The government is projecting to generate at least sh538.6 billion in additional revenue for the 2025/2026 financial year from a raft of new tax proposals.
These are targeting excise duty adjustments, import declarations, export levies, and tax administration reforms.
These proposals were presented by the Minister of State for Finance (General Duties), Henry Musasizi, to the Parliamentary Committee on Finance, chaired by Amos Kankunda, the Member of Parliament for Rwampara County, earlier this month.
The minister also revealed that separate administrative measures by the Uganda Revenue Authority (URA) will generate an estimated sh1.885 trillion, bringing the total additional revenue from both policy and administrative measures to over sh2.4 trillion in the next fiscal year.
“We project to generate Sh538.6 billion in FY25/26 from the tax policy proposals contained in the bills. In addition, we will generate Sh1,885 billion from URA administrative measures,” Musasizi said.
The government’s package includes seven amendment bills: The Income Tax (Amendment) (No.2) Bill, the Excise Duty (Amendment) (No.2) Bill, the Value Added Tax (Amendment) Bill, the Tax Procedures Code (Amendment) Bill, the Stamp Duty (Amendment) Bill, the Hides and Skins (Export Duty) (Amendment) Bill, and the External Trade (Amendment) Bill, all of which were laid on the floor of Parliament on March 27, 2025.
These new tax proposals come at a time when Uganda is grappling with increasing domestic borrowing pressures and a need to finance critical infrastructure projects without relying heavily on external debt. The new tax measures are thus part of a broader strategy to enhance domestic revenue mobilization (DRM), a key priority under the medium-term fiscal framework.
Beer and Cigarette Excise Duty increase to raise sh19.4 billion
A critical part of the tax proposals is a modest increase in excise duty on beer and cigarettes, anticipated to yield sh19.4 billion. Though seemingly minor in the context of the broader budget, the impact of these specific tax adjustments touches on both public finance and public health policy.
The minister explained that the excise duty on cigarettes has not been revised since the 2017/18 financial year, yet cumulative inflation over the period has risen by 28.8%. The unchanged rate has thus created a real revenue erosion effect for the government, while simultaneously maintaining cigarette affordability at odds with global anti-tobacco campaigns.
“We have also been under pressure from the health sector to increase the excise rates on tobacco products to much higher levels to reduce the health-related risks,” Musasizi stated. “Therefore, increasing the duty will not only align with inflationary trends but also serve as a public health objective by discouraging tobacco consumption, which imposes significant health costs on the economy.”
Similarly, the excise duty on beer manufactured from local raw materials is set to increase from Sh650 to Sh900 per litre. The increase aims to maintain fiscal equity and adjust for inflationary trends in the beverage industry, ensuring that government revenue keeps pace with economic conditions.
Import Declaration Fee: Sh79 Billion for the Standard Gauge Railway
A significant and potentially transformative policy is the introduction of an import declaration fee on goods imported for home use, expected to generate sh79 billion, earmarked specifically for the construction of the Standard Gauge Railway (SGR).
“This measure seeks to raise revenue for infrastructure investment, particularly for the SGR, which is critical for Uganda’s trade competitiveness,” Musasizi told MPs.
The move aligns Uganda with regional partners in the East African Community (EAC), such as Kenya, which applies a 2% CIF charge, and Tanzania, which imposes a 0.6% Customs Processing Fee. From an economic policy standpoint, the fee not only supports strategic capital investment but also indirectly promotes import substitution, which could have long-term implications for local industrial growth.
“It will render imports more expensive, hence promoting import substitution and supporting local industries,” the minister explained.
Tax Relief to Encourage Voluntary Compliance to yield sh200 billion
In a bid to promote tax compliance and reduce the enforcement burden on URA, the government has proposed a waiver of interest and penalties for taxpayers who voluntarily settle outstanding principal tax liabilities. The measure is projected to yield sh200 billion.
“We propose extending the waiver of any interest and penalties outstanding as of 30 June 2024, provided that the taxpayer pays the principal tax by 30 June 2026,” Musasizi said.
The waiver is part of a tax amnesty strategy that encourages businesses and individuals to regularize their tax affairs, particularly in a post-COVID recovery context.
“Over the last two years, Parliament has supported this proposal, which has led to increased tax revenue collection, reduced burden on URA’s enforcement mechanism, and provided relief to businesses,” he noted.
Reforming IFRIS penalties for fairer tax enforcement
The government implemented the Electronic Fiscal Receipting and Invoicing System (IFRIS) to enhance tax transparency. However, the flat penalty of sh6 million per invoice for non-compliance has sparked public outcry, especially among small and medium-sized enterprises.
To address these concerns, the ministry is proposing a reform of the IFRIS penalty regime where the penalty will instead be twice the tax owed by the taxpayer, a move that introduces proportionality into the tax enforcement system.
“Concerns have been raised regarding the high penalties… which disproportionately burden taxpayers. The amendment aims to resolve this,” Musasizi acknowledged.
Export Levy to incentivize agro-industrialization
Another notable change is the establishment of an export levy on wheat bran, cotton cake, and maize bran, raw agricultural commodities that are currently exported and re-imported as processed goods.
“We propose this to encourage local value addition, especially in the production of animal feeds,” Musasizi said.
By promoting domestic agro-industrial processing, the government hopes to reduce trade deficit in processed foods, create rural jobs, and stimulate the agriculture-based industrial economy, which is central to the National Development Plan (NDP III).
Startup Tax Exemption to nurture local entrepreneurship
The proposal for a three-year income tax holiday for startups created by Ugandan citizens after 1 July 2025 is a bold measure targeting the survival and growth of early-stage businesses.
“Many startups struggle with high startup costs. This incentive is aimed at fostering innovation, encouraging formalization, and promoting job creation,” Musasizi said.
The policy is expected to help enhance business survival rates, improve access to capital, and encourage youth entrepreneurship, which remains one of top development challenges.
Stamp duty removal to ease access to credit
In a move aimed at improving the ease of doing business, the government is proposing to remove stamp duty on agreements, memoranda of understanding, and mortgage deeds.
“This seeks to reduce the cost of debt for businesses and individuals, promote access to credit, and reduce bureaucratic and financial barriers,” the minister said.
With financial institutions often citing transaction costs as a barrier to small borrowers, this measure is seen as a catalyst for credit expansion, especially for micro and small enterprises (MSEs).
Tech-driven tax compliance and URA recruitment
The government is also betting big on technology-driven compliance solutions such as electronic receipts, digital tax stamps, rental tax systems, and electronic cargo tracking.
Additionally, the URA is expected to recruit 1,260 new staff to strengthen taxpayer engagement, particularly with high-net-worth individuals and sectors like construction, logistics, and professional services.
“We are stepping up efforts to eradicate corruption in revenue collection. Furthermore, we are recruiting to boost our numbers and reach more taxpayers,” Musasizi emphasized.
Parliament’s response
Finance Committee Chairperson Amos Kankunda confirmed that the bills were still in the early stages of parliamentary review.
“This was to formally introduce them to us so we will have in-depth discussions and generate a report,” Kankunda said.