The minister’s pledge comes nearly two months after URA issued guidance maintaining that councillors’ emoluments should attract a 40% withholding tax, regardless of the amounts they receive.
Finance Minister Henry Musasizi has pledged to direct the Uganda Revenue Authority (URA) to stop deducting Pay As You Earn (PAYE) from councillors’ allowances, potentially reversing an earlier tax position that subjected local government political leaders to a withholding rate of 40%.
Musasizi made the commitment on November 10, 2026, while responding to concerns raised by Members of Parliament over the taxation of district councillors’ allowances.
“I am going to give an instruction for URA not to deduct allowances of councillors,” Musasizi told Parliament.
He argued that most councillors depend on the allowances they receive from their respective local governments, which are already inadequate, with some leaders calling for an increase.
His assurance was welcomed by Speaker of Parliament Jacob Marksons Oboth, who responded: “That is what the Honourable Members were waiting for,” before proceeding to the next item of business.
Police Investigate Suspected Poisoning Deaths of Four Pupils in Kampala
The minister’s pledge comes nearly two months after URA issued guidance maintaining that councillors’ emoluments should attract a 40% withholding tax, regardless of the amounts they receive.
In a letter dated September 15, 2026, addressed to the Town Clerk of Kira Municipal Council, URA Commissioner for Domestic Taxes Denis Kugonza explained that councillors’ allowances were subject to the highest marginal tax rate because councillors were not full-time employees of the municipal council and could have other sources of taxable income.
The letter, referenced URA/DTD/BP/8.11.4 06/1000151480, was issued in response to a September 7 request by Kira Municipal Council seeking clarification on the implementation of PAYE provisions affecting its newly elected councillors.
The council had explained that its councillors came from different economic backgrounds, including market vendors, boda boda riders, housewives and professionals, with some depending on their political positions as their primary source of income.
It also raised concerns that the previous 30% deduction had already reduced councillors’ disposable income, while the increase to 40% had further worsened their financial difficulties.
However, in its response, URA cited Regulation 3(15)(c) of the Income Tax (Withholding Tax) Regulations, 2000, which provides for the standard withholding amount to be calculated using the highest marginal tax rate, currently 40%.
The authority further explained that employees who do not submit employee declarations to their employers are subjected to the standard withholding amount.
URA advised councillors who considered themselves disadvantaged by the deductions to file annual income tax returns and claim refunds where the tax withheld exceeded their actual annual tax liability.
The authority relied on Sections 118(1) and 123(1) of the Income Tax Act, which provide for the filing of annual returns and recovery of excess tax paid.
Saudi Court Sentences Migrant Worker to 100 Lashes Over Pregnancy Outside Marriage
Musasizi’s latest pronouncement, however, signals a possible shift from URA’s earlier administrative position, with the Government now considering stopping the deductions instead of requiring councillors to wait until they file annual returns to recover excess payments.
It remains to be seen when the minister’s promised directive will be formally communicated to URA and local governments and how the tax authority will implement the proposed change.
