Uganda’s telecommunications regulator has proposed a broad overhaul of taxes levied on digital services and devices, arguing that lower charges on smartphones, internet data and mobile money transactions would make connectivity more affordable and speed up the country’s transition to a digital economy.
The proposals are contained in a 2026 study by the Uganda Communications Commission (UCC) examining the effects of existing telecommunications taxation policies on the communications sector.
The regulator concludes that while current taxes have generated government revenue, they are increasingly discouraging digital adoption, private investment and innovation.
Uganda’s communications industry has experienced rapid expansion over the last decade, with mobile subscriptions exceeding 43 million and internet users estimated at more than 27 million by 2023.
Despite this growth, UCC says the sector remains weighed down by multiple taxes, including Value Added Tax (VAT), excise duties, mobile money charges and import taxes on ICT equipment.
According to the report, the prevailing tax framework has reached a point where it is limiting smartphone ownership, slowing internet uptake, reducing connectivity in rural communities and diminishing the sector’s wider contribution to economic growth.
To make digital services more accessible, UCC proposes reducing VAT on digital devices, cutting excise taxes on data bundles below one gigabyte and either removing or lowering taxes imposed on low-cost smartphones.
The Commission believes that making smartphones cheaper would encourage more Ugandans to come online and stimulate long-term growth in the digital economy. It suggests that reforming VAT on internet services would have a greater impact on affordability than adjusting excise duties alone.
UCC further urges government to recognise internet connectivity as an essential public service rather than a luxury item, noting that affordable access underpins progress in education, healthcare, agriculture, e-commerce, innovation and delivery of government services.
Among its recommendations is a gradual elimination of VAT on mobile data, supported by measures aimed at cushioning short-term revenue losses while expanding internet use and broadening the tax base over time.
The regulator also advocates tax incentives for telecommunications companies investing in network expansion, especially in underserved and rural areas. Suggested incentives include accelerated depreciation allowances and rebates linked to performance targets.
To improve access to digital devices, UCC recommends targeted subsidies and tax relief for affordable smartphones, alongside policies designed to boost participation in online platforms and services.
The report also addresses taxation of mobile money services, proposing a simplified tax model based on provider revenues or profits, while reducing or exempting levies on small transactions to promote financial inclusion.
Under the proposal, transactions ranging from Shs5,000 to Shs1 million would attract no withdrawal charges or taxes, a move UCC says could encourage wider use of mobile financial services, particularly among low-income households.
The Commission argues that such measures would support programmes such as the Parish Development Model by enabling beneficiaries to receive funds directly on their mobile phones, thereby reducing opportunities for misuse associated with cash handling.
Additional recommendations include subsidising merchant fees and offering tax credits to businesses that adopt mobile money payments, particularly those operating in agriculture, retail trade, transport and utilities.
UCC also calls for measures aimed at narrowing the digital divide, including tax exemptions for entry-level smartphones and assistive technologies, subsidised internet packages for vulnerable populations and zero-rated educational platforms.
Part of the revenue generated from the communications sector, the report says, should be earmarked for digital inclusion initiatives such as rural connectivity projects, affordable devices, digital literacy campaigns and programmes that address gender disparities in access to ICT services.
The proposals come at a time when government is increasing spending on digital infrastructure. The 2026/27 national budget sets aside Shs72.4 billion to enhance internet connectivity across public institutions, in addition to funding other digital transformation projects.
Nevertheless, internet services remain expensive for many Ugandans. A gigabyte of mobile data costs about Shs5,000, while monthly fibre internet subscriptions can exceed Shs130,000 before taxes.
Calls for lower digital taxes have also been echoed by private sector players. Businessman and former Uganda Investment Authority chairman Morrison Rwakakamba has urged government to review levies imposed on internet services, digital platforms and mobile money, arguing that affordable access is essential for financial inclusion and economic modernisation.
Telecommunications companies have advanced similar proposals. Airtel Uganda has petitioned Parliament to abolish the 10 per cent import duty on smartphones priced below Shs500,000, maintaining that cheaper handsets would bring millions more Ugandans online and eventually increase government revenues.
MTN Uganda, meanwhile, has proposed reducing the mobile money withdrawal tax from 0.5 per cent to 0.25 per cent and introducing a maximum charge of Shs5,000 per transaction to encourage greater use of digital payments.
Uganda’s National ICT Strategic Plan 2025/26–2029/30 acknowledges improvements in shared digital infrastructure, including investments in the National Data Centre and e-government platforms. However, it identifies high internet costs as one of the biggest obstacles to wider digital participation.
The strategy notes that Uganda ranks 91st out of 193 countries on the Global e-Participation Index and warns that expensive data services continue to undermine competitiveness and slow growth within the local ICT industry.
UCC maintains that comprehensive reforms to telecommunications taxation would ultimately increase digital inclusion, attract more investment, strengthen the communications sector and support Uganda’s broader digital transformation agenda.
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