By Andrew Kariuki

Traders and manufacturers in Uganda have urged the government to reconsider proposed tax measures for the 2026/27 financial year, warning that the changes could raise the cost of doing business and slow economic recovery.

Presenting a memorandum before Parliament’s Finance Committee, the Kampala City Traders Association (KACITA), led by Chairperson Isa Sekito, said the proposed amendments risk placing additional strain on businesses still recovering from recent economic shocks.

“The business community appreciates government’s continued efforts to enhance domestic revenue mobilisation. However, the proposed amendments come at a time when businesses particularly micro, small and medium enterprises are still recovering from multiple economic shocks,” Sekito said.

KACITA, which represents more than three million traders, warned that the proposals, though “well-intended,” could “inadvertently increase the cost of doing business, constrain cash flow, and reduce the competitiveness of local enterprises.”

Among the key concerns raised is the proposed 0.5% Alternative Minimum Tax targeting businesses that declare losses for seven consecutive years. Sekito argued that the measure would penalise struggling enterprises.

“The 0.5% Alternative Minimum Tax penalises businesses that are genuinely making losses due to economic challenges… this discourages investment and business recovery,” he said.

The association also opposed a proposed 10% withholding tax on telecom agents, warning it would significantly reduce earnings for operators working on thin margins.

On Value Added Tax, KACITA maintained that the current 18% rate is already high, saying it increases the cost of goods and reduces consumer demand. The association proposed lowering VAT to 16% and raising the registration threshold to at least Sh1 billion, instead of the proposed Sh250 million.

Sekito also raised concerns over plans to double stamp duty on land transactions from 1.5% to 3%, saying it would make it more expensive for businesses to acquire premises and discourage investment.

He further warned that higher excise duties on key commodities such as fuel, sugar, cooking oil and cement would push up inflation.

“Higher fuel prices will raise transportation and distribution costs and affect supply chains across all sectors. Businesses will pass these costs to consumers,” he said.

KACITA also opposed a proposal to increase the surcharge on used clothing from 15% to 30%, describing it as unsustainable and warning it could lead to job losses in a sector that contributes about Shs280 billion annually.

Manufacturers, through the Uganda Manufacturers Association (UMA), echoed similar concerns, particularly on a provision requiring taxpayers to pay 30% of assessed tax before lodging an appeal.

UMA Chairperson Richard Sekalala said the requirement limits access to justice and strains business operations, while member John Jet Tusabe noted it applies regardless of the nature of the dispute or the taxpayer’s financial capacity.

“The charge is regardless of whether the appeal is an issue of interpretation… or whether the taxpayer has capacity to pay the 30%,” Tusabe said.

UMA also urged the government to review the proposed 40% income tax rate, recommending a reduction to 35% to maintain competitiveness, and proposed raising the Pay As You Earn threshold from Sh235,000 to Sh500,000 to reflect the rising cost of living.

While opposing most of the tax proposals, manufacturers supported plans to extend the tax holiday for the Bujagali Hydro Power Project to seven years.

Lawmakers are now expected to review the proposals as debate continues, with business groups warning that failure to adjust the measures could push more enterprises into the informal sector and weaken economic growth.