The government has proposed an increase in taxes on cigarettes and beer manufactured from local raw materials in a move aimed at raising Shs19.4 billion.
The Ministry of Finance says the measure will help the country respond to inflationary trends and reduce health risks associated with tobacco use.
The proposal was announced by Henry Musasizi, Minister of State for Finance, while appearing before Parliament’s Finance Committee to present seven new Tax Bills for the 2025/26 financial year.
He said the excise duty on beer made from local ingredients will increase from Shs650 to Shs900, while taxes on cigarettes will also be adjusted upwards for the first time since FY 2017/18.
“Modest increase in excise duty on cigarettes and beer to generate Shs19.40Bn. The primary objective of this amendment is to generate additional revenue while accounting for inflation, especially on cigarettes,” said Minister Musasizi.
“The excise duty on cigarettes in Uganda has not been adjusted since Financial Year 2017-18, yet inflation has risen by 28.8% over the period. We have also been under pressure from the health sector to increase the excise rates on tobacco products much higher to reduce the health-related risks.”
Defending the government’s position, the Minister emphasized both economic and public health motives behind the decision.
“Increasing the duty will not only align with inflationary trends but also serve as a public health objective by discouraging tobacco consumption, which imposes significant health costs on the economy,” he said.
“To increase the excise duty on beer manufactured from local raw materials from Shs650 to Shs900 reflects the current economic conditions and inflation. This will ensure that the taxation of beer remains fair and that government revenue keeps pace with the economic realities.”
In a separate measure, the government is proposing the introduction of an import declaration fee on goods imported for home use, projected to raise Shs79 billion. These funds will be earmarked for the construction of the Standard Gauge Railway (SGR), a key infrastructure project aimed at improving Uganda’s trade competitiveness.
“This measure seeks to raise revenue for infrastructure investment, particularly for the standard gauge railway,” said Musasizi.
He noted, “In addition, it will render imports more expensive, hence promoting import substitution and supporting local industries. Furthermore, this proposal aligns with Uganda’s policy and other East African Community partner states where similar fees are already imposed. For instance, Kenya applies a 2% CIF charge, while Tanzania applies a 0.6% customs processing fee.”
Musasizi further disclosed that the 2025/26 tax measures, combining the tax policy proposals in the bills and administrative measures by the Uganda Revenue Authority (URA), are expected to yield Shs2.420 trillion in revenue.
“To finance the budget, we have proposed a modest tax policy measure. In this regard, we project to generate Shs538.6Bn in 2025-2026 from the tax policy proposals contained in the bills. In addition, we will generate Shs1.885Trn from URA administrative measures,” he explained.
The government also intends to intensify revenue mobilization by enhancing the predictability and fairness of the tax system. Musasizi revealed that third-party data—such as water and electricity bills—will be used to identify and bring more potential taxpayers into the tax net.
The proposed tax adjustments are now before Parliament for scrutiny and approval as the government seeks to balance revenue generation with economic recovery and social welfare priorities.
