A bombshell report from the Ministry of Finance has revealed that Uganda forewent a staggering Shs5 trillion in taxes during the 2024/25 financial year due to aggressive tax exemptions.
This massive loss represents 2.2% of the national GDP and constitutes 15.5% of all taxes collected domestically, sparking intense debate over whether the economy is actually benefiting from these giveaways.
The data was presented by Solomon Rukundo, a Tax Specialist at the Ministry of Finance, during a SEATINI-Uganda evaluation meeting held at Protea Hotel.
The report disaggregated the forgone revenue across various tax statutes, revealing exactly where the biggest gaps lie:
-
- VAT (Value Added Tax): Shs2 trillion
- Personal Income Tax: Shs1 trillion
- Excise Duty: Shs853 billion
- Customs Duty: Shs708 billion
- Corporate Income Tax: Shs431 billion (includes controversial 10-year tax holidays)
While the figure looks like a massive leap from the Shs3 trillion recorded in FY 2023/24, Rukundo clarified that the increase is largely due to improved data tracking and analytical tools rather than a sudden rush of new exemptions.
Jane Nalunga, the Executive Director of SEATINI-Uganda, raised serious red flags about the lack of monitoring. She noted that while incentives aim to boost investments, jobs, and exports, they currently remain “broad and unmonitored.” This directly drains resources needed for critical public services like healthcare and education.
Echoing her concerns, Aloysius Kittengo, a Program Coordinator at SEATINI, demanded a strict shift toward performance-based incentives. He suggested that companies should only receive tax breaks if at least 70% of their wage bill goes directly to local Ugandan workers.
Despite the massive revenue loss, the report strongly warns against scrapping VAT exemptions. Rukundo presented data showing that removing VAT exemptions would instantly increase the national poverty rate by 5.4%, heavily hitting female-headed households, families with children, and the elderly.
With global development aid declining rapidly, experts warn that Uganda must urgently fix its domestic resource leaks to stay afloat amidst rising public debt.
