KACITA, Manufacturers Push Back Against Planned Tax Increases

The Kampala City Traders Association (KACITA) has raised concerns over proposed tax changes for the 2026/27 financial year, warning they could raise business costs, strain cash flow, and push more enterprises into the informal sector if not adjusted.

While presenting their views to Parliament’s Finance Committee on April 8, 2026, KACITA Chairperson Isa Sekito acknowledged government efforts to increase domestic revenue but noted that the timing is difficult, especially for small and medium-sized businesses still recovering from recent economic challenges.

KACITA warned that several proposals, though well-intentioned, may negatively affect business operations. Among the key concerns is the proposed 0.5% Alternative Minimum Tax on companies that report losses for seven consecutive years, which the association says could penalize struggling businesses and discourage recovery. They also opposed a proposed 10% withholding tax on telecom agents, arguing it would significantly reduce earnings for operators who already work on small margins.

On Value Added Tax, KACITA said the current 18% rate increases prices and reduces competitiveness. The association suggested lowering VAT to 16% and raising the registration threshold beyond Shs250 million to ease pressure on businesses and encourage compliance.

The group also expressed concern over proposed increases in stamp duty, particularly on land transactions, saying higher costs could discourage investment. Additional taxes on vehicle transactions were also criticized for likely increasing transport and logistics costs.

KACITA further warned that higher excise duties on essential goods such as fuel, sugar, cooking oil, and cement could drive up inflation, as businesses would pass the added costs on to consumers. The association also opposed plans to double the surcharge on used clothing imports, citing risks of job losses and reduced compliance in a sector that supports many livelihoods.

Meanwhile, the Uganda Manufacturers Association (UMA) called for reforms to the Tax Appeals Tribunal process, particularly the requirement for taxpayers to pay 30% of assessed tax before lodging an appeal. UMA leaders argued that this condition limits access to justice and strains businesses financially.

UMA also proposed reducing the top income tax rate from 40% to 35% to improve competitiveness and attract talent. Additionally, they recommended increasing the PAYE threshold to Shs500,000 to reflect the rising cost of living.

However, the manufacturers welcomed the proposal to extend the tax holiday for the Bujagali Hydro Power Project, saying it could support continued investment in the energy sector.