Parliament approves 30% tax on second-hand clothes

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Parliament has approved a 30% tax on second-hand clothes and items, with the intention of curbing the dumping of worn-out goods and encouraging local textile manufacturing.

On April 22, 2026, Parliament passed the External Trade (Amendment) Bill, 2026, introducing a 30% environmental levy on all imported second-hand clothes, commonly known as "mivumba."

The State Minister for Finance, Henry Musasizi, said that passing the Bill would encourage the growth of Uganda’s textile industry while generating revenue for the country.

The chairperson of the Committee on Finance, Amos Kankunda, said the move is part of a broader government strategy to align with East African Community goals to phase out second-hand clothing imports and promote the Buy Uganda, Build Uganda policy.

However, the proposal faced opposition from a minority report presented by Brenda Nabukenya (NUP, Luweero District), who argued that the tax hike is a "punitive" measure that disproportionately affects low-income Ugandans who rely on the affordable second-hand market for their basic dignity.

Parliament also approved a raft of Bills introducing or increasing taxes on various goods to raise revenue for government activities in the new financial year.

The Bills include the Value Added Tax (Amendment) Bill, 2026, the Stamp Duty (Amendment) Bill, 2026, the Tax Procedures Code (Amendment) Bill, 2026, and the Excise Duty (Amendment) Bill, 2026. They were first scrutinised by the Committee on Finance, whose chairperson, Kankunda, presented reports to the House presided over by Speaker Anita Among on Tuesday, April 21, 2026.

Parliament passed the Value Added Tax (Amendment) Bill, 2026, increasing the VAT registration threshold from sh150 million to sh300 million in a move aimed at easing compliance pressure on small businesses.

Kankunda said the adjustment reflects economic changes and is intended to reduce compliance costs for small and medium enterprises.

“The current threshold has not changed since 2015 despite inflation and growth in business activity. As a result, many small businesses are required to register for VAT, file monthly returns and often hire accountants, which is costly and time consuming,” Kankunda said.

He noted that businesses in the sh150 million to sh250 million bracket contribute only a small share of VAT revenue.

“In practice, most businesses in this range contribute about 3 percent of total VAT collected,” he added.

The House rejected a minority proposal presented by Karim Masaba (Industrial Division, Independent), who argued that the threshold remained too low and would still burden small businesses. He instead pushed for a sh500 million threshold.

“Increasing the VAT registration threshold to sh500 million would reduce administrative and compliance costs for both taxpayers and government, and allow small businesses more space to grow,” Masaba said.

Musasizi presented revenue scenarios, noting that a sh250 million threshold would generate sh349.9 billion, while sh300 million would yield sh358.3 billion. A sh500 million threshold, he warned, would result in a revenue loss of about sh6.99 billion.

Parliament also passed the Tax Procedures Code (Amendment) Bill, 2026, introducing a sweeping tax amnesty that will wipe out all tax arrears, including penalties and interest, owed by taxpayers as of June 30, 2016, in what emerged as one of the most debated revenue reforms in recent years.

Kankunda said the tax amnesty is intended to clean up Uganda Revenue Authority ledger records, reduce long-standing disputes, and give taxpayers a fresh start.

He said many taxpayers had previously been unable to benefit from earlier waivers due to inconsistencies in URA ledger reconciliations, adding that the new arrangement would allow the authority to focus on current, enforceable tax obligations.

Parliament passed the Excise Duty (Amendment) Bill, 2026, revising excise duty on construction materials by increasing tax on cement, adhesives and grout from sh500 to sh750 per 50 kilogramme bag. The government justified the increment, noting that the rate had not been adjusted since 2015.

Parliament also approved an increase in duty on imported spirits targeting un-denatured alcoholic beverages with 80% alcohol content, a measure intended to protect local manufacturers such as waragi, vodka and gin producers.

In addition, the Bill introduces a tax of sh400 per litre of cooking oil and a levy of $1,500 per tonne on plastics to address environmental concerns and broaden the tax base. The House approved an increase in excise duty on cane sugar from sh100 to sh200, and raised the first registration fee for motorcycles from sh200,000 to sh500,000.

On paints, varnishes and lacquers, Parliament imposed a 10% excise duty on imported products while maintaining a lower rate of 3% on locally manufactured equivalents.

Meanwhile, Parliament passed the Stamp Duty (Amendment) Bill, 2026, rejecting proposed increases in taxes on land and motorcycle transfers while approving new measures on motor vehicle transactions.