Uganda’s telecommunications sector, one of the key drivers of the country’s digital economy, is under increasing pressure from a complex and heavy tax system. A new report commissioned by the Uganda Communications Commission warns that the country’s approach to taxing data, mobile money, airtime, and smartphones is slowing down digital growth and making access to services more expensive for ordinary citizens.
The report, conducted by ECASA Group of Consultants, shows that Uganda’s telecom industry has grown rapidly over the years, with tens of millions of mobile subscribers and internet users. Major operators like MTN Uganda and Airtel Uganda continue to dominate the market and contribute a significant share of government tax revenue. However, this growth is now being threatened by what the report describes as “taxes at every layer” of the sector.
According to the findings, consumers are paying multiple taxes on almost every digital service they use. These include VAT, excise duty on data and airtime, mobile money taxes, import duties on smartphones, and various regulatory fees. The report explains that this layered system is making smartphones and internet services expensive, especially for low-income users and rural communities, widening the digital divide in the country.
The study also highlights that Uganda Revenue Authority Commissioner General John Musinguzi Rujoki and other policymakers face a difficult balancing act: collecting revenue while also ensuring that digital services remain affordable. Stakeholders in the sector argue that the current tax burden is discouraging people from using more data and slowing the adoption of smartphones, which are essential for education, business, and financial inclusion.
At the same time, the report notes that Uganda’s ICT sector has been growing steadily and contributing more to GDP, but its relative share has started to decline in recent years. This suggests that while the sector is still important for revenue collection, its long-term growth potential may be weakening under the weight of high taxation.
The report presents an important argument: lowering certain taxes could actually increase government revenue in the long run. It shows that reducing VAT and excise duty on data could make internet cheaper, leading to more users, higher consumption, and ultimately more tax collected from a larger base. In some scenarios, revenue increases significantly even after tax cuts, because more people come online and use more services.
The study also compares Uganda with countries like South Korea, where telecom services are treated more like essential services with simpler and lower taxes. Unlike Uganda, South Korea does not apply heavy sector-specific taxes on digital services, allowing faster innovation, lower costs, and wider internet access.
Industry leaders such as Nyombi Thembo, Sylvia Mulinge, and Soumendra Sahu have all been part of ongoing discussions about how to balance taxation and sector growth, as operators continue to face the challenge of investing in infrastructure while keeping services affordable.
Ultimately, the report warns that Uganda risks slowing down its digital transformation if it continues relying heavily on a fragmented and high-cost tax system. It recommends reducing taxes on data and smartphones, simplifying the tax structure, and treating internet access as an essential service. The message is clear: Uganda’s digital future depends not only on expanding infrastructure, but also on making connectivity affordable for everyone.
