Traders warn new tax proposals could hurt businesses, raise prices

The Kampala City Traders Association (KACITA) has warned that proposed tax changes for the 2026/27 financial year could increase business costs, reduce cash flow, and push more traders into informality if not revised.

Presenting a memorandum to Parliament’s Finance Committee, chaired by Deputy Chairperson Moses Aleper, KACITA Chairperson Isa Sekito said traders support government efforts to raise revenue but questioned the timing of the proposals.

“The business community appreciates government’s continued efforts to enhance domestic revenue mobilisation. However, the proposed amendments come at a time when businesses particularly micro, small and medium enterprises are still recovering from multiple economic shocks,” he said.

KACITA, which represents over three million traders, said the proposals could raise operating costs and weaken competitiveness. The association raised concern about the proposed 0.5 per cent Alternative Minimum Tax on businesses reporting losses for seven years, saying it punishes struggling firms.

Sekito also warned that a proposed 10 per cent withholding tax on telecom agents would cut incomes for small operators. “The 10 percent withholding tax on commissions directly reduces earnings of agents and distributors, many of whom operate on thin margins,” he said.

On VAT, KACITA said the current 18 per cent rate raises prices and reduces demand. It proposed lowering the rate to 16 per cent and increasing the registration threshold to Shs1 billion to improve compliance.

The association also opposed higher stamp duty on land and new taxes on vehicles, warning these would increase transport and business costs. It added that higher taxes on fuel and basic goods could fuel inflation.

KACITA further criticised plans to double the surcharge on used clothes, saying the move could lead to job losses.

Meanwhile, the Uganda Manufacturers Association (UMA) called for changes to tax appeal rules, saying the requirement to pay 30 per cent of assessed tax before appeal limits access to justice.