Government faces balancing act on mobile money taxes and financial inclusion
As Parliament scrutinises the proposals, the outcome could shape not only the cost of mobile money transactions but also the pace at which Uganda transitions towards a more inclusive, digital-first economy.
Telecommunications giants MTN Uganda and Airtel Uganda have asked government to revise Uganda’s mobile money tax regime, proposing a reduction in the levy on withdrawals from 0.5 per cent to 0.25 per cent, alongside a cap of Shs5,000 per transaction.
The proposal was tabled before Parliament’s Finance Committee as part of industry submissions on tax measures tied to the 2026/27 national budget, setting the stage for renewed debate over the cost of digital financial services and their role in expanding financial inclusion.
A “middle-ground” proposal
Appearing before the committee, MTN Uganda’s General Manager for Corporate Services, Dennis Kakonge, said the company was not seeking to abolish the tax outright but instead advocating a “balanced” approach that maintains government revenue while easing the burden on users.
Kakonge argued that lowering the rate could stimulate transaction volumes, ultimately making the tax more sustainable.
“A lower rate would encourage more usage, which in turn can still deliver meaningful revenue for government,” he told lawmakers.
This argument reflects a broader industry position: that high transaction costs risk slowing down the very digital adoption that has made mobile money one of Uganda’s most transformative financial innovations.
Airtel pushes smartphone affordability
Alongside tax reforms on transactions, Airtel Uganda used the platform to push for the removal of a 10 per cent import duty on smartphones, particularly targeting devices priced below Shs500,000.
Managing Director Soumendra Sahu said lowering the cost of smartphones would help bring more Ugandans—especially those currently excluded—into the digital economy.
The company argues that increased smartphone penetration would drive higher data usage and digital transactions, eventually offsetting the lost import duty through value-added tax (VAT) and excise duties on telecom services.
The proposal underscores a growing recognition that device affordability remains a key barrier to digital inclusion in Uganda.
Lawmakers divided on tax direction
Members of Parliament expressed mixed reactions to the telecoms’ proposals, highlighting the delicate balance between revenue generation and financial inclusion.
Paul Omara backed calls to review mobile money taxes, warning that the current structure has made withdrawals more expensive than similar banking transactions.
He cautioned that high costs risk undermining the progress mobile money has made in extending financial services to previously unbanked populations.
However, Karim Masaba raised concerns about proposals to standardise the 0.25 per cent charge across both mobile money and banking services.
Masaba warned that expanding such a tax across the broader financial sector could increase transaction costs for high-value users and discourage formal banking, potentially driving people to keep money outside regulated systems.
Unanswered questions on agent taxation
Finance Committee Chairperson Amos Kakunda also pressed telecom companies on their silence regarding a proposed withholding tax on mobile money agents.
He questioned whether the lack of submission signalled tacit approval, noting that agents play a critical role in the mobile money ecosystem and could be significantly affected by new tax measures.
Kakunda said the committee would continue consultations before finalising its recommendations, emphasising the need for policies that strike a balance between easing the tax burden, promoting a cashless economy, and addressing the high cost of printing physical currency.
A defining moment for Uganda’s digital economy
The ongoing debate highlights the central role mobile money plays in Uganda’s economy, where millions rely on it for daily transactions, savings, and business operations.
While government faces pressure to raise domestic revenue, industry players warn that excessive taxation could slow digital adoption and reverse gains in financial inclusion.
As Parliament scrutinises the proposals, the outcome could shape not only the cost of mobile money transactions but also the pace at which Uganda transitions towards a more inclusive, digital-first economy.
