Uganda’s manufacturing sector has received a major boost after President Yoweri Museveni returned the Income Tax (Amendment) Bill, 2026 and the Excise Duty (Amendment) Bill, 2026 to Parliament for reconsideration, citing concerns that some of the proposed measures would hurt businesses, distort competition, and negatively affect the economy.

For manufacturers, the President’s decision represents a significant victory, particularly his rejection of the proposed sharp increase in excise duty on single-use plastics. Parliament had approved increasing the duty from the current 2.5% (or US$70 per tonne) to 25% (or US$1,500 per tonne), a move that industry players warned would dramatically increase production costs and reduce competitiveness.

In his communication to Parliament, President Museveni observed that the proposed increase would place substantial cost pressures on manufacturers involved in the production and use of plastic packaging, potentially affecting investment, production, and employment across the sector. He further noted that Uganda has not yet developed sufficient alternative packaging materials to support such a transition.

The decision aligns with concerns consistently raised by the Uganda Manufacturers Association (UMA), which has advocated for balanced tax policies that promote industrial growth while allowing manufacturers adequate time to transition to environmentally sustainable alternatives. During the tax consultation process, UMA cautioned that steep tax increases on key manufacturing inputs would ultimately be passed on to consumers, reduce industrial competitiveness, and discourage investment.

By returning the Bill, the President has opened the door for further consultation between Parliament, Government, and the private sector to develop a more practical approach that protects both environmental objectives and Uganda’s industrialization agenda.

The President also returned provisions in the Income Tax (Amendment) Bill, arguing that the proposed exemption of land-based casinos from withholding tax on betting winnings would create unfair competition, encourage tax avoidance, and lead to revenue leakage.

For Uganda’s manufacturers, however, the most immediate impact is the suspension of a tax measure that would have significantly increased production costs across industries that depend on plastic packaging, including food processing, beverages, pharmaceuticals, consumer goods, and agro-processing.

Industry leaders are expected to use the reconsideration period to engage Parliament and Government in crafting tax measures that achieve environmental sustainability without undermining manufacturing competitiveness, employment, and economic growth.