Uganda’s business community has intensified pressure on government to halt proposed tax increases in 2026, warning that the measures could deepen economic strain and slow recovery across key sectors.
During a presentation to Parliament’s Finance Committee on April 8, 2026, leaders from the Kampala City Traders Association and the Uganda Manufacturers Association argued that the timing of the proposed amendments threatens fragile business growth.
KACITA Chairperson Isa Sekito stressed that many enterprises, especially micro, small, and medium-sized businesses, continue to recover from recent economic shocks. He explained that while government efforts to boost domestic revenue remain important, new taxes could disrupt business stability and cash flow.
He warned that several provisions in the Income Tax (Amendment) Bill 2026 could discourage investment. In particular, he pointed to the proposed 0.5 percent Alternative Minimum Tax targeting companies reporting losses for seven consecutive years. According to Sekito, such a tax penalizes struggling businesses rather than supporting recovery.
Additionally, he raised concerns about a planned 10 percent withholding tax on telecom agents. He explained that many operators already work with thin profit margins, so reduced earnings could push them out of business.
The association also criticized the Value Added Tax proposals. Although government suggested increasing the VAT registration threshold from Shs150 million to Shs250 million, KACITA argued the adjustment remains too low. Sekito emphasized that the current 18 percent VAT rate raises prices, limits consumer spending, and weakens Uganda’s competitiveness in regional markets.
He added that high VAT rates often discourage compliance, forcing some businesses into the informal sector. To address this, KACITA proposed raising the threshold to at least Shs1 billion while reducing VAT to 16 percent.
Concerns extended further to the Stamp Duty (Amendment) Bill 2026. Sekito noted that doubling stamp duty on land transactions from 1.5 percent to 3 percent would significantly increase the cost of acquiring business premises. He also warned that additional charges on vehicle registration and transfers would drive up logistics costs, which businesses would eventually pass on to consumers.
Meanwhile, rising excise duties triggered even stronger reactions. KACITA cautioned that higher taxes on fuel, sugar, cooking oil, and cement could accelerate inflation and disrupt supply chains. Sekito explained that increased fuel costs alone would affect transportation and distribution across all sectors, pushing prices higher nationwide.
The group also opposed proposed changes under the External Trade (Amendment) Bill 2026, particularly the plan to double the surcharge on used clothing imports from 15 percent to 30 percent. Sekito described the move as unsustainable, warning that it could lead to job losses in a sector that contributes approximately Shs280 billion annually.
At the same hearing, the Uganda Manufacturers Association raised separate concerns about tax administration and fairness. Led by Chairperson Richard Sekalala, the group urged lawmakers to amend the Tax Appeals Tribunal Act.
Manufacturers criticized the requirement for taxpayers to pay 30 percent of assessed tax before filing an appeal. UMA member John Jet Tusabe argued that the rule restricts access to justice and burdens businesses regardless of their financial capacity or the nature of disputes.
Furthermore, UMA proposed reducing the top income tax rate from 40 percent to 35 percent, stating that high taxation undermines Uganda’s attractiveness to investors. Tusabe explained that current Pay As You Earn (PAYE) rates already strain workers and complicate talent retention.
To ease pressure on employees, manufacturers recommended increasing the PAYE threshold from Shs235,000 to Shs500,000 per month. They warned that excessive taxation could reduce compliance and ultimately lower government revenue.
The association also objected to new excise duties on locally produced and imported paints, as well as higher taxes on cement. However, manufacturers welcomed the proposed extension of the tax holiday for the Bujagali Hydro Power Project, signaling support for policies that encourage long-term investment.
Lawmakers acknowledged the concerns during the session. Richard Wanda highlighted cases where initial tax assessments far exceeded final liabilities, warning that upfront payments could cripple businesses before disputes are resolved.
As debates continue, Uganda’s private sector insists that balanced tax reforms remain essential for sustainable growth. Business leaders argue that without adjustments, the proposed policies risk increasing inflation, reducing competitiveness, and slowing economic recovery across the country.
