Uganda tax exemption reforms are now a priority as the Uganda Revenue Authority (URA) struggles to meet revenue targets. These reforms have become more critical amid ongoing shortfalls in collections and a growing public debt burden.
In FY2023/24, URA collected only Shs27.8 trillion, falling short of its Shs29.9 trillion target. As FY2024/25 nears its end, URA still needs to raise Shs4 trillion to meet the Shs32 trillion goal. URA Commissioner General John Musinguzi expressed hope earlier this month, saying the goal remains within reach. However, tax experts like Aloysius Kitengo from the Tax Justice Alliance Uganda believe hitting the target would require extraordinary conditions. He cited persistent revenue leakages, including illicit financial flows and unnecessary tax incentives, as major hurdles.
These shortfalls push the government to borrow more, adding pressure to Uganda’s already high public debt, now estimated at Shs116 trillion. Yet, despite these difficulties, authorities have increased the revenue target for FY2025/26 to Shs37 trillion.
Analysts urge the government to rationalize tax expenditures. Many tax incentives reward investors who don’t create jobs, transfer skills, or pay fair wages—despite receiving significant benefits. Such one-sided deals do little to strengthen the local economy.
If reforms take hold, officials should link exemptions to performance. Metrics such as local job creation, skill transfers, and compliance with wage standards should determine eligibility. Authorities must conduct midterm reviews and cancel benefits when investors fail to meet agreed targets.
Tax experts recommend limiting exemptions to entire sectors instead of individuals. This approach reduces market distortion and ensures fair treatment across industries. They also argue that statutory exemptions, outlined by law, offer greater transparency than discretionary executive grants.
The Auditor General has criticized Uganda’s lack of clear rules on tax incentives. His reports show that Uganda does not evaluate the impact of existing exemptions. As a result, many exemptions remain in place without evidence of contributing to economic growth. He recommends developing clear, public guidelines to govern and evaluate all tax exemptions.
Civil society organizations such as SEATINI, OXFAM, and CSBAG support these reforms. They continue to call for transparency, fairness, and accountability in the tax exemption process.
Moses Talibita, a lawyer with the Uganda National Health Consumers Organisation, explains the broader dilemma. “Uganda offers tax holidays and waivers to attract investors, but the long-term cost often outweighs the short-term benefits,” he says. “When investors benefit for over a decade without delivering results, the economy suffers.”
He acknowledges that incentives aim to drive industrialization but believes they haven’t improved job quality. “Most Ugandans still work informal, low-wage jobs. They don’t contribute to the National Social Security Fund, leaving them vulnerable during retirement,” he added.
To make Uganda tax exemption reforms effective, the government must ensure only productive businesses benefit. Entities must create decent jobs, pay fair wages, and participate in the formal economy. Authorities must conduct regular reviews and cut off incentives that don’t deliver clear economic gains.
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