WHY UGANDA’S TAX WAIVERS ARE A FISCAL TRAP, NOT AN ECONOMIC LIFELINE

The Minister of State for Finance, Henry Musasizi recently tabled an urgent appeal before Parliament to grant tax waivers to three financially distressed entities: the Uganda Printing and Publishing Corporation (UPPC), City Harvest Electrical Installation Supply & Repairs Ltd, and the Diocese of Northern Uganda. Citing acute cash-flow crises, the minister argued that relief is vital to safeguard their operations and protect their economic contributions. While the impulse to rescue struggling institutions is politically attractive, Parliament must tread carefully. Uganda’s expanding culture of ad-hoc corporate bailouts and tax holidays directly contradicts the National Resistance Movement (NRM) 2026–2031 Manifesto. Under the banner of the "No Sleep Kisanja" (Kisanja No More Sleep)—an executive mandate explicitly demanding strict governance, high efficiency, and zero tolerance for underperformance—the state must rethink its fiscal generosity. This uncoordinated erosion of our revenue base directly sabotages the country's collective aspiration of achieving Ten-Fold Economic Growth from US$ 50 billion to US$ 500 billion. Evaluating the necessity of these waivers requires looking past individual corporate pleas to confront a stark macroeconomic reality. According to a joint report by the Ministry of Finance and tax experts, Uganda forewent an astronomical Shs5 trillion in taxes during the 2024/25 financial year alone through various tax expenditures, exemptions, and waivers. This is not pocket change. It represents 2.2% of our national GDP and effectively swallows 15.5% of the total tax revenue collected by the Uganda Revenue Authority (URA). The leakages cut across every major revenue stream. Value Added Tax (VAT) exemptions account for Shs2 trillion of the bleeding, followed by Shs1 trillion in Personal Income Tax, Shs853 billion in Excise Duty, Shs708 billion in Customs Duty, and Shs431 billion in Corporate Income Tax. A decade ago, annual revenue losses from tax relief hovered between Shs1 trillion and Shs1.5 trillion. By FY 2023/24, that number grew to Shs3.6 trillion, culminating in the record-breaking Shs5 trillion deficit in FY 2024/25. Civil society organizations like SEATINI-Uganda, along with international institutions like the IMF and the World Bank, have repeatedly warned that the massive fiscal costs of these incentives heavily outweigh their realized economic benefits. Uganda is starving its own public services to subsidize selected enterprises. Beyond blanket industrial exemptions, the country has grown dangerously reliant on a patchwork of case-by-case parliamentary bailouts. In February 2025, Parliament cleared Shs9.5 billion in waivers for entities including J2E Investment Corporation and Nkumba University. In August 2026, an Shs8.7 billion waiver was cleared for Fresh Cuts Uganda Limited. Now, we face an additional Shs16.8 billion bundle of requests for UPPC, K-Roma Limited, and Ankole Western University Proponents of these waivers argue that intervention is an act of economic pragmatism. In many cases, including the current batch, entities are facing collapse because government ministries, departments, and agencies have failed to pay them for services rendered. Forcing a company into liquidation due to state-induced domestic arrears is counterproductive. Furthermore, entities like UPPC handle critical statutory printing, while religious institutions provide vital social safety nets that the state cannot replicate. However, the counterarguments are structurally devastating. A "Kisanja No More Sleep" government cannot afford complacency. To achieve double-digit GDP expansion and a qualitative leap in economic management, the Ten fold Growth Strategy prioritizes a very clear pillar: competitively growing the share of the formal economy for a larger revenue base. Handing out endless tax waivers shrinks that revenue base instead of growing it. Furthermore, granting ad-hoc waivers creates a severe moral hazard. It signals to the business community that tax compliance is negotiable, and that aggressive lobbying beats sound financial management. It also distorts the free market, giving subsidized companies an unfair advantage over compliant, tax-paying competitors who manage their cash flows responsibly. Are tax waivers a good move to save the economy? The answer is a conditional yes, but only if they stop operating as arbitrary political or administrative favors. The Minister’s call for a clear, transparent, and structured criteria to guide future tax waivers is the most vital takeaway from this legislative dilemma. To align with the NRM Manifesto and protect the path to a US$ 500 billion economy, Parliament must immediately codify three strict benchmarks to drastically reduce tax expenditures: [ First, the compensatory rule must apply. If an entity's financial distress is directly caused by government delays in paying domestic arrears, a tax waiver is a justified, necessary correction to offset state-inflicted harm. Second, we must apply a strict "but-for" test. Relief must be restricted exclusively to inherently viable enterprises facing temporary, external macroeconomic shocks—not structurally mismanaged companies looking for a soft landing. Third, any tax relief must be tied to mandatory reciprocity. Waivers must legally bind the beneficiary to strict operational restructuring and compliance milestones to guarantee they return to full tax-paying status, rather than returning to Parliament for another bailout in a few years. While short-term tax waivers may be practically necessary to save critical enterprises from collapsing under the weight of government arrears, continuing down this uncoordinated path will completely destabilize Uganda's domestic revenue mobilization. A government in an era of "No Sleep" must keep its eyes wide open to the dangers of fiscal leakage. Parliament's immediate priority should not be passing more isolated bailouts, but rather enacting a rigorous, permanent legal framework to ensure that any future tax relief is transparently justified, fair to compliant taxpayers, and strictly accountable to our shared growth targets