Kampala, Uganda – Over UGX 330 billion in crucial funds currently sits frozen, entangled in prolonged tax disputes within Uganda’s system. This staggering sum represents not just delayed government programs, but also vital working capital desperately needed by businesses, particularly the nation’s manufacturers. In a powerful move to address this bottleneck, the Uganda Manufacturers Association (UMA), through its Economic Business Committee, is spearheading a critical discussion to reform the country’s tax dispute resolution framework.

At the heart of the crisis lies a contentious rule: the mandatory 30% upfront payment required to challenge a tax assessment. While seemingly designed to secure government revenue, this provision places an immense and often unjustifiable burden on manufacturers, regardless of the dispute’s eventual outcome.

The Heavy Burden on Manufacturers:

For manufacturing businesses, where cash flow is the lifeblood of daily operations, the 30% upfront payment can be crippling:

• Crippled Cash Flow: Manufacturers operate on tight margins and rely heavily on predictable cash flow to purchase raw materials, pay suppliers, meet payroll, and maintain production lines. Tying up 30% of a disputed tax assessment, which could be erroneous, severely restricts this flow, hindering routine operations.
• Stifled Investment and Expansion: Funds locked in disputes are funds that cannot be invested in new machinery, technological upgrades, research and development, or expanding production capacity. This directly undermines manufacturers’ ability to grow, innovate, and compete regionally.
• Unfair Financial Risk: Businesses are forced to part with significant capital even before their case is heard or proven. If the assessment is later found to be incorrect, retrieving these funds can be a lengthy and bureaucratic process, prolonging the financial strain and discouraging future investment.
• Reduced Competitiveness: Local manufacturers facing such financial pressures are at a disadvantage compared to regional competitors who may operate under more lenient tax dispute resolution systems. This impacts their ability to export and expand their market share.

A Game-Changer for Uganda’s Economy:

The UMA’s advocacy transcends the immediate concerns of individual businesses; it’s a push for broader economic revitalization. Manufacturers are significant contributors to Uganda’s GDP, job creation, and export revenue. Resolving these protracted tax disputes and freeing up over UGX 330 billion could:

• Inject Capital into the Economy: The unlocked funds would immediately become available for productive use by businesses, stimulating investment, consumption, and overall economic activity.
• Accelerate Government Programs: If the tax assessments are indeed valid, expediting resolutions means these much-needed funds can flow into government coffers faster, enabling timely execution of critical public services and development projects.
• Boost Business Confidence: A fairer, more predictable tax dispute system fosters greater trust between taxpayers and the Uganda Revenue Authority (URA). This increased confidence encourages both local and foreign investment, knowing that unforeseen tax disputes won’t unduly paralyze operations.

UMA’s Vision for Reform:

The Uganda Manufacturers Association, working with partners like Picfare Uganda, BDO Uganda, and Nile Breweries Uganda, is advocating for concrete reforms, including:

• Revising the 30% Payment Rule: Proposing alternative mechanisms that ease cash flow pressures on manufacturers while still ensuring a commitment to the dispute resolution process.
• Expediting Dispute Resolutions: Pushing for clearer timelines, more efficient processes, and potentially expanded capacity within the Tax Appeals Tribunal (TAT) to significantly reduce the backlog of unresolved cases.
• Fostering Public-Private Dialogue: Establishing more consistent and transparent channels for collaboration between the URA and the manufacturing sector to shape fairer, clearer, and more predictable tax policies.

This push for tax dispute reform is more than just a plea for relief; it’s a strategic move to unleash the full potential of Uganda’s manufacturing sector. By resolving this critical bottleneck, the nation can unlock billions, spur economic activity, and solidify the foundation for sustainable industrial growth.