Uganda’s telecom taxes could be costing the government more than they raise, study finds

Uganda’s telecommunications industry has become one of the country’s most heavily taxed sectors — and according to a new study, that may be holding back the very digital economy the government is trying to build.

The report, commissioned by the Uganda Communications Commission (UCC), looks at the impact of the country’s telecoms tax regime on a sector that now connects more than 47.5 million mobile subscribers and 17.9 million active internet users. It found that a combination of levies — including 12% excise duty on internet data, 18% VAT, mobile money withdrawal levies of up to 0.5%, import duties on devices, and various regulatory fees — has pushed up the cost of getting online so much that it may be suppressing the growth it is meant to fund.

A self-defeating tax?

The study’s most striking conclusion is also its most counterintuitive: cutting some telecom taxes could ultimately raise more government revenue, not less.

Researchers ran fiscal simulations suggesting that lower excise duty and VAT on telecom services and devices would encourage more people to get connected, attract greater private investment, and expand the overall market — generating more long-term tax revenue from a bigger, more active digital economy than the current setup manages to extract from a smaller one.

Who pays the price

The report found that Ugandan consumers are not immune to these costs. When prices rise, many simply use their phones and data less, delay buying smartphones, or give up digital services altogether — a pattern researchers describe as price-sensitive demand.

That effect falls hardest on those already on the margins of connectivity: low-income households, small businesses, and rural communities. Because network infrastructure is more expensive to deploy in remote areas, the added burden of taxation has, the study says, slowed the rollout of services to underserved regions — turning unequal access to the internet into a question of income and geography rather than mere availability.

A warning to investors

The study also flags concern among telecom operators and investors about the unpredictability of Uganda’s tax rules — citing frequent changes, overlapping levies, and inconsistent interpretation of tax laws. Because telecoms investment requires long planning horizons and heavy upfront capital, researchers argue that this uncertainty discourages exactly the kind of investment Uganda needs to expand its networks.

Balancing the books

Despite the findings, the report does not call for scrapping telecom taxes altogether. The sector remains a major contributor to the public purse — accounting for more than 12% of Uganda’s VAT collections and roughly 40% of excise duty revenue — at a time when government spending needs are growing.

Instead, the study urges a more “balanced approach” that weighs the state’s need for revenue against the risk of throttling a sector central to Uganda’s Vision 2040 digital ambitions.

The underlying question, the report suggests, is one of trade-offs: whether Uganda treats telecoms primarily as a cash cow to tax, or as critical infrastructure to nurture — and how that choice will shape who gets left behind as the country pushes toward a digital future.