Like most developing countries, Uganda faces serious fiscal challenges in her effort to mobilize and effectively use resources for poverty reduction. However, the tax base remains small as reflected in the low tax-to-GDP. The government is under internal and external pressure to increase its domestic revenue collection and in turn, reduce its dependency on donors. In response to the pressure the government endeavoured to maintain fiscal discipline, partly by raising taxes. The consequences of this move on the poor remains unclear. The main purpose of this paper is to throw light on effects of alternative reforms to existing tax system on those households living in poverty. The analysis was carried out using the nationally representative Uganda national household survey of 1999/00 (UNHS I) using micro-simulation techniques.