What you need to know:

Since Uganda’s PAYE rates are the highest across East Africa, there is limited room to increase this rate.

The Ministers of Finance in Burundi, Kenya, Rwanda, Tanzania and Uganda read their respective budgets for financial year 2023/ 2024 on 14 June 2023.  The Democratic Republic of Congo and South Sudan Ministers of Finance are yet to read their budgets.  The good news is that generally Gross Domestic Product (“GDP”) for financial year 2022/ 2023 (“FY 2022/2023”) in Kenya, Rwanda, Tanzania and Uganda has been projected to grow with Rwanda leading the pack at 6.2%.  Apart from Tanzania that managed to keep its inflation rate at an average of 4% as of May 2023, Burundi, Kenya, Rwanda and Uganda have seen spikes in their inflation rates.

The Uganda Shilling remained resilient against the USD despite the elevated inflation and increase in interest rates by the United States Federal Reserve.  However, the Tanzania Shilling registered the best performance in the region as of March 2023 having depreciated the least against the USD. As the East African states continue to manage their foreign exchange and Kenya seemingly most affected by availability of foreign exchange, the bigger question for most of the East African states is the debt sustainability and how the debt commitments will be funded in FY 2023/2024.

To fund the debt payments, several tax measures were suggested across the East African states.  We have seen Kenya, Tanzania and Rwanda suggest tax changes and some of them are anchored in increasing the applicable tax rates.  On the other hand, the proposed Uganda tax changes do not necessarily increase tax rates but rather are targeted at an efficient tax administration system and reducing revenue leakage.  Could this be a case of Uganda going against the grain and seeking not to over-tax its citizens while its neighbours are seeking to increase tax rates to collect tax? A glimpse of the recent proposed tax changes (both direct and indirect) across some of the East African countries could attempt answer this question as well as show if there is any room left for increasing tax rates in Uganda.