Uganda's Tax System Isn't Bringing in Enough Revenue but Is Targeting Small Business the Answer?

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Analysis - Uganda, with a fiscal deficit of 5.6% in 2023, has increasingly turned to local resources to make up for its revenue shortfall since the World Bank suspended its funding on 8 August 2023 over the country's anti-homosexuality law.

against what they saw as high taxes and harsh enforcement tactics of the Uganda Revenue Authority. Maria Jouste, who has researched Uganda's tax system, including itswere seen in Dar es Salaam, Tanzania in May 2023 over high taxation and heavy-handed enforcement of levies on small businesses.

The revenue agency has not clearly stated how much it expects to collect from these measures but its actions are born out of high revenue targets which might be too ambitious. Overly ambitious revenue targets can doThe Uganda Revenue Authority turned its focus on traders and VAT law enforcement after the country faced a decline in development aid.

Fairness in taxation varies widely by perspective. In general, a progressive tax system - where the rate is higher for the rich than for low-income earners - is widely argued to be a fair system. Uganda's tax laws have elements of being progressive, particularly in personal income taxation. Generous tax incentives and holidays predominantly benefit large firms. Smaller businesses rarely qualify for these benefits. The corporate statutory tax rate is 30%, but theUganda faces serious challenges in raising sufficient funds for public services and economic development. Key tax policies have remained unchanged for a decade. Personal income tax rates have been the same since 2012 and the VAT threshold and presumptive tax thresholds since 2015.

 

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