Govt pledges to review incentive regime for investors

The government has pledged to review the tax incentive regime in response to concerns that it may be hindering economic growth by favoring certain categories of investors.

At a conference on Tax Policies and Tax Administration for Ugandan Investors organised by the Ministry of Finance at Hotel Africana on Wednesday, Prime Minister Robinah Nabbanja announced plans to meet with stakeholders, including manufacturers and government technocrats, to refine incentive proposals. These proposals will then be presented to Cabinet.

“The government is committed to continuously reviewing and refining our tax incentive framework to maximise its effectiveness and minimise revenue losses. As you are aware, tax incentives play a pivotal role, especially with regard to attracting investments in key sectors, like manufacturing, fostering industrialisation and creating jobs,” she said.

She acknowledged that the agriculture, technology, and manufacturing sectors have already benefited from tax incentives designed to promote value addition and export promotion. However, she stressed the need to balance these incentives with the need to maintain a robust revenue base. 

“As we request for the tax incentives, we must also be mindful of the need to check that our revenue base as over-reliance on tax incentives can lead to revenue foregone, and could thus adversely impact the government's ability to finance critical public services. The NRM government remains committed to creating a tax environment that is conducive to business and fair to all taxpayers,” she said.

Ms Nabbanja's comments came in response to concerns from local investors who claimed that excessive taxation on industries, agribusiness, and hotels is driving many businesses to the brink.

Mr Deo Kayemba, Chairperson of the Uganda Manufacturers Association, criticised some of the fines and penalties imposed for non-tax compliance as excessively punitive. “There should be a greater emphasis on helping businesses comply with tax regulations rather than focusing solely on revenue from fines,” Kayemba argued.

Ms Susan Muhwezi, Chairperson of the Uganda Hotel Owners Association (UHOA), highlighted Uganda's complex tax environment, citing 27 different taxes and licenses that burden the hospitality industry. She detailed specific taxes, including corporation tax (30%), withholding tax (6%), and value-added tax (18%), and proposed simplifying and harmonizing the tax system.

Additional taxes include local service tax, property tax, ground rent, and various licensing fees. Ms Muhwezi suggested consolidating these into fewer taxes and licenses to streamline the process.

In response, Ms Nabbanja said, “I have noted all your concerns, particularly those raised by Madam Muhwezi. I promise to arrange a meeting with you and the leaders of these investors to develop concrete solutions, which I will then present to Cabinet.”

State Minister for Finance (General Duties) Henry Musasizi assured investors that the government is reviewing existing tax incentives to ensure they align with national development goals. “We are working to make the tax system more conducive to business growth while ensuring fairness and inclusivity,” Mr Musasizi stated.

State Minister for Investment (Privatization) Evelyn Anite emphasized the importance of collaboration between the government and the private sector in developing effective tax policies. “We are committed to creating a level playing field where both local and foreign investors can thrive,” Ms Anite said.

The Permanent Secretary at the Ministry of Finance and Economic Planning, Ramathan Ggoobi, underscored the importance of modernising tax administration through technology. 

“The government recognizes that tax administration must evolve with the changing economic environment. Leveraging technology, such as e-tax, EFRIS, and Digital Tax Stamps, has significantly improved our efforts to modernize tax administration, reduce compliance costs, and enhance transparency,” Mr Ggoobi said.