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By virtue of Kenya's Finance Act 2023, which took effect on July 1st, the VAT on petroleum products was increased from 8% to 16%.
Due to this, the price of a litre of petrol in Kenya has gone from about sh4,700 to sh5,000; that of diesel from about sh4,300 to sh4,600; and that of kerosene from about sh4,100 to about sh4,400.
Uganda is already preparing for a rise in the price of petroleum goods as well as other things because the majority of its imports pass through Kenya's Mombasa Port.
Currently, a litre of gasoline costs about sh5,000 in Uganda.
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According to Thadeus Musoke, the chairman of the Kampala City Traders Association, the cost of transporting goods from Kenya will increase as a result of Kenya's tax reforms.
"All of this will make doing business in Uganda more expensive. Even the costs of some Kenyan-made goods will rise," he predicted.
He cited as an example the cost of shipping a 20-foot container from Mombasa to Kampala, which is likely to rise, to be about $3,000 (or roughly Sh11 million).
The chairman of the Uganda Private Sector Foundation, Stephen Asiimwe, said that they are concerned about Kenya's tax revisions.
According to him, "it will have an effect on the cost of logistics and transportation, as well as those industries that use diesel to power machines."
The new law, which was approved last month, also increases the maximum personal income tax rate to 35% and imposes a 1.5% housing levy on all employees.
The additional revenue from the tax increases is anticipated to total $1.42 billion (200 billion shillings) annually.
President William Ruto of Kenya stated that the government must cut back on borrowing while defending the tax increase. The World Bank has classified the government as being at a high risk of debt distress due to its 9.4 trillion shilling ($67 billion) public debt burden.