Uganda: Traders and Manufacturers Urge Government to Reconsider Proposed Tax Increases for 2026

The Kampala City Traders Association (KACITA) has raised alarms regarding proposed tax amendments for the 2026/27 financial year, warning that these changes could escalate the cost of doing business, strain cash flow, and drive more enterprises into the informal sector if not revised. This statement was made during a presentation to the Finance Committee, led by Deputy Chairperson Moses Aleper, on April 8, 2026.

KACITA Chairperson Isa Sekito expressed appreciation for the government’s ongoing efforts to enhance domestic revenue mobilization. However, he emphasized that the timing of these proposals poses significant challenges for businesses, particularly micro, small, and medium enterprises, which are still recovering from recent economic shocks. Sekito stated, “The proposed amendments come at a time when businesses are still recovering from multiple economic shocks.”

Concerns Over Income Tax Amendments

KACITA, representing over three million traders across various sectors, noted that while the tax proposals may be well-intended, they risk inadvertently increasing the cost of doing business and reducing the competitiveness of local enterprises. Sekito specifically highlighted concerns regarding the proposed Income Tax (Amendment) Bill 2026, which includes new withholding taxes and a 0.5% Alternative Minimum Tax (AMT) on businesses reporting losses for seven consecutive years. He remarked, “The 0.5 percent Alternative Minimum Tax penalizes businesses that are genuinely making losses due to economic challenges, discouraging investment and business recovery.”

Additionally, Sekito pointed out a proposed 10% withholding tax on telecom agents, which he argued would adversely affect low-margin operators. “The 10 percent withholding tax on commissions directly reduces earnings of agents and distributors, many of whom operate on thin margins,” he added.

VAT Registration Threshold and Compliance Issues

Regarding the Value Added Tax (VAT) Amendment Bill 2026, KACITA criticized the proposed increase in the VAT registration threshold from Shs150 million to Shs250 million, deeming it insufficient. Sekito stated, “The 18 percent rate increases the final price of goods and services, reduces affordability and domestic consumption, and makes Ugandan businesses less competitive compared to regional peers.” He warned that high VAT rates could discourage compliance, leading many businesses to remain informal. KACITA proposed raising the threshold to at least Shs1 billion and reducing VAT from 18% to 16% to better align with regional markets.

Stamp Duty and Excise Duty Concerns

Turning to the Stamp Duty (Amendment) Bill 2026, Sekito cautioned against doubling stamp duty on land transactions from 1.5% to 3%. He argued that this change would significantly increase the cost of acquiring business premises and discourage investment. He also opposed new stamp duties on vehicle registration and transfers, noting that these would raise transport and logistics costs, ultimately affecting consumers.

KACITA expressed strong reservations about the Excise Duty (Amendment) Bill 2026, warning that increased taxes on fuel, sugar, cooking oil, and cement would lead to inflation. Sekito stated, “Higher fuel prices will raise transportation and distribution costs and affect supply chains across all sectors. Businesses will pass these costs to consumers.” Furthermore, KACITA opposed proposals in the External Trade (Amendment) Bill 2026 to increase the surcharge on used clothing from 15% to 30%, which Sekito described as a “100% increase in surcharge burden, highly unsustainable for traders,” warning of potential job losses and reduced compliance.

Manufacturers Call for Tax Reforms

In a related development, the Uganda Manufacturers Association (UMA) has called for amendments to the Tax Appeals Tribunal Act, specifically to review the requirement for taxpayers to pay 30% of assessed tax before filing an appeal. UMA Chairperson Richard Sekalala stated that this provision is stifling business operations and denying taxpayers access to justice. Member John Jet Tusabe noted that the requirement applies universally, regardless of the nature of the dispute or the taxpayer’s financial situation.

On broader tax reforms, UMA proposed amendments to the Income Tax Amendment Bill 2026, urging the government to eliminate or reduce the proposed 40% income tax rate to 35%. Tusabe argued that the current rate undermines Uganda’s competitiveness and investment climate, stating, “Workers are already over-taxed, and attracting and retaining talent in Uganda is increasingly becoming difficult partly due to the unfavorable PAYE tax rates.” The manufacturers also proposed increasing the Pay As You Earn (PAYE) threshold from Shs235,000 to Shs500,000 per month, citing the rising cost of living and warning that excessive taxation could undermine compliance and affect revenue collection.

Opposition to New Excise Duties

The manufacturers voiced objections to new and revised excise duties on selected products, including a 3% tax per liter or kilogram of locally produced paints and a 10% tax on imported paints, as well as an increase in tax on cement from Shs500 to Shs1,000 per 50 kg. However, UMA welcomed the proposal to extend the tax holiday for the Bujagali Hydro Power Project to seven years, pledging to provide further evidence to justify the continued tax exemption.

Bungokho Central Representative Hon. Richard Wanda cited a case where the Uganda Revenue Authority assessed a taxpayer at Shs33 billion, but the tribunal later determined the actual liability at Shs8 billion. He warned that requiring such a taxpayer to first pay 30% of the initial assessment could cripple businesses.

Source: www.zawya.com

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Published on 2026-04-15 11:47:00 • By the Editorial Desk