Taxation for the digital era: Uganda

Accessible, reliable and affordable broadband Internet is the foundation of the digital economy and digital inclusion. Improved broadband penetration is associated with substantial socioeconomic benefits, contributing to enhanced productivity, facilitating information exchange, and improving service delivery across the economy.

The ICT sector in Uganda is taxed heavily. MTN and Airtel alone made up 40% of excise duty revenues and 12.7% of VAT revenues in the financial year 2019/2020. Yet the sector’s GDP contribution is only 1.8%.

While there is an increased and justified momentum around the world for the collection of a Digital Service Tax (DST), the introduction

of yet another tax in Uganda that singles out an enabling sector like the ICT sector, would discourage investment and make the target of universal broadband access and usage difficult to achieve.

This policy brief shows that there is an alternative option to a DST for Uganda. The context surrounding this policy brief is an unprecedented new global tax framework that was adopted by the OECD in October 2021. This framework solves the main challenge that many unilateral DST’s cannot address: a fair allocation of taxing rights so that the home country is no longer the sole beneficiary of taxation of multinational companies (MNEs). It also prevents MNEs from avoiding corporate income tax. Download the Policy Brief here.