The Ugandan government has announced its intention to forfeit introduction of new taxes in the 2025/2026 financial year. The country’s State Minister for Finance Henry Musasizi, notes that the strategic decision underscores the government’s commitment to optimize the utilization of existing taxes and clamping down on corruption. Wilson Manishimwe, Policy Analyst at Corporate Image Limited joins CNBC Africa for more.
The Ugandan government has announced its intention to forfeit introduction of new taxes in the 2025-2026 financial year. The country’s State Minister for Finance Henry Musasizi, notes that the strategic decision underscores the government’s commitment to optimize the utilization of existing taxes and clamping down on corruption. I spoke to Wilson Manishimwe and here is more. The move by the government not to introduce new taxes in the next financial year is welcome and anybody can see that Ugandans are overtaxed. New taxes may not significantly improve on their collections, but I look at the point that it's better for the government to strengthen tax administration rather than introducing new tax measures. Uganda has among the lowest taxed GDP ratios in East Africa at 13% of the GDP. So if government can have more emphasis on addressing issues of corruption, addressing issues of tax leakage, addressing issues of tax avoidance and also expanding tax register, it is much better than introducing new tax measures in the new financial year. So already you have a very narrow tax base, a very narrow tax register of about four million people. So if they can focus on how to strengthen tax administration through, one, closing leakages, addressing corruption, having more people brought into the tax bracket, it's better than introducing new taxation measures in the new financial year. Well, Wilson, this is quite important to address because we are seeing the government already in the fiscal year for 2024-2025, they had a budget deficit. And by government not raising any additional new taxes in this proposed fiscal year, how will this play out, considering that they've also been a slowdown from development partners in terms of releasing funding to key government projects? You realize that government has been rationalizing different agencies, when they rationalized agencies such as Ugandan National Road Authority was returned to Ministry of Works, Ugandan Coffee Development Authority was returned to Ministry of Agriculture and so many other agencies. So when you rationalize, you create some space, create a saving in terms of public finance. So when you rationalize, and then, I mean, there is some money left there that I think can be used to improve on service delivery. So I mean, money is going to be there. But again, why can't government try to focus within its own means? Like, you can try to cut unnecessary expenditures and then you don't affect service delivery. So it is the issue of government not coming up with new tax measures is welcome. But again, you realize that government already has some savings it hopes to make through rationalization of government agencies. Yeah. And in closing, Wilson, of course, right now we do know that the current funding for the development projects for the country have sort of had hitches. But I like the fact that you say that the government will be able to make some savings through this rationalization plan and also trying to clamp down on corruption. How much is currently lost to corruption? And if this is reversed, what would it mean for Uganda's economy? There was a report by IGG, I think in 2022, that government, okay, that Uganda or the country was losing 10 trillion every year, 10 trillion shillings every year in corruption. Imagine what 10 trillion can do if that money, I mean, is put to service delivery. It's quite a lot of money. So if you address corruption and also close other revenue leakages within government, we can improve our service delivery. Well, finally, Mwanishi Mwe, we've seen the auditor general in the recent past talking about budget absorption. Is this perhaps what prompted the government to reconsider its plans when it comes to introducing any new taxes in the financial year under review? Most probably, maybe. Although, you see, government projects sometimes tend not to begin on time. So budget absorption is one of the challenges that we are facing with public finance investments. You find that a project wants to start, but people have not been co-facilitating wants to start, but people have not been co-facilitating. People do not have, the project does not have a concept, does not have a clear design. So, and in a way, you find that some of the money, even money which has been borrowed, you find that government has signed money, has brought money, but that money has not been put to use because projects are not ready. Although I don't think it is the one which has, which could have informed the decision not to introduce new taxes in the new financial year, but government has to step up and address the issue of the project implementation challenges. Yeah. All right. Thank you so much, Wilson. And what would be your overall assessment for 2025 for Uganda's economy? Is it going to be a better year compared to last? What is your gut feeling? I'm quite bullish that the economy is going to continue and continue to improve because we have seen simple investments in areas of oil and gas. We have seen the country continue to attract foreign direct investments. We've seen the sector such as tourism continuously recover from the effects of COVID-19. And I mean, I'm quite bullish that the economy is going to recover, is going to continue to grow. And I mean, because when you look at the projections by the Minister of Finance Bank of Uganda and World Bank, last year the economy grew at around 6% and this year's growth is likely to be at around 6.5-7%. And I mean, it's possible we can make it.
