This paper investigates the fiscal cost and developmental consequences of Uganda’s expanding tax-expenditure regime over the
period FY2016/17–FY2022/23. Drawing on Uganda Revenue Authority administrative files, Ministry of Finance Tax-Expenditure
Reports, and UNU-WIDER firm-level data, we estimate that revenue foregone through exemptions, rate reliefs and special credits
has risen from 0.87 % to 1.62 % of GDP—equivalent to 11.9 %–12.5 % of actual tax collections in recent years. Decomposing these
figures, we find that VAT exemptions account for the largest share (≈33 %), followed by customs duty waivers (≈27 %) and corporate
income-tax incentives (≈27 %). Importantly, half of the firms currently enjoying tax holidays would remain highly profitable at the
standard 30 % corporate rate, implying that marginal dead-weight losses may be as high as US$42 million annually—nearly one-fifth
of total CIT revenue. Using difference-in-differences and synthetic-control techniques, we show that while selected incentives are
associated with modest increases in investment and employment among multinational corporations, these effects are concentrated in
very large firms (1.9 % of the registry) and exhibit diminishing marginal returns. Meanwhile, the aggregate revenue loss—estimated
at UGX 2.4 trillion between 2014 and 2018—undermines fiscal space for pro-poor spending, exceeding combined allocations to
health, agriculture, water and social development in FY2019/20. We conclude that Uganda’s current tax-expenditure architecture is
regressive, opaque and poorly targeted. Reforms that sunset redundant incentives, introduce mandatory cost–benefit analysis, and
ring-fence exemptions for verifiable market failures could raise domestic revenue by at least 1 % of GDP without compromising
growth. The paper provides a roadmap for integrating these measures into the 2025–30 National Development Plan and offers
lessons for other resource-constrained economies navigating the incentives-versus-revenue dilemma.