KAMPALA, Uganda — For millions of Ugandans, the mobile phone was once a symbol of financial liberation. From paying school fees to sending money across rural communities, digital wallets became the bank accounts of the unbanked.
But a growing web of government taxes is now threatening to reverse this progress, pushing many back toward a cash-only existence.
According to the latest figures from the Bank of Uganda, the scale of the industry is immense. There are now more than 43 million registered mobile money accounts, processing a staggering 326.3 trillion shillings annually. Yet, industry experts warn these numbers mask a brewing crisis of affordability.
The government currently levies multiple taxes on the ecosystem: a 0.5 percent excise duty on withdrawals, a 15 percent duty on telecom service fees, and a 10 percent withholding tax on agent commissions.
For those on low incomes, these costs are becoming prohibitive.
In one striking example of the digital divide, sending and withdrawing 1 million shillings via mobile money can cost a user 20,000 shillings in combined fees and taxes. By comparison, the physical transport cost to deliver that same cash in person between the Kampala suburbs of Kireka and Wandegeya is roughly 6,000 shillings.
If people have a cheaper alternative, they will take it, said Jane Nalunga, executive director of the Southern and Eastern Africa Trade Information and Negotiations Institute. She noted that for many, the “digital tax” is simply too high a price to pay for convenience.
Analysts also point to an uneven playing field. While mobile money is the primary tool for the informal sector and the poor, it carries a transaction-value tax that traditional bank agency networks—often used by wealthier citizens—do not face.
This “triple taxation” has created a difficult dilemma for the government. While mobile money is an easy “cash cow” for revenue collection, the high costs are undermining national goals for a digital, cashless economy.
It is a lesson Uganda has learned before. In 2018, the introduction of a 1 percent withdrawal tax led to an immediate slump in usage, forcing the government to halve the rate.
