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🇺🇬 Uganda /Economy & Trade

New Telecom Taxes Renew Debate Over Whether Uganda Is Taxing Financial Inclusion

From AllAfrica Uganda · () English

Summarized and contextualized by DistantNews.

At a glance

News Named sources Context piece
  • Uganda's tax regime is facing renewed criticism as a proposed 10% tax on mobile money agent commissions threatens to increase costs for consumers and hinder financial inclusion.
  • Industry players and regulators warn that existing high taxes on telecommunications services already make digital finance expensive, discouraging low-income households and rural communities.
  • Parliament is considering legislation to review mobile money taxes, with proposals including removing transaction charges and reducing VAT on internet services to boost digital adoption.

Uganda's drive towards financial inclusion faces a new hurdle as a proposed 10% tax on mobile money agent commissions sparks renewed debate over the country's tax policies. While the tax targets agents, industry insiders fear the cost will be passed to consumers, exacerbating existing financial burdens.

many people already avoid depositing money onto mobile wallets because they know they will lose part of it when making withdrawals.

— Julius MukundaCivil Society Budget Advocacy Group Executive Director Julius Mukunda explains the impact of existing withdrawal taxes on user behavior.

This latest measure adds to a complex web of taxes already impacting digital services. Consumers already contend with a 0.5% levy on withdrawals, transaction fees, a 15% tax on those fees, excise duty on data and airtime, and VAT on telecom services. Entry-level smartphones also face significant import duties and VAT, further restricting access to digital tools.

Civil society organizations argue that these cumulative taxes make mobile money one of the most expensive services in the region. Julius Mukunda, Executive Director of the Civil Society Budget Advocacy Group, warns that taxing agents' commissions will increase operating costs, disproportionately affecting rural communities where agents are the primary banking channel. He notes that many already avoid mobile money due to withdrawal costs.

taxing agents' commissions will increase operating costs, which are likely to be transferred to customers.

— Julius MukundaJulius Mukunda warns about the potential consequences of the new tax on telecom agents.

The Uganda Communications Commission (UCC) has also voiced concerns, highlighting that heavy taxation slows digital transformation, suppresses demand for internet services, and widens the digital divide. The UCC has proposed reforms, including removing withdrawal charges on small amounts, eliminating VAT on mobile internet, and lowering import taxes on affordable smartphones, to encourage wider adoption of digital financial services.

heavy taxation is slowing digital transformation.

— Uganda Communications Commission (UCC)The Uganda Communications Commission (UCC) has previously warned about the negative effects of taxation on digital progress.

Lawmakers are now revisiting the issue, with Budadiri East MP Julius Nakiyi granted leave to draft legislation aimed at reviewing mobile money taxes. The debate centers on whether the current tax structure hinders the government's own objectives for digital financial inclusion.

Uganda's layered tax structure suppresses demand for internet services, increases the cost of digital transactions and widens the digital divide.

— Uganda Communications Commission (UCC)The UCC elaborates on how the tax structure hinders digital adoption.
DistantNews Editorial

Originally published by AllAfrica Uganda. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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