products such as alcohol, sugar, and cooking oils. The excise duty on un-denatured spirits under 80 percent alcohol by volume is set to rise from UGX 1,700 to UGX 3,500 per litre. Experts say such measures can curb overconsumption while raising revenue.

Talibita Moses, lawyer at Uganda National Health Consumers’ Organisation, praised the sugar and cooking oil levies but stressed that policies should protect small-scale food producers from being outcompeted by industrial manufacturers.

Conversely, Moureen Wagubi, Executive Director of the Institute for Social Transformation, cautioned that abrupt hikes on essentials could harm MSMEs and disproportionately affect women, advocating a phased increase of UGX 300 per kilo over three years.

The Ministry proposed raising Stamp Duty on land transfers from 1.5 percent to 3 percent, sparking concerns that the change could hinder land acquisition, particularly for vulnerable groups like orphans. Vehicle registration taxes are also set to rise, with motorcycles charged UGX 50,000, small vehicles UGX 100,000, and commercial vehicles UGX 200,000.

Imelda Namugga, economist and board member of the Civil Society Budget Advocacy Group, suggested commercial vehicle levies be aligned with size and environmental impact, proposing UGX 400,000 for heavy-duty vehicles, while noting that higher land transfer taxes could make land ownership inaccessible for the poor.

The Pay-as-You-Earn threshold will increase from UGX 235,000 to UGX 335,000 per month, a move aimed at boosting disposable income for lower earners. Experts, however, argue that the threshold should be UGX 600,000, noting that incomes below UGX 550,000 do not meet basic needs.

The Income Tax (Amendment) Bill also proposes extending the tax holiday for Bujagali Hydropower Project to 2032. While the government argues the extension helps maintain affordable electricity, civil society experts warn that such exemptions have historically failed to lower end-user power costs and could cost Ugandans UGX 800 billion.

Taxes on plastics and second-hand clothing are welcomed as environmental safeguards. Excise duty on worn clothes will rise to 30 percent to curb importation and reduce waste, though traders call for quality-based categorisation to protect legitimate business.

While stakeholders agree that the proposals could strengthen revenue collection and promote public health, they caution that some measures could strain MSMEs, affect affordability, and reduce equity. Experts urge the government to balance fiscal goals with social and economic realities, advocating phased implementation for sensitive items like sugar, cooking oil, and land transfers.