Uganda’s traders, under KACITA, are urging government to revise proposed tax amendments, warning that higher taxes could slow economic recovery, increase business costs, and push more enterprises into informality.
Uganda’s business community, led by Kampala City Traders Association (KACITA), has raised concerns over the proposed Tax Amendment Bills for the Financial Year 2026/2027, warning that several measures could slow economic recovery and increase the cost of doing business.
KACITA Chairman Isa Sekitto called on government to urgently reconsider key proposals, including reducing Value Added Tax (VAT) from 18% to 16%, increasing the VAT threshold to Shs 1 billion, and scrapping high import duties on textiles that exceed regional standards.
“We are not opposed to taxation, but it must be fair and growth-oriented. Reducing VAT to 16% and raising the threshold to Shs 1 billion will ease pressure on businesses and improve competitiveness,” Sekitto said.
“The current import duty structure on textiles is too high compared to the region. It is hurting compliant traders and encouraging smuggling.”
The remarks were made during a press conference in Kampala ahead of KACITA’s scheduled appearance before Parliament’s Finance Committee chaired by Amon Kankunda.
In its submission, KACITA acknowledged government efforts to strengthen domestic revenue mobilisation and improve tax administration. Official projections indicate that Shs 1,741 billion is expected from new tax policy measures, alongside Shs 3,164 billion from administrative interventions by the Uganda Revenue Authority (URA), contributing to a projected revenue effort of 15.5% of GDP.
However, the association cautioned that these proposals come at a time when businesses are still recovering from high operational costs, limited access to affordable financing, and foreign exchange volatility.
“Businesses are still in recovery mode. Increasing taxes at this point risks reversing the gains we are trying to make as a country,” Sekitto added.
Representing more than three million businesses, KACITA warned that some of the proposed measures could increase operational costs, strain cash flows, discourage investment, and ultimately push more enterprises into informality.
Among the key concerns are provisions in the Income Tax Amendment Bill, including a 10% withholding tax on telecom and digital agents, a 0.5% Alternative Minimum Tax, and a 6% withholding tax on entertainers and non-business assets.
KACITA Head of Policy and Research Basha Baker warned of the cumulative impact of these measures.
“These taxes may look small on paper, but their cumulative effect is significant. They reduce incomes, especially for young people in the digital and creative economy,” Baker said.
“We risk penalizing compliance while pushing more businesses into informality, which in the long run undermines revenue collection.”
On VAT, KACITA welcomed the proposed increase in the registration threshold from Shs 150 million to Shs 250 million but argued that it remains insufficient.
“Even at Shs 250 million, many small businesses will still be burdened. A threshold of Shs 1 billion would provide real relief and allow businesses to grow before entering the tax net,” Baker explained.
The association also raised concerns over the Excise Duty Amendment Bill, particularly proposed increases on essential goods such as fuel, sugar, cooking oil, cement, plastics, and motorcycles.
“When you increase taxes on essential goods, the effect is immediate—prices go up, demand drops, and businesses suffer,” Baker said.
KACITA warned that the proposed increase in motorcycle tax from Shs 200,000 to Shs 500,000, along with new levies on items such as tiles, could drive inflation, raise production costs, and reduce consumer purchasing power.
Further concerns were raised about the Stamp Duty Amendment Bill, including increased land transfer fees and the introduction of a Shs 50,000 duty on motor vehicle transfers.
“Raising the cost of acquiring assets like land and vehicles will slow down investment, especially among small and growing businesses,” Sekitto said.
On transport, KACITA highlighted potential challenges under the Traffic and Road Safety Amendment Bill, warning that restrictions on vehicle import age and environmental levies could increase logistics costs.
“Affordable transport is critical for small businesses. Restricting access to reasonably priced vehicles will directly affect operations and expansion,” Baker noted.
While welcoming the waiver of tax liabilities outstanding as of June 30, 2016 under the Tax Procedures Code Amendment Bill, the association criticised strict penalties linked to the Electronic Fiscal Receipting and Invoicing System (EFRIS).
“Compliance should be encouraged, not punished harshly. We need more education, reasonable penalties, and transition periods,” Baker added.
On external trade, KACITA opposed the proposed increase in surcharge on used clothing from 15% to 30%, warning that it could disrupt livelihoods across the value chain.
“This sector supports thousands of livelihoods. Doubling the tax burden will disrupt businesses and reduce incomes across the value chain,” Sekitto said.
KACITA emphasised that Uganda’s tax regime must align with regional standards to avoid encouraging smuggling and informal trade.
“What we need is a balanced approach—one that grows revenue without suffocating the very businesses that generate it,” Sekitto concluded.
