Uganda slows down on new taxes as government prepares for 2025-2026 fiscal budget

Uganda has made a strategic decision to halt the introduction of new taxes in the upcoming 2025-2026 financial year. This move, according to the country's State Minister for Finance Henry Musasizi, is a testament to the government's dedication to maximizing the utilization of existing taxes and cracking down on corruption. Wilson Manishimwe, a Policy Analyst at Corporate Image Limited, shared insights on this decision, emphasizing the significance of strengthening tax administration over imposing new tax measures. Manishimwe pointed out that Uganda has one of the lowest taxed GDP ratios in East Africa, standing at 13% of the GDP. With a narrow tax base and register of approximately four million individuals, the focus should be on enhancing tax administration by addressing issues such as corruption, tax leakage, tax avoidance, and expanding the tax register rather than introducing new taxes. By improving tax administration, the government can potentially increase revenue collection without burdening the populace with new tax measures. Recognizing the challenges faced in the previous fiscal year of 2024-2025, which saw a budget deficit and a slowdown in funding from development partners for key projects, Manishimwe highlighted the government's efforts to rationalize various agencies as a means of creating savings within public finance. By reallocating resources and cutting unnecessary expenditures, the government aims to maintain service delivery standards without resorting to new taxes. The emphasis on internal resource management and the utilization of savings garnered through agency rationalization reflect a conscious effort to navigate fiscal challenges without adding to the tax burden. Corruption remains a significant obstacle to Uganda's economic progress, with reports indicating an annual loss of 10 trillion shillings to corrupt practices. By tackling corruption and other revenue leakages, there is a potential for substantial improvements in service delivery and overall economic performance. The focus on enhancing transparency and accountability in financial management is crucial to unlocking the country's economic potential. The execution of development projects has been hindered by issues such as budget absorption and project implementation challenges. While budget absorption remains a persistent concern, prompting the government to reassess its tax strategies for the upcoming financial year, addressing project implementation inefficiencies is essential for optimal resource utilization. The readiness and efficiency of projects directly impact the absorption of allocated funds and the realization of development objectives. Looking ahead to 2025, Manishimwe expressed optimism regarding Uganda's economic prospects. Investments in sectors like oil and gas, continued foreign direct investments, and the recovery of industries such as tourism post-COVID-19 bode well for the country's economic growth. Projections from the Minister of Finance, Bank of Uganda, and the World Bank indicate a positive trajectory, with expected growth rates of 6.5-7% for the year. This optimism is rooted in the resilience of Uganda's economy and its capacity to attract investments and stimulate growth across various sectors. As the government refrains from introducing new taxes and focuses on leveraging existing resources more effectively, Uganda is poised to navigate economic challenges and capitalize on emerging opportunities for sustainable growth in the year ahead.