Taxation was introduced in East Africa by the British colonial administrators through the system of compulsory public works such as road construction, building of administrative headquarters and schools, as well as forest clearance and other similar works.
The first formal tax, the hut tax, was introduced in 1900. This is when the first common tariff arrangements were established between Kenya and Uganda. Through this, Ugandans started paying customs duty as an indirect tax, which involved imposition of an ad valorem import duty at a rate of 5% on all goods entering East Africa, through the port of Mombasa and destined for Uganda.
A similar arrangement was subsequently made with German East Africa (Tanganyika) for goods destined for Uganda that entered East Africa through Dar-es-Salaam and Tanga ports. This gave rise to revenue which was remitted to Uganda.
The Protectorate government heavily relied on customs duties to fund its programs as the indigenous Ugandans were not engaging in activities that would propel
the growth of the monetary economy.
The government in order to raise revenue to fund its programmes introduced a flat rate poll tax that was imposed on all male adults. This pay tax forced the indigenous Ugandans to enter the market sector of the economy through either selling their agricultural produce or hiring out their services. The tax burden was later increased by the introduction of an additional tax to finance local governments. This culminated into the first tax legislation in 1919 under the Local Authorities’ Ordinance.
In 1953, following recommendations by a committee headed by Mr. C.A.G Wallis, graduated personal tax was introduced to finance local governments. Income tax was introduced in Uganda in 1940 by a Protectorate ordinance. It was mainly payable by the
Europeans and Asians but was later on extended to Africans. In 1952, the ordinances were replaced by the East African Income Tax Management Act, which laid down the basic legal provisions found in the current income tax law.
The East African Income Tax Management Act of 1952 was repealed and replaced
by the East African Income Tax Management Act of 1958. The administration of both income tax and customs duty was done by departments of the East African
Community (EAC) until its collapse. Under the EAC dispensation, there were regional taxing statutes and uniform administration but the national governments (or partner states, as they were called) retained the right to define tax rates.
After the breakup of the EAC, the Income Tax Department was transferred to Ministry of Finance in 1974 and later followed by the Customs Department in 1977. In 1991, the function of administering central government taxes was shifted from the Ministry of Finance to the Uganda Revenue Authority, a body corporate established by an Act of Parliament.
The EAC was re-established in 1999 by Tanzania, Kenya and Uganda. Rwanda and Burundi joined the EAC in 2007. The EAC in December 2004 enacted the East African Community Customs Management Act 2004 (EAC-CMA). This Act governs the administration of the EA Customs union, including the legal, administrative and operations.