Uganda’s Treasury has proposed a significant tax hike on tobacco, locally brewed beer and imported goods, aiming to generate billions of shillings for infrastructure development and public health initiatives.
Finance Minister Henry Musashiji presented seven tax bills to the Parliamentary Finance Committee and outlined the government’s strategy to increase revenue amid economic pressure.
Important proposals include increasing excise taxes on beer manufactured from local ingredients from SHS650 to SHS900.
Musashiji explained that this adjustment is necessary to reflect current economic conditions and inflation.
Additionally, the government plans to raise cigarette taxes, citing pressure from the health sector to mitigate the negative effects of smoking.
“A modest increase in the excise tax on cigarettes and beer will generate Shs 19.4 billion. The main purpose of this amendment is to generate additional revenue, particularly while occupying tobacco inflation.
Uganda’s cigarette excise tax has not been adjusted since the 2017-18 fiscal year, but inflation has risen 28.8% over the period.
We are also under pressure from the health sector to make tobacco products much higher consumption rates to reduce health-related risks,” Musashiji said.
He further defended the government’s position, saying, “Increasing obligations not only coincides with the trends in inflation, but also serves as a public health target by blocking the consumption of tobacco, which places a significant health cost on the economy.
To reflect current economic conditions and inflation, the excise tax will be raised on beer produced from local ingredients from SHS650 to SHS900.
This ensures that taxation on beer remains fair and that government revenues correspond to economic realities. ”
In the move to fund the construction of the Standard Gauge Railway, a key infrastructure project for Uganda’s trade competitiveness, the government also proposed the introduction of import declaration fees for goods imported for household use.
This scale is expected to produce 79 billion scrunchies.
“The measures aim to raise revenues for standard gauge railway infrastructure investments, particularly important to Uganda’s trade competitiveness.
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Additionally, imports will become more expensive, which will encourage import substitutions and support local industries.
Furthermore, the proposal is consistent with Uganda policies and other East African community partner states, where similar fees are already being charged.
For example, Kenya charged a 2% CIF fee, while Tanzania added a customs processing fee of 0.6,” explained Musasizi.
Addressing concerns about the Electronic Finance Reception and Billing System (EFRIS), the government has moved to streamline penalties for violations. The previously imposed SHS6M Fine was criticized by disproportionately burdened taxpayers, and will be replaced by a double tax penalty.
“Concerns have been raised regarding the high penalty of SHS6M per invoice regardless of the value of the transaction that disproportionately burdens taxpayers. To address this issue, we propose that we amend the penalty structure so that exemption penalty is doubled by taxpayers.”
The proposed tax changes are currently under review by the Congressional Finance Committee, and its implementation will depend on legislative approval.
