By Crystal Kabajwara

STATISTICS from the Tax Appeals Tribunal (TAT) today show an exponential growth in the number of tax disputes.

Between 2020 and 2025 the number of new applications filed at the Tribunal grew by 127% – from 188 in 2020 to 410 in 2025! 

In Financial Year 2025 (FY25), the Tribunal resolved 266 tax disputes worth UGX506billion – almost double the value just two years earlier (a 91% increase from UGX265billion in 2023).

I am often asked why tax disputes are so sharply on the rise.

In the past I attributed this to the usual suspects – poor taxpayer compliance and a corresponding increase in compliance enforcement by the Uganda Revenue Authority (URA).

But I have come to realise that the answer lies in a simple yet profound concept: we suffer a trust deficit in Uganda.

A trust deficit occurs when trust in people, institutions, markets, or systems falls below the level needed for an economy to function smoothly. 

It operates at both micro- and macro-economic levels and can be devastating.

At the micro-economic level, a lack of trust between individuals and firms stifles day-to-day transactions. A small business that is not trusted by its suppliers has to pay upfront for goods rather than purchase on credit.

Employees who do not trust management will only do the bare minimum at work, reducing productivity; banks that don’t trust borrowers, lend at higher interest rates, and borrowers who do not trust banks avoid formal credit altogether.

This lack of trust leads to higher transaction costs, as every deal requires contracts, lawyers, and collateral. Small businesses find it difficult to expand, and traders prefer to hide cash under their mattresses than invest it. 

In the workplace, teams with low internal trust conceal information, avoid taking risks, and focus on politics rather than innovation.

This behaviour leads to the growth of the informal economy, as people prefer cash transactions that do not leave an audit trail. 

In some cases they could even resort to barter trade, or transact through unregistered businesses to avoid formal institutions.

In the end, tax revenue suffers, reducing the government’s ability to provide social services. 

I once asked my longtime “cab guy”, Godi, whether he had considered expanding his business through partnerships.

“Madam, abantu bafera! Baja okunkubirayo!” (People are crooks. They will cheat me!) he said. 

He preferred running one vehicle he could control, rather than risk growing under a partnership. Uganda is full of ‘Godis’ who would rather make some “ka little money” than explore partnerships and joint ventures.

At a macro-economic level, citizens do not trust the government, courts, regulators, or the tax system. This contributes to capital flight, low tax morale, and a weakened currency. 

Countries with low institutional trust pay higher interest on loans, as lenders demand a risk premium. The difference between our borrowing costs in Uganda and those of another country that does not suffer a trust deficit is largely a Trust Premium.

If citizens don’t trust the tax authority, they will under-report or evade taxes. If investors don’t trust policy consistency, they hold their cash offshore. If our currency is not trusted, people will keep their money in dollars or gold. If the tax authority does not trust taxpayers, multiple tax audits and investigations will arise, and tax disputes will multiply. 

The trust deficit creates a vicious cycle of higher costs, lower investment, slower growth, and increased corruption. It also leads to low tax morale and low tax collection, affecting the tax-to-GDP ratio. 

This translates into poor roads, schools and hospitals and forces the government to borrow to fund social services – which will be more expensive because of the Trust Premium.

As a country with ambitious growth aspirations, mitigating deficits such as the trade deficit, the budget deficit, and the debt burden requires us to address this most fundamental deficit first – The Trust Deficit. 

As a country, we no longer know what trust looks like because bad has become good and good has become bad. It will take us much longer to achieve our national aspirations if we maintain this state of affairs.

We must prioritise rebuilding trust through citizen engagement, accountability, and transparency. 

Leaders must be held accountable for their actions and must be willing to say, “I am sorry, I made a mistake.” Citizens must also play their part by demanding accountability and transparency from their leaders.  

The Trust Deficit is a complex issue, but it is not insurmountable. 

Trust me – it can be done.

*Crystal Kabajwara is the Chairperson of the Tax Appeals Tribunal.