Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/283829 
Year of Publication: 
2023
Series/Report no.: 
WIDER Working Paper No. 2023/133
Publisher: 
The United Nations University World Institute for Development Economics Research (UNU-WIDER), Helsinki
Abstract: 
Uganda has one of the lowest corporate income tax collection rates in sub-Saharan Africa, while offering generous corporate tax incentives. It is unclear whether tax incentives achieve their objectives without primarily benefiting firms, potentially undermining domestic revenue mobilization and encouraging tax avoidance. Using Uganda's administrative tax data for 2014-21 and a new tax incentive dataset, this study shows that tax holidays and the reintroduction of investment allowances are associated with a significant increase in investment and mostly with higher workforce-related expenses. However, there is no clear evidence of a causal link with these incentives, while tax holidays can cost Uganda over UGX160 billion annually, corresponding to 0.12 per cent of GDP, thus demanding further research. In addition to guidance for Ugandan policy-makers on the effect of particular tax incentives, the results also highlight the importance of assessing impacts and systematic use of administrative tax data for evidence-based policymaking in developing countries.
Subjects: 
corporate tax incentives
domestic revenue mobilization
administrative tax data
developing countries
tax avoidance
JEL: 
F63
H25
H26
O23
Persistent Identifier of the first edition: 
ISBN: 
978-92-9267-441-0
Document Type: 
Working Paper

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