Rising Debate Over Mobile Money Taxation in Uganda
Civil society organizations, small and medium enterprises, and mobile money agents in Uganda are calling for urgent reforms to the country’s mobile money withdrawal levy. The groups argue that the current 0.5 percent excise duty on withdrawals is disproportionately affecting low-income users and small businesses that depend heavily on mobile money for daily financial transactions.
The debate has reignited wider concerns about digital taxation, financial inclusion, and the long-term sustainability of Uganda’s fast-growing mobile money ecosystem.
How the Mobile Money Levy Was Introduced
Uganda first introduced a 1 percent tax on mobile money transactions in 2018 as part of efforts to expand the national tax base. The policy targeted the rapidly expanding digital finance sector, which had become a key driver of economic activity.
However, following public backlash and reduced transaction activity, the government revised the tax structure, limiting it to a 0.5 percent levy on withdrawals only. Deposits and transfers were exempted, but the withdrawal charge remained in place across major platforms such as MTN MoMo and Airtel Money.
Over time, mobile money has evolved into a critical financial lifeline, particularly in rural and underserved communities where traditional banking infrastructure remains limited.
CSOs and SMEs Call for Targeted Reforms
A coalition including civil society groups and representatives from SMEs and mobile money agents is now pushing for changes ahead of upcoming budget discussions.
They are proposing a reduction of the withdrawal levy from 0.5 percent to 0.25 percent, alongside a cap of Shs 5,000 per transaction to shield low-value users from excessive charges. The coalition is also calling for reduced or removed taxes on smartphones priced below Shs 350,000 to improve affordability and support digital inclusion.
Additionally, the group is urging a broader review of Uganda’s digital tax framework to ensure that it does not discourage the use of mobile money or push citizens back toward cash-based transactions.
Concerns Over Impact on Households and Small Businesses
Stakeholders argue that the current tax structure places a heavier burden on those who use mobile money most frequently but in smaller amounts. These include low-income earners, informal traders, and rural households who rely on mobile money for everyday payments, savings, and remittances.
Small and medium enterprises have also expressed concern that the levy increases operational costs. Many SMEs depend on mobile money for supplier payments, customer transactions, and managing cash flow, making the service essential to their business operations.
Mobile money agents, who play a key role in cash-in and cash-out services across the country, have warned that their already thin commissions are being further squeezed, particularly in rural areas where transaction volumes are lower.
Fear of Slower Financial Inclusion Progress
Critics caution that failure to adjust the levy could slow down Uganda’s progress in financial inclusion. Mobile money has significantly expanded access to financial services in the country, especially for populations previously excluded from formal banking systems.
There are concerns that higher transaction costs may reduce usage, discourage small-value transactions, and ultimately push users back toward cash-based systems, reversing gains made over the past decade.
Similar outcomes have been observed in other African markets where digital transaction taxes led to reduced activity among micro and small users before policy adjustments were introduced.
Government Revenue Needs Versus Digital Growth
While advocates of the levy argue that it contributes to government revenue in a narrow tax base environment, stakeholders are calling for a more balanced approach. They suggest exploring alternative revenue sources or adopting a more progressive tax structure that does not disproportionately affect low-income users.
The ongoing debate highlights the tension between revenue mobilization and promoting a thriving digital economy that supports innovation, inclusion, and economic growth.
A Critical Moment for Policy Direction
As Uganda prepares its upcoming fiscal policy decisions, the outcome of this debate could have a lasting impact on the future of mobile money in the country. Any adjustments, whether reductions, caps, or exemptions, are likely to influence usage patterns, business operations, and financial inclusion trends.
For now, CSOs, SMEs, and mobile money agents continue to push for dialogue with policymakers, emphasizing the need for a system that supports both national revenue goals and the everyday financial realities of ordinary Ugandans.
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