KAMPALA, Uganda — Tobacco companies are protesting a government proposal to significantly raise taxes on cigarettes, warning it could lead to substantial revenue losses for both the industry and the state.
Officials from Leaf Tobacco Company told Parliament’s Finance Committee that the proposed Shs10,000 ($2.65) increase per 1,000 sticks of cigarettes would drive up retail prices, reduce consumption, and ultimately lower sales and tax revenue. The tax hike is part of a broader government proposal to increase levies on cigarettes and beer, set to take effect July 1.
Under the proposed tax bill, locally manufactured soft cap cigarettes would increase from Shs55,000 to Shs65,000 per 1,000 sticks, while hinge lid varieties would rise from Shs80,000 to Shs90,000 per 1,000 sticks, representing a 10 percent increase.
The government anticipates generating an additional Shs19.4 billion from the tax increase. However, Dr. David Kamukama, head of Corporate and Public Relations at Leaf Tobacco and Commodity, the only local cigarette producer, suggested a more moderate increase of Shs5,000 per 1,000 sticks.
“The overall impact of the extreme cigarette taxes as proposed results in promoting the illegal market, reducing sales and taxes from regulated businesses, and promoting toxic, unregulated products in the country,” Kamukama said. He noted that their annual tax contributions have already fallen from Shs40 billion in 2020 to Shs17 billion, and the new measures would worsen this trend.
Charles Nsamba, Corporate and Regulatory Affairs Manager at British American Tobacco (BAT), urged the government to first address the issue of illicit tobacco trade before implementing any tax increases.
“We recommend that the government implement source-based enforcement. We strongly believe the government has visibility at various warehouses,” Nsamba told the committee. He alleged that products not manufactured locally, like the Oris brand, are being smuggled into the country, sometimes by high-ranking officials, putting legal manufacturers at a disadvantage due to lower prices. Nsamba argued that curbing illegal trade should be the priority over increasing taxes on imported cigarettes.
Finance Committee Chairperson Amos Kankunda said the committee is gathering input from all affected parties before making recommendations.
In other tax-related discussions, the Uganda Leather and Allied Industries Association (ULAIA) voiced strong support for the Hides and Skins (Export Duty) (Amendment) Bill, 2025, which proposes an export levy of $0.80 per 100 kilograms of glue stock. ULAIA board chairperson Abdul Hakiim Sekandi said the tax would encourage local processing, boost industrial growth, create jobs, and enhance the sector’s contribution to the Ugandan economy. The Uganda Tanners Association also supported the bill, calling it a crucial step for local industrialization and value addition.
Separately, the Institute of Certified Public Accountants of Uganda (ICPAU) welcomed a proposed amendment to the Income Tax Act that would exempt new businesses valued at Shs500 million or less from income tax. ICPAU’s Managing Partner, Sillajji Baguma, told the committee that the proposal would promote entrepreneurship. However, ICPAU proposed extending the exemption period from three to five years and allowing businesses to carry forward losses incurred during the tax-free period. They also requested clarification on the treatment of assessed losses after the exemption ends.
