When Mayimuna wakes up to prepare breakfast, the tax clock begins to tick. The electricity, piped water, and groceries she consumes are all subject to an 18 percent Value Added Tax (VAT). This is an unavoidable consumption tax on basic items such as sugar, bread, and milk. Meanwhile, Magdalene pays fuel taxes before she even reaches her workplace. She pays these levies either directly at the pump or indirectly through her transport fares.
Magdalene’s transport fare to work is considered a personal expense. The government does not subsidise it, nor are employers legally required to cover it. Furthermore, any transport allowance she receives from her employer is fully taxable. Under Section 19 of the Income Tax Act, these allowances are treated as taxable employment income subject to Pay As You Earn (PAYE) tax.
The only way for Magdalene and Mayimuna to legally avoid this tax on their allowance is by becoming Members of Parliament. Until then, they will continue forking out Shs1,550 per litre of petrol and Shs1,230 per litre of diesel in taxes. Following the enactment of the Excise Duty (Amendment) Bill, 2026, which introduced a Shs200 per litre increase, the total tax will hit Shs1,750 for petrol and Shs1,430 for diesel starting in the new financial year, which is just days away.
When transacting via mobile money, Mayimuna and Magdalene face a 0.5 percent tax on withdrawal values, a 15 percent tax on service fees, and a 12 percent excise duty on airtime and data. By lunchtime, Peter will also pay VAT on his food. He faces an excise duty-another consumption tax-on beverages, eating directly into his disposable income. On his way home, Paul buys basic household goods such as soap, milk, and toilet paper. All of these carry an 18 percent VAT.
Paul works with a daily budget of Shs20,000 to Shs50,000. Taxes alone consume between Shs4,000 and Shs10,000 of his income every single day. If Paul diligently saved that tax amount daily, he would put aside between Shs1.4 million and Shs3.6 million in a year. This total surpasses the Shs1 million soft loan that households receive through the Parish Development Model (PDM) to invest in income-generating enterprises.
As Ugandan taxpayers, Paul, Peter, Magdalene, and Mayimuna generally see 20 to 50 percent of their income consumed by taxes embedded in the final retail cost of goods and services at any given time. This is the daily reality for most of the country’s 46 million citizens who go to sleep with a tax liability and wake up shouldering that same burden. As a result, they remain trapped in a vicious tax cycle. If Mayimuna, Magdalene, Paul or Peter runs a side hustle business, it will simply increase their tax obligations.
As a small trader, you must pay an annual Trade License fee to the local municipal council or the Kampala Capital City Authority to operate legally. Finally, when you sell goods or provide services to the government or designated large businesses, they may deduct an advance tax. This is usually a 6 percent withholding tax deducted directly from your payment.
Can’t tax into prosperity
The belief that a country can tax itself into prosperity is not only baffling but also akin to the primitive accumulation of revenue. This perhaps explains the famous words in Sir Winston Churchill’s political pamphlet, For Free Trade: ‘We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself by the handle.’ While Churchill spoke in another era, researchers such as Mr Africa Kiiza believe the statement sharply resonates with present-day Uganda, where citizens are increasingly overtaxed amidst worsening public services and economic insecurity.
‘Suffice it to say, taxation in Uganda is no longer just about income; it is now woven into the fabric of daily survival,’ noted Mr Kiiza, a PhD fellow in the Faculty of Business, Economics, and Social Sciences at Universität Hamburg. Research by civil society organisations working on tax and financing for development has often illuminated that Uganda’s tax regime disproportionately burdens low-income earners.
According to recent data from the Ministry of Finance and the Uganda Revenue Authority, indirect and consumption-based taxes continue to dominate Uganda’s collections, with domestic taxes accounting for nearly 60 percent of total government revenue. Indirect and consumption-based taxes are paid regardless of whether one is rich or poor. ‘It is fair to say that Uganda’s tax regime increasingly taxes daily survival rather than wealth,’ said Mr Kiiza.
