Published on 05/04/2025
In an effort to generate additional revenue and address public health concerns, the Ministry of Finance has proposed tax increases on cigarettes and beers manufactured from local raw materials. The measure, expected to raise UGX 19.40 billion, comes amid pressure from the health sector to curb tobacco consumption due to its associated health risks.
The proposal was unveiled by Henry Musasizi, Minister of State for Finance, while appearing before Parliament’s Finance Committee to present seven Tax Bills. According to Minister Musasizi, the excise duty on beer made from local raw materials will increase from UGX 650 to UGX 900 to reflect the current economic conditions and inflation.
“Modest increase in excise duty on cigarettes and beer to generate Shs19.40Bn. The primary objective of this amendment is to generate additional revenue while accounting for inflation, especially, on cigarettes. The excise duty on cigarettes in Uganda has not been adjusted since Financial Year 2017-18, yet inflation has risen by 28.8% over the period. We have also been under pressure from the health sector to increase the excise rates on tobacco products much higher to reduce the health-related risks,” explained Minister Musasizi.
The Minister defended the government’s position, emphasizing that the tax increase serves both fiscal and public health objectives.
“Increasing the duty will not only align with inflationary trends but also serve as a public health objective by discouraging tobacco consumption, which imposes significant health costs on the economy. To increase the excise duty on beer manufactured from local raw materials from Shs650 to Shs900 to reflect the current economic conditions and inflation. This will ensure that the taxation of beer remains fair and that government revenue keeps pace with the economic realities.”
New Import Declaration Fee to Fund Standard Gauge Railway
In addition to the proposed excise duty hikes, the government has also introduced an import declaration fee on goods imported for home use, expected to generate UGX 79 billion. The revenue from this fee will be allocated toward the construction of the Standard Gauge Railway, a critical infrastructure project aimed at enhancing Uganda’s trade competitiveness.
“This measure seeks to raise revenue for infrastructure investment, particularly for the standard gauge railway, which is critical for Uganda’s trade competitiveness. In addition, it will render imports more expensive, hence promoting import substitution and supporting local industries. Furthermore, this proposal aligns with Uganda’s policy and other East African community partner states where similar fees are already imposed. For instance, Kenya apprised a 2% CIF charge, while Tanzania apprised a 0.6 customs processing fee,” explained Minister Musasizi.
Revised Penalty Structure for Electronic Fiscal Receipting and Invoicing System (EFRIS)
The government has also moved to streamline penalties under the Electronic Fiscal Receipting and Invoicing System (EFRIS). Previously, noncompliant taxpayers faced a fine of UGX 6 million per invoice, irrespective of transaction value. Under the new proposal, the penalty will be revised to twice the amount of tax owed by the taxpayer.
“Concerns have been raised regarding the high penalties of Shs6M per invoice, regardless of the value of the transaction, which disproportionately burden the taxpayers. To address this issue, we propose to amend the penalty structure so that the penalty for non-compliance will instead be twice the tax owed by the taxpayer,” noted Minister Musasizi.
Projected Revenue from New Tax Measures
The government has outlined that the proposed tax measures in the seven Tax Bills, along with Uganda Revenue Authority (URA) administrative measures, are projected to generate over UGX 2.4 trillion for the national budget. Minister Musasizi emphasized the importance of a predictable, certain, and fair tax system to boost revenue mobilization.
“To finance the budget, we have proposed a modest tax policy measure. In this regard, we project to generate Shs538.6Bn in 2025-2026 from the tax policy proposals contained in the bills. In addition, we will generate Shs1.885Trn from URA administrative Measures,” said Musasizi, which brings the total to Shs2.420Trn.
To enhance tax collection, the Uganda Revenue Authority plans to recruit an additional 1,260 staff to improve taxpayer coverage, particularly targeting high-net-worth individuals in sectors such as construction, transport, and professional services. The initiative is also part of a broader effort to eliminate corruption in revenue collection.
“We are also stepping up efforts to eradicate corruption in revenue collection. Furthermore, we are recruiting 1,260 staff to boost our numbers and reach more taxpayers, especially the high-net-worth individuals in businesses like construction and transport and professionals,” stated Minister Musasizi.
Among the bills presented to Parliament’s Finance Committee include the Income Tax Amendment Bill No.2 2025, Excise Duty Amendment Bill No.2 2025, The Value Added Tax Amendment Bill 2025, The Tax Procedures Code Amendment Bill 2025, The Stamp Duty Amendment Bill 2025, Hides and Skins Export Duty Amendment Bill 2025, and The External Trade Amendment Bill 2025.
These proposed measures mark a significant shift in Uganda’s tax landscape, aiming to balance revenue generation with economic realities while addressing public health and infrastructure development priorities.
