Uganda Communications Commission Calls for Tax Reforms

However, the future is likely to see huge changes in how much people pay for digital products in Uganda because of new reforms that have been proposed by the Uganda Communications Commission (UCC) in regard to the country’s telecom taxes. These reforms are intended to reduce the price of smartphones, the Internet, and mobile money transfers.

High Taxes Identified as a Barrier to Growth

In a new UCC report analyzing the effect of telecommunications taxation, the existing tax regime is noted to be a significant barrier to digital inclusion, innovation, and investments. The Ugandan communication sector has developed very fast, and it now has 43 million mobile subscriptions and 27 million internet users by 2023. Nonetheless, the sector is still subjected to different taxes such as VAT, excise, mobile money taxation, and import duties for ICT gadgets.

UCC states that although these taxes have contributed towards government revenue collection, their main effect has been an increase in the price of digitization making it difficult for people to use smartphones and the internet.

Proposed Changes to Lower Costs

According to the UCC, the VAT on digital gadgets should be reduced, and the excise duty on small data packages should be cut down. Moreover, the body suggests that there should either be no tax on low-end phones or that it be considerably reduced. This is because it will make smartphones cheaper, thereby boosting internet usage and the digital economy.

Furthermore, the regulator wants the internet to be viewed as an essential service, rather than a luxury. In this regard, it suggests the phased VAT reduction on mobile data.

Mobile Money and Digital Payments Also Targeted

The measures go beyond services available online. UCC has proposed reforming the tax system on mobile money, lowering the taxes on small amounts of money as well as reducing the cost of withdrawing the money. UCC thinks that this will promote the use of digital financial services by many Ugandans, particularly poor people.

In addition to this, the recommendations include tax incentives for companies that use mobile money for payment purposes.

Supporting Uganda’s Digital Future

The recommendations are made at a time when Uganda is putting more emphasis on investments in digital technology. The government has invested billions of shillings in digital connectivity and transformation initiatives. Players in the industry like Airtel Uganda and MTN Uganda have equally supported the reduction of taxes on mobile phones and mobile money services.

According to the UCC, the reduction of telecom taxes will help make the services affordable, enhance digital inclusion, promote investment, and aid Uganda to develop its digital economy in the future.