The Ugandan government has declined a proposal to reduce the 0.5% excise duty on mobile money withdrawals, a levy that has been a point of contention since its introduction. The decision was communicated by the Ministry of Finance, Planning and Economic Development, which stated that the current tax structure would be maintained for the foreseeable future.
The proposal to lower the tax was reportedly put forward by mobile money agents and telecom operators, who argued that the levy was discouraging the use of formal financial channels. They contend that the tax, applied on the value of cash withdrawn from a mobile wallet, has led to a decline in transaction volumes as some users revert to informal cash exchanges to avoid the charge. The government’s stance, however, prioritizes the revenue generated by the tax, which contributes to the national budget.
Mobile money is a cornerstone of financial inclusion in Uganda, as it is across much of East Africa, providing banking services to millions who lack access to traditional accounts. The sector is dominated by MTN Uganda and Airtel Uganda. The tax on withdrawals was first introduced in 2018 and has been adjusted several times, reflecting an ongoing tension between fiscal needs and digital finance policy.
We have noted the concerns but after careful consideration, we have found that reducing this tax at this time would not be in the best interest of the economy,a ministry official was quoted as saying. The official emphasized that the revenue is critical for funding public services and infrastructure projects.
Industry observers note that Uganda’s approach contrasts with some regional neighbors who have revised or removed similar taxes after observing negative effects on digital payment adoption. The decision comes at a time when major telecom groups are seeking to deepen their investments in financial technology. In a separate development earlier this month, MTN Group completed the spin-off of its Ghana mobile money business into a separate fintech unit, a strategic move aimed at scaling its financial services across Africa.
The retention of the tax is likely to be met with continued resistance from the telecom sector. Analysts suggest that high transaction costs could slow progress toward greater financial inclusion, a key goal for many African governments. The debate in Uganda underscores a broader continental challenge: balancing the immediate fiscal benefits of taxing fast-growing digital economies against the longer-term goal of creating affordable, accessible financial systems for all.