This paper investigates the apparent disconnect between Uganda’s sustained macroeconomic growth and its persistently low tax-to-
GDP ratio—the “weak link” that constrains fiscal space and public investment. Using annual data from FY1991/92 to FY2022/23, we
estimate a structural vector-error-correction model that combines national accounts, fiscal, and institutional indicators. Results show
that while real GDP growth has averaged 6 % per year, the tax effort—measured as the ratio of actual to predicted tax revenue given
economic structure—has stagnated around 0.65. Decomposition exercises attribute roughly half of this shortfall to narrow tax bases
(exemptions in agriculture and informal services) and half to administrative weaknesses (compliance gaps and weak enforcement).
Panel evidence from 13 peer low-income countries further indicates that Uganda’s tax effort lies 3–4 percentage points of GDP below
the level consistent with its income and openness. Counterfactual simulations suggest that broadening the VAT base, rationalizing
investment incentives, and digitizing business registration could raise the tax-to-GDP ratio by up to 5 percentage points within five
years without materially dampening growth. The findings underscore that accelerating growth alone is insufficient; complementary tax
policy and administrative reforms are needed to convert rising incomes into reliable domestic revenues.