Theme: Uganda's Decision to Forego New Taxes in the 2025-2026 Budget amidst Emphasis on Tax Administration and Anti-Corruption Measures
Uganda has made a strategic decision to halt the introduction of new taxes in the upcoming 2025-2026 financial year. This move, according to the country's State Minister for Finance Henry Musasizi, is a testament to the government's dedication to maximizing the utilization of existing taxes and cracking down on corruption. Wilson Manishimwe, a Policy Analyst at Corporate Image Limited, shared insights on this decision, emphasizing the significance of strengthening tax administration over imposing new tax measures. Manishimwe pointed out that Uganda has one of the lowest taxed GDP ratios in East Africa, standing at 13% of the GDP. With a narrow tax base and register of approximately four million individuals, the focus should be on enhancing tax administration by addressing issues such as corruption, tax leakage, tax avoidance, and expanding the tax register rather than introducing new taxes. By improving tax administration, the government can potentially increase revenue collection without burdening the populace with new tax measures. Recognizing the challenges faced in the previous fiscal year of 2024-2025, which saw a budget deficit and a slowdown in funding from development partners for key projects, Manishimwe highlighted the government's efforts to rationalize various agencies as a means of creating savings within public finance. By reallocating resources and cutting unnecessary expenditures, the government aims to maintain service delivery standards without resorting to new taxes. The emphasis on internal resource management and the utilization of savings garnered through agency rationalization reflect a conscious effort to navigate fiscal challenges without adding to the tax burden. Corruption remains a significant obstacle to Uganda's economic progress, with reports indicating an annual loss of 10 trillion shillings to corrupt practices. By tackling corruption and other revenue leakages, there is a potential for substantial improvements in service delivery and overall economic performance. The focus on enhancing transparency and accountability in financial management is crucial to unlocking the country's economic potential. The execution of development projects has been hindered by issues such as budget absorption and project implementation challenges. While budget absorption remains a persistent concern, prompting the government to reassess its tax strategies for the upcoming financial year, addressing project implementation inefficiencies is essential for optimal resource utilization. The readiness and efficiency of projects directly impact the absorption of allocated funds and the realization of development objectives. Looking ahead to 2025, Manishimwe expressed optimism regarding Uganda's economic prospects. Investments in sectors like oil and gas, continued foreign direct investments, and the recovery of industries such as tourism post-COVID-19 bode well for the country's economic growth. Projections from the Minister of Finance, Bank of Uganda, and the World Bank indicate a positive trajectory, with expected growth rates of 6.5-7% for the year. This optimism is rooted in the resilience of Uganda's economy and its capacity to attract investments and stimulate growth across various sectors. As the government refrains from introducing new taxes and focuses on leveraging existing resources more effectively, Uganda is poised to navigate economic challenges and capitalize on emerging opportunities for sustainable growth in the year ahead.
"I'm quite bullish that the economy is going to continue and continue to improve because we have seen simple investments in areas of oil and gas. We have seen the country continue to attract foreign direct investments. We've seen the sector such as tourism continuously recover from the effects of COVID-19. - Wilson Manishimwe, Policy Analyst at Corporate Image Limited"
Uganda, new taxes, 2025-2026 fiscal budget, State Minister for Finance, tax administration, corruption, economic growth, development projects, budget absorption, project implementation, oil and gas sector, tourism, COVID-19 recovery, foreign direct investments, Minister of Finance, Bank of Uganda, World Bank