Digital tax reforms Uganda have moved to the center of policy debate as small businesses demand relief from taxes they say limit growth and financial inclusion. Representatives of Uganda’s small and medium enterprises told Parliament that current levies on mobile transactions and digital tools create barriers for millions of users.
The Federation of Small and Medium-sized Enterprises presented its proposals before the Committee of Finance, Planning and Economic Development. The group argued that high taxes on mobile money and smartphones restrict access to digital services and slow the shift toward a formal, cashless economy.
The federation’s executive director, John Walugembe, called for immediate adjustments to existing laws. He proposed reducing excise duty on mobile money withdrawals from 0.5 percent to 0.25 percent. He also suggested a cap of Shs5,000 per transaction to protect low-income users.
Walugembe told lawmakers that these changes would ease pressure on small traders and informal businesses. Many of them rely on mobile money for daily transactions. Lower costs, he said, would encourage wider use and improve financial inclusion.
The digital tax reforms Uganda debate also covers access to devices. The federation urged government to remove import duty on entry-level smartphones valued at up to Shs500,000. It also proposed zero-rating VAT on these devices to make them more affordable.
Walugembe explained that smartphones act as a gateway to the digital economy. He noted that cheaper devices would bring more Ugandans online. As more users adopt digital tools, transaction volumes would rise and expand the tax base.
Lawmakers acknowledged the proposals and welcomed further discussion. The committee, chaired by Vice Chairperson Moses Aleper, said it would review the recommendations carefully. Members noted that digital inclusion remains critical to achieving long-term development targets under Vision 2040.
The push for digital tax reforms Uganda comes during the public consultation phase of the Tax Amendment Bills for the 2026 to 2027 financial year. This period allows stakeholders to shape policy before Parliament finalizes changes.
Economists say the debate reflects a broader shift across Africa. Governments want to expand tax revenue, but they also need to support digital growth. According to the World Bank, lowering digital access costs can significantly increase financial inclusion in emerging markets.
Mobile money plays a central role in Uganda’s economy. Millions of users depend on it for payments, savings, and transfers. However, high transaction costs often discourage frequent use, especially among low-income earners.
The digital tax reforms Uganda proposals aim to change this dynamic. Lower withdrawal taxes would reduce the cost of using mobile money. This could increase transaction volumes and expand agent networks across the country.
Walugembe told legislators that more transactions would create jobs. He pointed to mobile money agents as a key employment channel. As usage grows, demand for agents would rise in both urban and rural areas.
Experts also link smartphone access to economic expansion. Affordable devices enable users to join e-commerce platforms, access financial services, and participate in digital markets. The International Monetary Fund notes that digital adoption can boost tax revenue over time by expanding formal economic activity.
Uganda has already made progress in digital infrastructure. Telecom companies continue to expand network coverage, while fintech firms introduce new services. However, cost barriers remain a major challenge for users and small businesses.
The federation argues that reducing these barriers will deliver long-term gains. Increased digital activity would generate revenue through telecom taxes, corporate income tax, and payroll taxes from new jobs. In this sense, the proposed reforms focus on growth rather than short-term revenue collection.
Critics, however, caution that tax cuts could reduce immediate government income. They argue that policymakers must balance fiscal needs with economic expansion. Parliament will need to weigh these competing priorities as it reviews the proposals.
For now, the digital tax reforms Uganda discussion highlights a key policy dilemma. Governments want to raise revenue, but high taxes can slow innovation and limit access. The outcome of this debate will shape how Uganda integrates into the digital economy.
The direction lawmakers choose will matter beyond the SME sector. A more inclusive digital system could unlock new opportunities for entrepreneurs, increase transparency, and strengthen economic resilience. The current proposals suggest that SMEs see tax reform not as a concession, but as a strategy for long-term national growth.
