Uganda is considering implementing a series of taxes on key products like fuel and building materials in the upcoming financial year, sparking concerns over a potential surge in the already high cost of living.

The government argues that these proposed taxes are necessary to address a revenue shortfall expected as part of efforts to reduce borrowing. The proposals, presented to Parliament by State Minister of Finance Henry Musasizi, are outlined in five sets of tax Bills: Excise Duty Amendment Bill 2024, Stamp Duty Amendment Bill 2024, Income Tax Bill 2024, Value Added Tax Bill 2024, and Tax Procedures Amendments Bill 2024.

Among the proposed measures is a levy of USh 500 ($0.12) on each 50kg bag of cement, adhesive, grout, white cement, or lime. Additionally, the government seeks to introduce charges of USh1,550 ($0.39) per litre of gasoline, USh1,230 ($0.31) per litre of gas oil, and USh1,550 ($0.39) per litre of paraffin.

Furthermore, new taxes are proposed on bottled mineral water, opaque beer, and gains from property transactions. Bottled mineral water would be subject to either a 10 percent tax or USh75 per litre, whichever is higher, while opaque beer would face a 12 percent tax or USh150 per litre, whichever is higher. Additionally, a five percent withholding tax would apply to gains earned from the sale of land in cities and municipalities, the sale of rental property, and the sale of shares of private companies.

These proposed taxes, if implemented, could have significant implications for Ugandan consumers, particularly those already grappling with the high cost of living. Critics argue that such measures may exacerbate financial burdens on households and businesses, potentially dampening economic activity and consumption.

While appearing before Parliament’s Budget Committee, Mr Musasizi said the government intends to generate Ush1.9 trillion ($488 million) from the proposed taxes to finance the proposed Ush 58.3 trillion ($15 billion) budget for 2024/25.

The proposed budget, according to the Ministry of Finance, will focus on the full monetisation of the Ugandan economy through agriculture, industrialisation, expanding and broadening services, and digital transformation and market access.

The minister also revealed that due to the high-interest rates on the global credit market, Uganda has backed off plans to borrow about $414 million from external lenders that would have covered the gap created by revenue collection shortfalls.

The proposals have however irked a section of legislators and tax experts who contend that they target the majority of the poor, leaving them exposed to adverse effects like increased standards of living.

Legislators said there is a need to widen the tax base instead of introducing new ones.