By KT Reporter
Civil Society Organisations (CSOs) in Uganda have urged the government to reduce the duration of tax holidays for companies to curb what they describe as unnecessary tax losses. They note that the government continues to grant significant incentives to foreign investors, often without proper cost-benefit analysis, negatively affecting domestic revenue mobilization (DRM) efforts.
The Tax Justice Alliance Uganda (TJAU), a coalition of about 60 national and sub-national organisations, recommends that tax holidays should not exceed three years. Currently, some exemptions last up to ten years and can be renewed depending on negotiations with the government. “The loss of revenue due to tax expenditures is overwhelming. For the financial year 2022/23, foregone revenue due to tax expenditures was estimated at UGX 2,972 billion, or 12.5 percent of the UGX 23,733 billion collected,” they said.
In August 2025, the Ministry of Finance, Planning, and Economic Development (MoFPED) requested TJAU to submit CSO tax proposals for the 2026/27 financial year for review. Uganda’s 2026/27 budget proposals will focus on the tenfold growth strategy, with projected government spending reduced by 4.1 percent to UGX 69.4 trillion. “These tax expenditures undermine fairness and erode the domestic tax base.
Section 21(1)(ae) of the Income Tax Act provides generous holidays to foreign multinationals, while smaller local firms face stricter requirements under Section 21(1)(za),” the CSOs said. They propose harmonizing exemptions and prioritizing incentives that directly benefit local economic growth. Instead of tax holidays, they recommend performance-based tax credits for investors who generate employment, add value, and contribute to national development priorities under NDP IV.
TJAU’s study showed that seven out of ten companies benefiting from tax holidays or exemptions are foreign-owned, with only 30 percent local; of these, two-thirds benefit due to “connections.” KACITA noted, “This is unreasonable as large, profitable businesses are expected to pay taxes. These arrangements increase the burden on a few taxpayers and reduce government revenue.”
The CSOs also called for revisiting “protectionist” tax policies, including high import duties intended to build local capacity, and recommended prioritizing trade-critical roads such as Malaba-Kampala, Kampala-Gulu-South Sudan, Kampala-Mutukula, and Kampala-Katuna highways. Regarding rental income and property rates, the CSOs propose integrating collection through URA or local governments, and allowing taxpayers to pay in instalments to ease the burden.
In the digital economy, they urge clarifying withholding tax responsibilities for e-commerce and recommend reforms modeled on India and Nigeria to close loopholes. Uganda’s tax-to-GDP ratio remains around 14 percent, and despite over 5 million registered taxpayers, only about 1 million pay taxes. The CSOs propose taxing MPs’ emoluments, removing certain exemptions, and widening the base.
They also recommend reintroducing a 0.5 percent withholding tax on agricultural supplies above UGX 10 million, mainly applied to middlemen. In transport services, they call for revitalizing the Advance Tax for passenger transport to increase revenue and strengthen the social contract between taxpayers and the government.
For Pay-As-You-Earn (PAYE), they propose revising the threshold from UGX 2,820,000 to UGX 6,000,000 per year, with an additional 5 percent increase for those earning above UGX 144,000,000. The CSOs emphasize that these reforms should ensure fairness, broaden the tax base, and improve revenue collection efficiency while supporting local economic growth.
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