‘Ugandans are subjected to at least 10 major forms of taxation, including PAYE, VAT, excise duty, withholding tax, rental tax, customs duties, and local service taxes not to mention licenses, fees, and other statutory deductions. Even those outside formal employment cannot escape taxation, because taxes are embedded in almost every commodity and service consumed daily,’ he added.
What for?
According to Mr Kiiza, many Ugandans continue to navigate poor healthcare systems where they pay 30 percent of health costs out of pocket. This situation is worsened by the national debt crossing Shs130 trillion, meaning every Ugandan, including those born this morning shoulders a public debt burden of nearly Shs3 million. This burden is further compounded by the high doctor-to-patient ratio of 1:25,000, which is far higher than the World Health Organisation standard of 1:1,000, and the high national nurse-to-patient ratio of 1:11,000, which far exceeds the WHO-recommended 1:200 ratio.
This is in addition to collapsing drainage infrastructure, youth unemployment, unreliable public transport, and underfunded schools. But the irony lies in who gets tax holidays in Uganda. A study by the Ministry of Finance Tax Expenditure Report for FY2023/24 revealed that Uganda forewent Shs3.6 trillion in tax exemptions. ‘This is complicated by the misuse of public funds by public workers, with Shs10 trillion approximately 5 percent of Uganda’s GDP lost to corruption annually,’ Mr Kiiza says.
This is enough to fully construct and equip approximately 35-45 specialised health facilities in Uganda. Business Daily findings, corroborated by several studies including those by the Southern and Eastern Africa Trade Information and Negotiations Institute (SEATINI), the Civil Society Budget Advocacy Group (CSBAG), and WB/IMF reports, indicate that Uganda’s tax system is unreasonably burdensome.
When contacted last week, the executive director of CSBAG, Mr Julius Mukunda, described a typical day in the life of a Ugandan taxpayer as a daily endurance test. ‘They pay taxes on electricity, fuel, and airtime, but must still dig into their own pockets to pay for private security, private healthcare, and private schooling because public systems are failing them. ‘The Ugandan taxpayer is overstretched, underserved, and bearing a disproportionate weight of the national budget,’ Mr Mukunda said.
Asked whether a typical Ugandan get real value from the taxes they pay, Mr Mukunda who is also a budget and policy analyst, said: ‘Yes, but absolutely not adequately.’ He argues that Ugandans see some benefits through roads, schools, and public infrastructure and security-that keeps the country running. But he added: ‘For the average, day-to-day Ugandan, the answer is a resounding no.’ Furthermore, CSBAG’s budget monitoring across districts reveals that citizens continue paying more while facing poor healthcare, unemployment, corruption, and weak accountability
Remedies
But all is not lost. The government can rebuild confidence through three urgent measures. First, there must be radical transparency in public expenditure. Taxpayers must visibly see their money translating into functioning schools, hospitals, roads and decent public services. Uganda must also reduce overreliance on indirect taxation and adopt a more progressive tax regime where wealthier individuals, speculative sectors and multinational corporations contribute fairly.
Third, government must tackle illicit financial flows, corruption and wasteful tax exemptions. Sustainable domestic revenue cannot emerge from squeezing struggling citizens while billions leak from the system annually. ‘Ultimately, Ugandans are not resisting taxation itself. They are resisting a system where sacrifice is demanded without corresponding dignity, fairness or visible national transformation,’ concludes Mr Kiiza.
Government’s take
When contacted, the Deputy Secretary to the Treasury, Mr Patrick Ocailap, said the tax regime can’t be regressive. He asked: ‘How else can you be fair, ensure equity, and maintain affordability in a tax system without applying some level of indirect taxes? This kind of tax, he said, cannot be avoided in taxation. ‘For example, the 18 percent VAT is for everybody and is fair to all. Remember, fairness is one of the canons of taxation.’ Before that, the director of economic affairs at the Ministry of Finance, Mr Moses Kaggwa, said: ‘I don’t do a regime that is not fair. If you talk about tax burdening, in the case of an employee, they are only subjected to PAYE, and that’s all.’