Unleash, not squeeze, Uganda’s ICT sector

In July 2018, the Ugandan government imposed new taxes on the ICT sector in the form of excise duties on social media use and mobile money services. Two new excise duties were introduced: a mobile money tax of 1% on the transaction value of payments, transfers and withdrawals and a social media tax of 200 UGX per day. The excise duty on mobile money (MM) fees was also increased from 10% to 15%.

Uganda’s excise duties on the ICT sector continue to increase, holding back a sector that facilitates economic growth

 Apr 02Jul 05Jul 14Jul 18Oct 18
Airtime7%12%12%12%12%
VAS20%20%20%
Landlines5%12%12%
International callsUSD 0.09/mUSD 0.09/mUSD 0.09/m
MM fees10%15%15%
Value of MM payments, transfers & withdrawals1%0.5%
Social Media tax200 per day200 per day

The additional taxes increase the cost of both data consumption and mobile money usage and will lead to slower broadband and mobile money adoption. Immediately after the imposition of the taxes, data use and mobile money transaction values declined.

Rather than fostering economic growth, the government of Uganda is looking at ways of raising additional tax revenues from the ICT sector. This ignores the role of the ICT sector as a contributor to other sectors of the economy. Removing all ICT sector excise duties would facilitate GDP growth, stimulate job creation and help the informal sector to become more formal, leading to a wider tax base and higher tax revenues. Economic growth will generate more tax revenues and enable investment in other parts of the economy, such as infrastructure. The ICT sector needs to be turned into a growth engine to power Uganda’s ambitious development programme. Our policy brief estimates the economic consequences of the tax increase.

The full policy brief can be downloaded below:

Unleash not squeeze the ICT sector in Uganda