As Uganda prepares to implement the 2025/26 national budget, a critical question looms over the country’s fiscal trajectory: Can the Uganda Revenue Authority (URA) meet the ambitious domestic revenue target of Shs 37.2 trillion?
During the national budget reading on Thursday, June 12, Finance Minister Matia Kasaija outlined the government’s plan to mobilize this amount, which is expected to finance approximately 60 percent of the national budget.
However, this ambitious projection has sparked concern, particularly given URA’s consistent struggles to meet previous targets. In the outgoing 2024/25 financial year, the tax body is projected to have collected only Shs 27.36 trillion, falling short of its Shs 31.36 trillion target by nearly Shs 4 trillion.
This shortfall is not an isolated incident. For the fifth consecutive year, URA has failed to meet its revenue targets. In the 2023/24 financial year, for instance, the authority missed its Shs 29 trillion target, underlining a worrying trend that could jeopardise future fiscal stability.
Despite these setbacks, Minister Kasaija remains optimistic. In his address to Parliament, he acknowledged the historical revenue gaps but expressed confidence in the government’s renewed strategy to strengthen domestic revenue mobilisation.
He revealed that a series of policy and operational reforms are being rolled out to address the systemic bottlenecks hampering revenue performance.
Central to the government’s strategy is broadening the tax base. The Minister highlighted that targeted investment in high-potential sectors such as agro-industry, tourism, mineral development including oil and gas information and communication technology, and science and innovation will bring more businesses into the formal economy.
In addition, the government intends to support small and medium enterprises (SMEs) and wealth creation initiatives as a means to tap into previously untaxed economic activity.
Kasaija also underscored the government’s commitment to fighting corruption within the URA. He announced intensified efforts to root out corrupt officers and taxpayers who collude to evade taxes.
The government plans to leverage digital technologies to reduce human interaction in tax administration, thereby curbing rent-seeking behaviour and increasing transparency.
To improve efficiency and compliance, the government will enhance its digital tax solutions. These include expanding the use of the Electronic Fiscal Receipting and Invoicing Solution (EFRIS), digital tax stamps, rental income tax tracking, and rigorous auditing specially in areas prone to abuse such as transfer pricing by multinational companies.
Border surveillance and anti-smuggling initiatives are also being strengthened. The Minister announced that URA will deploy advanced technologies such as drones, scanners, and tracking systems at border points, complemented by increased patrols in smuggling-prone areas.
These efforts are intended to plug revenue losses that arise from illicit trade and unregulated cross-border activity.
Another major focus is on rationalising tax exemptions. Kasaija said the government will review all current tax exemptions to ensure they align with national industrial policy. New sunset clauses will be introduced to phase out outdated or unjustified incentives that drain public finances without delivering commensurate economic returns.
Tax law reforms are on the agenda to close existing loopholes that facilitate revenue leakage. These reforms are expected to provide legal clarity, thereby encouraging voluntary tax compliance among businesses and individuals.
To bolster tax administration capacity, the URA will undergo internal strengthening through the recruitment and training of additional tax officers. Kasaija emphasised that building a competent and efficient workforce is critical to improving revenue performance and enforcing compliance.
Furthermore, the government will provide support to local governments and revenue-generating public entities. The aim is to enhance their ability to mobilise local revenues and reduce overreliance on central government transfers.
Despite these well-laid plans, the budget for the 2025/26 financial year is expected to run a substantial deficit. Total government expenditure is projected at Shs 51.53 trillion, excluding Bank of Uganda securities and domestic refinancing.
This results in a fiscal deficit estimated at 7.6 percent of the country’s GDP, which the government plans to bridge through both domestic and external borrowing, as well as grants.
Analysts have welcomed the government’s renewed revenue strategy but warn that success will depend on implementation.
They caution that achieving the Shs 37.2 trillion target will require more than policy pronouncements. URA must not only enforce tax laws more rigorously but also rebuild public trust in the tax system and ensure equitable taxation across all income groups.
Persistent challenges such as the widespread informality of Uganda’s economy, tax evasion, and low compliance among high-income earners must be tackled head-on.
Without tangible improvements in these areas, Uganda’s revenue potential will remain constrained, posing risks to service delivery, infrastructure development, and economic growth.
In the end, whether URA will rise to the challenge remains to be seen. What is certain, however, is that without substantial gains in domestic revenue collection, Uganda’s fiscal space will continue to tighten, leaving the government with fewer options to fund its ambitious development agenda.