Progressivity or Regressivity in Uganda's Tax System: Implications for the Fy2014/15 Tax Proposals

In this paper, insights were provided on the tax-benefit implications of the FY2014/15 tax proposals as well as the 2012/13 income tax reform. While the income tax reform enhanced the progressivity of pay-as-you-earn (PAYE), it resulted in significant loss of government revenue by nearly 0.2 percent of GDP. Interesting findings do emerge with the non-income tax. The study concluded that, Uganda’s tax system comprises of a mixture of progressive (e.g.on fuel, pasteurised milk) and regressive taxes (e.g. on salt, piped water, kerosene). In terms of horizontal equity, the degree of progressivity varies across gender and geography. Regardless of these findings, the entire tax system becomes less progressive with the 2014/15 tax proposals but the negative impact is offset by the progressivity in public spending on health and primary education. As such focusing on progressivity or lack of it at individual item level could be misleading, calling for examining the tax system in its entirety. The paper calls for more evidence-based tax policy processes to minimise government’s reversal of its proposed tax measures.