Public policy commentator and Rukiga County Member of Parliament-elect Patrick Kiconco Katabaazi has argued that Uganda’s proposed income tax reforms emphasise fairness while cautioning about the potential economic impact of high taxes.
Speaking to Canary Mugume during Next Big Talk hosted by Next Radio on Thursday, Kataabazi offered insights into the government’s strategy to raise revenue for the 2026/27 financial year.
The reforms, part of the proposed Income Tax Amendment Measures, include a controversial proposal to increase Pay As You Earn (PAYE) tax from 30 per cent to 40 per cent for individuals earning above Shs 10 million per month. While the proposal has drawn public concern, Kataabazi argued that it would affect only a small proportion of taxpayers.
“The majority of PAYE taxpayers earn Shs 1,000,000 or less. The revision from 30 to 40 per cent targets high-income earners and will not impact most Ugandans,” he said, highlighting the principle of fairness that underpins global tax systems.
Kataabazi also noted that Ugandans earning less than Shs 355,000 per month will be exempt from paying income tax, a rise from the current threshold of Shs 235,000, giving some relief to low-income earners. Meanwhile, those earning above Shs 10 million per month would face the increased rate of 40 per cent, a move aimed at raising government revenue while maintaining fairness in the system.
Kataabazi said that the government plans to raise Shs 4.8 trillion in additional taxes in the next financial year. He stressed that while some tax measures are moderate, Uganda’s growing budget requires the introduction of new taxes and adjustments to existing ones.
However, Kataabazi warned that high taxes could discourage business activity and hinder economic formalisation.
“High taxes can drive people out of business. For goods with elastic demand, price increases caused by taxation reduce consumption. Over-taxing can limit efforts to expand the tax base, as some prefer to remain informal,” he said.
Beyond income tax, the proposed measures include other significant fiscal changes. Fuel and diesel taxes are expected to rise by Shs 200 per litre, which would not only affect drivers but also increase transport costs, food prices, and the overall cost of doing business in Uganda.
Excise duty on sugar is set to rise from Shs 100 to Shs 300 per kilogram, impacting consumers directly. Land valued above Shs 100 million will be subject to a 5 per cent tax, while stamp duty on land transfers is proposed to increase from 1.5 per cent to 3 per cent.
Landlords who collect annual rent exceeding Shs 2.82 million will pay a 12 per cent tax on the surplus, with payments potentially shifting from quarterly to monthly.
Additionally, VAT regulations are being tightened to prevent importers from splitting large orders to avoid registration, while certain items, including solar lanterns, biomass pellets, and aircraft supplies, will see reduced or removed VAT to promote accessibility and reduce costs.
Kataabazi urged policymakers to strike a balance between revenue collection and economic growth.
“Taxes are necessary to fund public services, but overly aggressive taxation risks pushing businesses into the informal sector, limiting the government’s ability to broaden the tax base,” he said.