Uganda’s Tax System Faces a Crisis of Credibility » The Hoima Post –

By Alexander LuyimaUganda’s tax system is sinking into a profound crisis of credibility after the Uganda Revenue Authority (URA) failed to meet its revenue targets for four consecutive months as 2025 came to a close. Preliminary figures indicate a cumulative shortfall running into trillions of shillings between August and November alone. Yet, in a move that has ignited widespread public anger, the same institution has turned to Parliament seeking additional funds to pay staff bonuses.
To many Ugandans, the contradiction is stark and insulting: an authority that failed to collect the money needed to fund public services is now asking taxpayers to reward that failure. At the heart of the outrage lies a deeper problem—ordinary citizens are increasingly being forced to shoulder the cost of systemic institutional weakness.
The figures paint a grim picture. In August, URA collected 2.59 trillion shillings against a target of 3.05 trillion. September followed with a shortfall of 361.7 billion shillings, October missed by 311.8 billion, and November by a further 415.8 billion. This trend is not new. In the 2022/23 financial year, URA failed to meet its annual target by 1.08 trillion shillings.
While officials frequently cite global economic pressures, many economists argue that the root causes are largely domestic—and self-inflicted.
“The recurring shortfalls point to a fundamental disconnect,” says Dr. Fred Muhumuza, an economist and policy analyst at Makerere University. “Revenue targets are often designed to satisfy government spending ambitions rather than the actual taxable capacity of the economy. When this is combined with structural inefficiencies in collection, failure becomes inevitable.”
One of the most damaging structural flaws is the high cost of tax compliance, which actively discourages small business growth. World Bank data shows that Ugandan businesses spend an average of 271 hours per year complying with tax requirements. For small traders, market vendors, and workshop owners, formalizing a business often means grappling with complex systems and hiring accountants—costs that can erase already thin profit margins.
“The system punishes those who attempt to formalize,” explains Sarah Chelangat, Director of the Uganda Small Scale Industries Association. “The financial and psychological burden makes remaining informal the only rational survival strategy. Over time, that shrinks the national tax base instead of expanding it.”
Beyond technical inefficiencies lies an even deeper problem: a collapse of trust. Uganda scored just 26 out of 100 on Transparency International’s 2023 Corruption Perceptions Index, ranking 141st globally. This erosion of confidence directly undermines tax morale—the willingness of citizens to pay taxes voluntarily.
“Taxation is a social contract,” says Professor Augustus Nuwagaba, an international economic consultant. “Citizens contribute in expectation of public goods. When they see corruption, missing drugs in health centers, and deteriorating infrastructure, that contract is broken. In such conditions, non-compliance becomes a rational protest, not a moral failure.”Public frustration is further inflamed by how the tax burden is distributed. While small traders are aggressively pursued for daily and weekly nuisance taxes, the Ministry of Finance reports that tax exemptions cost the treasury an estimated 4.5 trillion shillings in the 2022/23 financial year. These exemptions—mostly granted to large corporations in sectors such as oil and manufacturing—are intended to stimulate investment but are widely criticized for their opacity and weak oversight.
“We have engineered a deeply regressive system,” argues Julius Mukunda, Executive Director of the Civil Society Budget Advocacy Group. “It relentlessly pursues small traders while granting massive, opaque exemptions to large and often profitable companies. We are burdening the many to subsidize the few—and the strategy is clearly failing.”
Recent protests by traders against the digital EFRIS system highlight this tension. Although the system is promoted as a tool to curb large-scale tax evasion, many small businesses experience it as yet another complex, costly obligation imposed on those least able to absorb it.
The solution does not lie in harsher enforcement alone. What Uganda needs is a radical simplification of taxation for small and medium enterprises, a transparent and time-bound review of all major tax exemptions, and—above all—a visible commitment to rebuilding public trust through accountable and effective service delivery. The URA must transform from being perceived as a predatory collector into a credible partner in national development.
This persistent revenue failure is not merely a technical budgetary issue. It is a direct subtraction from Uganda’s future—from the quality of its roads, schools, and hospitals. The data is clear. Expert consensus is clear. The remaining question no longer belongs to URA boardrooms or parliamentary committees, but to the country’s markets and living rooms: how long can a state endure when its tax system erodes the very society it depends on?

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