While politicians are eager to spend taxpayers’ money and corporations continue to exploit tax avoidance and evasion loopholes, ordinary citizens remain the primary financiers of Uganda’s national budget.
In the previous financial year, Uganda Revenue Authority (URA) added nearly 730,000 new taxpayers, bringing the total number of registered taxpayers to 5.25 million.
However, according to the Auditor General’s Report, only 48 percent of registered taxpayers actually paid taxes.
This means that approximately 2.7 million taxpayers, about 52 percent of those registered, remain inactive. Of those who contributed revenue, 20 percent were employees under the Pay as You Earn (PAYE) system, where taxes are automatically deducted from salaries.
This suggests that growth in the taxpayer register has not been matched by effective compliance enforcement, particularly in corporate income taxation.
Before the 2025/26 financial year, Uganda’s domestic revenue collections increased from Shs22 trillion in the 2021/22 financial year to Shs32 trillion in 2024/25, representing a 46 percent increase over four years.
Yet this growth has not translated into a stronger revenue effort. Uganda’s tax-to-GDP ratio remains stagnant at 13.5 percent, below the 15 percent benchmark for developing countries, the sub-Saharan African average of 18.6 percent, and the global average of 23 percent.
This indicates that while the economy is growing and revenues are increasing, government is not capturing a larger share of national income, particularly from multinational corporations and high-net-worth individuals.
Revenue growth has largely mirrored economic expansion rather than reflecting structural improvements in tax mobilisation.
The same people paying more
Tax analysts and tax justice advocates describe this trend as tax deepening, a situation where government extracts more revenue from existing taxpayers rather than expanding the tax base.
The ordinary taxpayer pays PAYE, Value Added Tax (VAT) on purchases, excise duties on fuel, and other indirect taxes.
Meanwhile, corporations, investors, and wealthy individuals often benefit from tax exemptions, tax holidays, and the ability to repatriate up to 100 percent of their profits.
Members of Parliament (MPs) have also insulated themselves from part of the tax burden.
Although MPs pay PAYE on their basic salaries, they passed amendments exempting many of their allowances and emoluments from taxation, unlike the allowances earned by ordinary citizens.
At the same time, government borrowing continues to grow. Public debt is estimated at around Shs130 trillion.
If repaid immediately, every Ugandan, including newborn children, would carry a debt burden of roughly Shs3 million.
The country has already surpassed the 50 percent debt-to-GDP threshold, breaching the Ministry of Finance’s Charter for Fiscal Responsibility and exceeding levels often regarded by the International Monetary Fund (IMF) as prudent.
Today, nearly Shs40 out of every Shs100 collected in domestic revenue goes toward servicing debt, which significantly reduces the funds available for health, education, agriculture, and infrastructure.
Who really funds the budget?
When Daily Monitor interviewed citizens for this article, seven out of 10 respondents said government funds the budget. This reflects a broader civic awareness gap.
In reality, the budget is financed primarily by citizens and businesses through taxes and other revenues generated from economic activity. Government merely collects, allocates, and spends these resources.
Africa Kiiza, a PhD Fellow at the Faculty of Business, Economics and Social Sciences at Universität Hamburg, says the burden falls disproportionately on ordinary Ugandans.
On April 25, 2026, Parliament approved a Shs84.39 trillion budget for the 2026/27 financial year. Of this amount, Shs44.18 trillion, about 52 percent, will be financed domestically, largely through taxation.
Kiiza argues that Uganda’s revenue collection system increasingly relies on a narrow base of compliant and easily targeted taxpayers, particularly salaried workers and consumers.
‘A keen examination of URA’s revenue collection structure reveals a deeper imbalance, an increasing reliance on a narrow base of compliant and easy-to-target taxpayers,’ he says.
The target, he says, rotates around salaried workers and consumers, while at the same time, large corporations and high-net-worth actors often contribute less than their economic footprint would suggest.’
Kiiza further notes that tax evasion has become widespread among many corporations, despite their capacity to meet tax obligations. URA estimates that Uganda loses approximately $500m (Shs2 trillion) annually through money laundering and other illicit financial flows.
Corporate tax evasion
Uganda’s tax-to-GDP ratio has remained between 13 and 15 percent, below the 18-20 percent range often recommended by the IMF and World Bank for lower-middle-income economies seeking sustainable development financing.
According to Kiiza, this gap reflects weaknesses in tax enforcement, generous tax incentives, and persistent tax avoidance practices.
As a result, indirect taxes such as VAT and excise duty, which account for roughly 30-35 percent of URA collections, have become the backbone of government revenue. These taxes are inherently regressive because everyone pays them, including low-income households.
Every purchase, from fuel and transport to soap and household goods, contributes to financing the national budget.
Meanwhile, highly profitable sectors such as telecommunications, banking, extractives, and fast-moving consumer goods often reduce their effective tax burden through investment deductions, accelerated depreciation, loss carry-forwards, and sector-specific exemptions.
Uganda also faces challenges associated with profit shifting and transfer pricing, where multinational companies allocate costs and profits across subsidiaries to minimise taxable income in higher-tax jurisdictions.
Technical gaps remain
While URA has strengthened its audit capacity in recent years, significant technical gaps remain between tax authorities and multinational corporations.
According to Kiiza, local companies are increasingly adopting similar tax-minimisation strategies. In sectors such as manufacturing, agribusiness, and telecommunications, complex ownership structures and intra-group transactions often obscure actual profitability.
Uganda’s investment-led growth strategy has relied heavily on tax holidays and exemptions, especially within special economic zones, agro-processing, and export-oriented industries.
Fiscal analysts and civil society organisations estimate that these exemptions cost the country around 2 percent of GDP annually, about Shs5 trillion in foregone revenue.
Although such incentives are intended to attract investment and create jobs, weak enforcement of expiry provisions often transforms temporary incentives into long-term revenue losses.
Meanwhile, PAYE continues to be deducted automatically from formal workers. Small traders and consumers bear VAT and excise duties embedded in everyday goods and services. Even those in the informal sector contribute indirectly through consumption taxes.
The result is a fundamental paradox within Uganda’s tax system: those with the least bargaining power contribute most consistently, while those with the greatest capacity to structure and shift income often contribute proportionally less.
A question of fairness
Kiiza argues that Uganda’s budget is more than a technical financial document; it reflects economic power relations. ‘Answering who funds the national budget exposes a structural imbalance: a system increasingly sustained by ordinary citizens, while significant corporate and high-wealth fiscal space remains undertaxed, underenforced, or selectively exempted.’
Without reforms to tax incentives, stronger corporate transparency, improved enforcement, and greater international tax cooperation, he warns that the fairness and sustainability of Uganda’s fiscal system will remain in doubt.
Ultimately, these challenges could undermine Uganda’s long-term ambition of achieving meaningful middle-income status.