Tax exemptions in Uganda are under renewed scrutiny as the Uganda Revenue Authority (URA) struggles to meet its revenue targets year after year. These tax breaks, often given to investors, continue to cost the country more than they return in value.
Typically, tax exemptions allow companies to avoid certain taxes through exclusions, deductions, or credits. While designed to stimulate investment, many recipients fail to meet expectations—such as creating jobs, transferring technology, or offering fair wages. Instead, they enjoy massive financial benefits without giving much back to the economy.
In FY2023/24, URA collected Shs27.8 trillion, falling short of its Shs29.9 trillion goal. As the FY2024/25 draws to a close, URA still needs to raise Shs4 trillion to hit the Shs32 trillion target. Despite optimism from URA Commissioner General John Musinguzi Rujoki, tax experts believe it would take a miracle to close that gap.
Tax analyst Aloysius Kitengo from the Tax Justice Alliance Uganda warns that illicit financial flows and unproductive tax incentives are leaking revenues. The consistent revenue gaps force the government to borrow more, pushing Uganda’s public debt to a staggering Shs116 trillion.
Despite these setbacks, the government continues to raise targets. The goal for FY2025/26 is now Shs37 trillion. Without substantial reforms, hitting these targets may prove impossible.
To address the issue, experts recommend transforming tax exemptions in Uganda into performance-based tools. New tax breaks should link to job creation, decent wages, and measurable technology transfers. Authorities should conduct midterm performance reviews and cancel exemptions if companies fall short.
Currently, unfair tax exemptions favor a few individuals or businesses over others in the same industry. This distorts competition and undermines trust in the tax system. Reforms should ensure that exemptions apply to entire sectors, not selected players.
Experts also urge the government to favor statutory exemptions—those based on legal provisions—over discretionary executive decisions. Unlike executive incentives, statutory exemptions come with more structure and less room for abuse.
Unfortunately, Uganda lacks clear guidelines on how tax exemptions are granted or monitored. The Auditor General and civil society groups like SEATINI, Oxfam, and CSBAG consistently call for transparency and standard procedures. Without regular impact reviews, there is no justification for maintaining many of these tax incentives.
The Auditor General’s reports repeatedly point out that exemptions often lack supporting documentation, impact analysis, or clear termination timelines. The government must publish comprehensive guidelines and ensure all future exemptions undergo routine evaluations.
Lawyer Moses Talibita from the Uganda National Health Consumers Organisation says Uganda’s young economy needs investors. However, offering tax holidays for 10 to 15 years without follow-up limits growth. He argues that if exemptions don’t support industrialization or boost job quality, they should be withdrawn.
He also highlights that many working Ugandans remain in informal or low-paying jobs. Without formal employment, they can’t contribute to national pension schemes like NSSF, risking their future retirement security.
Uganda’s fiscal strategy must evolve. Offering exemptions without accountability damages public trust and deprives the state of critical funding for education, healthcare, and infrastructure.
If designed and monitored properly, tax exemptions in Uganda could serve as powerful tools for sustainable economic growth. But without reform, they will remain costly loopholes that only benefit a few.
