DIGITAL TAX REVOLT! Good news as UCC takes on taxmen, calls for slashing digital transaction levies
The Uganda Communications Commission (UCC) has proposed sweeping reforms to Uganda’s telecommunications tax regime, including reducing taxes on smartphones, internet data, and mobile money transactions, to make digital services more affordable and accelerate the country’s digital transformation.
The proposals are contained in UCC’s report, “A Study on the Impact of the Current Telecommunications Taxation Policy on the Communications Sector (2026),” which argues that the current tax structure is constraining digital inclusion, investment, and innovation despite the sector’s rapid growth.
According to the report, Uganda’s communications sector has expanded significantly over the past decade, registering more than 43 million mobile subscriptions and 27 million internet users by 2023, making it one of the country’s fastest-growing industries.
However, UCC says the sector operates under a heavy tax burden that includes excise duties, Value Added Tax (VAT), mobile money levies, and import duties on Information and Communications Technology (ICT) devices, all of which increase the cost of digital access.
“The current high-tax, business-as-usual regime has delivered short-term revenues but has reached its economic limits, constraining usage growth, smartphone adoption, rural connectivity, and the sector’s contribution to GDP,” the report states.
To stimulate digital adoption, UCC recommends reducing VAT on digital devices, lowering excise duty on data bundles below one gigabyte, and removing or reducing VAT and excise taxes on entry-level smartphones.
The Commission argues that such reforms would lower the cost of smartphones, increase internet usage, and expand the country’s digital economy over the long term.
It also recommends prioritising VAT reform over excise duty reforms, saying reducing or eliminating VAT on mobile data would have a greater impact on affordability and internet uptake.
The report further calls on the government to classify internet access as an essential service rather than a luxury, noting that affordable connectivity is critical for innovation, education, healthcare, agriculture, e-commerce, and digital public services.
UCC also proposes a phased removal of VAT on mobile data, accompanied by fiscal transition measures to minimise revenue losses while encouraging greater internet usage and expanding the tax base over time.
To encourage further investment, the Commission recommends long-term tax incentives for telecommunications operators, including accelerated depreciation allowances and performance-based rebates, particularly for expanding network coverage to rural and underserved communities.
It also advocates targeted tax reliefs and subsidies for affordable smartphones to increase digital inclusion and boost participation in online services.
The report recommends using telecommunications tax reform as a catalyst for improving business efficiency and public service delivery by simplifying tax procedures for small businesses, mobile money agents, and handset retailers.
UCC also wants the government to reform mobile money taxation by introducing a simplified revenue- or profit-based charge on service providers while exempting or reducing taxes on low-value transactions to promote financial inclusion.
The Commission proposes zero tax or no withdrawal charges on mobile money transactions ranging between five thousand and one million shillings, arguing that this would encourage greater use of digital financial services, particularly among low-income Ugandans.
It says the approach could also support government programmes such as the Parish Development Model (PDM), allowing beneficiaries to receive funds directly through their mobile phones while reducing opportunities for corruption associated with cash handling. “Under this arrangement, the Ministry of Finance can send the money directly to verified beneficiaries on their mobile phones without involving parish committee staff who have been accused of corruption,” the report notes.
UCC further recommends subsidising merchant fees or introducing tax credits for businesses that adopt mobile money payments, especially in the retail, agriculture, transport, and utilities sectors.
According to the report, lowering the cost of accepting digital payments would encourage businesses to move away from cash transactions, accelerate digital payments, and broaden the tax base.
To address inequality in access to digital services, UCC proposes targeted tax exemptions for entry-level smartphones and assistive technologies, subsidised data packages for vulnerable groups, and zero-rated educational platforms.
It also recommends ring-fencing part of telecommunications sector revenues to finance digital inclusion initiatives, including rural connectivity, affordable devices, digital literacy, and programmes aimed at reducing gender disparities in ICT access.
The recommendations come as the government increases investment in digital infrastructure. The approved national budget allocates 72.4 billion shillings for public sector internet connectivity, alongside additional funding for digital transformation initiatives.
Despite recent improvements, internet access remains costly for many Ugandans.
Mobile data currently costs about five thousand shillings for one gigabyte, while monthly fibre internet subscriptions can cost up to one hundred anD thirty thousand shillings, excluding applicable taxes.
Businessman and former Uganda Investment Authority chairman Morrison Rwakakamba has also called for a review of taxes on internet services, digital platforms, and mobile money, arguing that lower taxes would promote financial inclusion and accelerate digital transformation. Telecommunications companies have made similar proposals. Airtel Uganda has asked Parliament to scrap the 10 percent import duty on smartphones costing less than five hundred thousand shillings, saying cheaper devices would bring more Ugandans online and expand the tax base.
Meanwhile, MTN Uganda has proposed reducing the mobile money withdrawal tax from 0.5 percent to 0.25 percent and introducing a cap of five thousand shillings per transaction to encourage greater use of digital financial services.
According to the National ICT Strategic Plan 2025/26–2029/30, Uganda has made significant investments in shared digital infrastructure, including the National Data Centre and several e-government platforms to improve public service delivery.
The strategy notes that while internet bandwidth costs have declined over the years and are projected to continue falling, the high cost of internet data remains one of the biggest barriers to digital inclusion. Uganda also continues to trail many African countries in digital participation, ranking 91st out of 193 countries on the Global e-Participation Index.
“High data prices remain one of the main reasons many people are not using the internet and related services. They continue to undermine Uganda’s competitiveness and hinder the growth of the local ICT sector,” the National ICT Strategic Plan states.
According to UCC, comprehensive telecommunications tax reforms would not only improve affordability but also stimulate investment, increase digital inclusion, expand the tax base, and support Uganda’s long-term digital transformation agenda.
GOT A HOT STORY? EMAIL: redpeppertips@gmail.
SOURCE PROTECTION/CONFIDENTIALITY IS OUR NO.1 PRIORITY.
About Post Author
