Uganda’s plan to raise an additional Shs4.8 trillion in new taxes for the 2026/27 financial year is intensifying debate among economists, with growing concern over how the country balances aggressive revenue mobilisation with sustaining economic growth.
Proposals being prepared by the Uganda Revenue Authority and the Ministry of Finance include higher Pay-As-You-Earn rates for top earners, new capital gains taxes on selected assets, increased fuel levies, and expanded excise duties on everyday commodities such as sugar and cooking oil..
These measures are expected to generate about Shs2.3 trillion directly from tax policy changes, with the rest coming from improved enforcement and compliance.
Government officials argue the strategy is necessary as Uganda pivots away from external financing. With budget support projected to fall sharply, policymakers are under pressure to expand domestic revenue to fund infrastructure, oil development and a growing national budget.
However, economists at the Institute of Certified Public Accountants of Uganda (ICPAU) warn that the structure of the proposed taxes could have mixed effects. They point out that Uganda’s tax base remains narrow, with a small number of taxpayers contributing the bulk of revenues, while a large informal sector remains largely untaxed. This raises concerns that increasing rates on already compliant taxpayers may deepen inequality and discourage formal sector expansion.
There is also a broader macroeconomic risk. Data shows that consumption taxes and trade-related revenues have recently underperformed targets, reflecting weak demand in sectors such as construction, trade and hospitality. Economists argue that raising excise duties and fuel taxes in such an environment could further suppress consumption and raise the cost of doing business.
At the same time, experts support elements of the reform, particularly adjustments that raise the tax-free income threshold.
According to proposals by the Institute of Certified Public Accountants of Uganda, increasing disposable income for lower earners can stimulate consumption, savings and investment, ultimately widening the tax base over time. This reflects a growing consensus that tax policy should not only focus on extraction, but also on enabling economic activity.
Public sentiment adds another layer of complexity. Surveys show that while most Ugandans accept taxation as necessary, many remain concerned about fairness, corruption and how tax revenues are used. This trust deficit could undermine compliance if new measures are perceived as overly burdensome.
Ultimately, Uganda’s tax push highlights a central economic dilemma: the need to finance an ambitious development agenda while preserving private sector momentum.
Economists say the success of the reforms will depend less on how much is collected, and more on whether the tax system can broaden participation, improve efficiency and support long-term growth.