In a week, the current financial year will come to an end, and the implementation of the new National Budget will commence. The National Budget 2026/2027 followed a number of amendments to several laws and will also introduce several tax administration measures.
The Minister of Finance, Planning and Economic Development, Henry Musasizi, said the tax policy proposals in the bills would bring in an additional 1.74 trillion shillings in the financial year 2026/27, and he expected 3.16 trillion from URA administration measures.
These would then contribute to the projected revenue effort of 15.5 percent of GDP, representing a growth of 0.6 percentage points. One area affected by the reforms is the Excise Duty, an indirect tax levied on specific, targeted goods and services at the time of manufacture, import, or consumption rather than on their final retail sale. However, this tax is usually transferred by the manufacturer or seller to the final consumer.
The changes included increasing excise duty on diesel and petrol by 200 per litre, increasing the specific excise duty rate on any other undenatured spirits of alcoholic strength by volume of less than 80 percent from 1700 shillings to 3500 shillings per litre.
It also saw an increase in excise duty at first registration on motorcycles from 200,000 to 500,000 shillings, extended excise duty to apply to all single-use plastics, and increased the rate from 2.5 percent or 70 dollars per ton, whichever is higher, to 25 percent or 1,500 dollars per ton, whichever is higher.
Other adjustments were an increase in duty on cement from 500 to 1,000 shillings for every 50 kilograms, an increase in excise duty rate for sugar from 100 per kilogram to 300 per kilogram, the introduction of excise on cooking fat and fatty acids at 500 shillings per litre or kilogram, and an increase in excise duty on cooking oil from 200 to 400 shillings per litre.
These changes are bound to impact consumption, personal incomes, and operations and pricing by the business community. Notably, there are increments that have been slapped on items whose costs and supply are already subjected to the geopolitics that include the war in the Middle East.
Those include mainly diesel and petrol, whose prices have increased by more than one third since late February when Israel and the USA launched military strikes on Iran.
Pushing duties up by 200 shillings to 1,430 and for petrol to 1,750 shillings per litre will directly inflate logistics and power generation costs, making local goods uncompetitive in the region, according to the business community. Unless the oil marketing companies decide to absorb all or part os the new tax increments, the current fuel prices could be raised by another 200 shillings per litre, next financial year that starts July 1.
Uganda Manufacturers Association (UMA) calls the timing dangerous for the economy. UMA Tax Policy Consultant John Jet Tusabe wonders why Uganda is doing the opposite of how other countries are responding.”Other countries are intervening by reducing taxes on fuel, yet Uganda is increasing the taxes.
This will reverse the recently made economic gains as fuel is a vital input across all sectors.” On the new 300 shilling duty on sugar, analysts say that the impact does not stop with the person adding sugar to their tea, but also affects micro and small enterprises. Moureen Wagubi, the Executive Director, Institute for Social Transformation says that these taxes affect the low income learners most who struggle to even get a kilo of sugar.
Also, she adds, cottage industries like processors of juice, snacks like chapati and potato chips, highly depend on sugar and cooking oil, which are now targeted with tax increases. Jane Nalunga, Executive Director at SEATINI Uganda, a regional trade rights NGO, says that by raising the Pay-as-You-Earn eligibility threshold, the government allowed low-salaried earners some savings, but that the same government is taking it away by increasing taxes on essential goods. URN