We evaluate a major personal income tax reform in Uganda that came into effect in
2012–13. The reform increased the tax-free lower threshold, increased tax rates for higher
incomes, and introduced an additional highest tax band. Using the universe of pay-as-you-earn
administrative data submitted by employers in the formal sector, we analyse the impact on taxable
income of the introduction of the additional top tax band. Our results indicate that the elasticity
of taxable income in Uganda is larger than in previous results from developed countries. Overall,
the additional revenue generated from the introduction of the additional top tax band by far offset
the revenues lost from the decreased revenues from employees with medium to lower taxable
incomes, despite the large elasticity of taxable income at the top. We contribute to the very scarce
literature on the effects of personal income tax reform on employees’ income in a low-income
country in Africa.